Partial State Ownership Research Articles

The power of implicit political capital on companies’ entry barriers

The paper distinguishes the political capital of private enterprises into three types, in terms of the political identity of entrepreneurs, partial state ownership, and government background of entrepreneurship. The first two are classified as explicit political capital, while the third is called implicit political capital. We investigated how political capital, the institutional environment, and access to protected industries intersect within private sector enterprises (PSEs). The data sample from 2011 to 2018 of listed private companies in China is employed. Firstly, the findings indicate political capital significantly enhances access to protected industries for PSEs. Second, implicit political capital shows a strong impact, while the effects of partial state ownership and entrepreneurs’ political identity are weak. Third, explicit political capital weakens the effect on access to protected industries, while implicit political capital still holds significant influence under the improvement of institutional environments. It reveals the situation under the imperfect environment of the market economic system and legal system in China. To be explicit, the concept of ruling by man or power is deeply rooted in the traditional Chinese social governance and social structure model. Therefore, there is enormous room for implicit political capital to function.

Critical Mass and Critical Representation

Women’s critical mass helps change male-dominated cultures and promote women’s career advancement, but its effects vary across organizational domains and are sometimes constrained by persistent gender structures and power relationships inside and outside workplaces. By analyzing a nationally representative sample of China’s private companies, this study examines how women’s representation, not only in sheer numbers but also in certain powerful positions (e.g., owners or shareholders), affects women’s leadership potential. Despite evidence of positive trends in women’s leadership in the Chinese corporate context, women’s representation has been hamstrung by institutional legacies (e.g., partial state ownership). The effects of women’s representation also differ by industrial sector. Women are more likely to reach senior management in low-tech, labor-intensive industries, where women dominate the workforce, than in industries with higher technological demands, where men dominate the workforce. Women owners or shareholders matter more for the promotion of women CEOs in higher-tech companies. Our study contributes to the literature on gendered organizations by offering insights on how transitional institutional forces and large industrial systems converge and interact with women’s representation to affect their upward occupational trajectory in developing contexts.

Turnover of local government core officials, political connections and the investment and financing of private‐sector enterprises

AbstractIn this study, we examined the power operation and policymaking mechanisms of local governments in China and analysed the sources of risk in macroeconomic policies. Based on the reality of local governance in China, this article defines political uncertainty as normal or abnormal changes in the Standing Members of the Communist Party of China (CPC) Provincial‐level Committee. We analysed the impact of turnovers of these local core officials upon the investment and financing of local private‐sector enterprises. We found that when changes in provincial inner core officials happened normally, the long‐term impact on the investment and financing of local private‐sector enterprises was not so obvious. However, when senior officials were investigated for corruption, the investment and financing of enterprises dropped significantly. For enterprises with personal political capital only, the impact of local core official turnover upon firm financing was even more pronounced. For private‐sector enterprises with partial state ownership, however, this negative impact was significantly weakened in the long term.

The role of business models in firm internationalization: An exploration of European electricity firms in the context of the energy transition

This article ties in directly with recently intensified interest in business models in international business (IB), using the energy transition as empirical context to explore their relevance in firm internationalization. The global energy transition presents a challenge for almost all industries, but some face specific difficulties particularly important from an IB perspective. We study a set of European firms that used to operate in a highly regulated context with (partial) state ownership, until government-directed market liberalization started to allow further competition and internationalization. Existing firms were prompted to adapt their business models to these changes, with new ventures entering the market to reap opportunities with novel energy-related technologies and business models. Linking insights from strategic management to the IB literature, we conceptualize business model-related specific advantages (BMSAs), and explore the role of BMSAs in the internationalization of the firms in our sample. We also uncover barriers to BMSA recombination in (potential) host countries, consider BMSA location-boundedness, and discuss implications for firms’ international expansion by presenting a new framework. Consequences for the energy transition and the actors already involved and (in)directly confronted with it are explicated, while outlining promising areas for further research, building on the insights and limitations of our study.

State ownership and corporate innovative efficiency

In this paper, we investigate the innovative efficiency of SOEs in China. Innovative efficiency refers to output of patents per dollar spending of R&D expenditure. The data indicate that minority SOEs are substantially more innovatively efficient than non-SOEs and majority SOEs. The relative innovative efficiency of minority SOEs is more pronounced among firms with high financial constraints. The data are consistent with the view that, in the Chinese context, there are favorable benefits to partial state ownership through access to talent, connections, and technological resources that enable efficient patent outcomes from R&D expenditure.

The role of political capital on private equity placement acquisition for Chinese publicly listed private sector enterprises

This paper explores the relationship between various forms of political capital and the private equity placement of publicly listed PSEs. The results show that the political capital of PSEs can significantly affect PEP in the processing time, approval results and scale of financing. Specifically, implicit political capital can significantly shorten the processing time, but cannot significantly affect the approval results; however, both partial state ownership and political participation can significantly increase the approval rating. Moreover, partial state ownership has the most powerful effect on the scale of financing. In addition, the analysis of the impact of different levels of entrepreneurs’ political identity on PEP applications reveal that as the level of political identity increases, the PEP approval rate is higher.

Публічні фінанси та фінансовий менеджмент у публічній сфері: сутність понять, відмінні риси та особливості системних складових

У статті розкрито зміст поняття «публічні фінанси» через розширення рамок цієї категорії від традиційних відносин, які формують потоки фінансових ресурсів у межах бюджетної системи України до фінансових відносин, які передбачають взаємодію(партнерство) інших суб’єктів приватного та публічного секторів економіки на користь реалізації функцій держави. Зазначається, що усі суб’єкти фінансових відносин можуть діяти як у вітчизняному, так і у міжнародному правовому полі за умови обов’язкового та чіткого нормативно-законодавчого регламенту фінансової діяльності у публічній сфері. Досліджено зміст суміжних категорій, таких як «бюджетний менеджмент», «державний фінансовий менеджмент» та «публічний фінансовий менеджмент», доведена їхня відмінність через змістовну розрізненість публічних фінансів як об’єкта управління. Запропонована уточнена дефініція «фінансовий менеджмент у публічній сфері», яка дозволяє врегулювати питання фінансового менеджменту на всій площині публічної сфери та врахувати зазначені складові публічних фінансів як об’єкта управління. Доведена необхідність формування спеціального комплексного інструментарію реалізації функцій фінансового менеджменту у публічній сфері по відношенню до окремих суб’єктів фінансових відносин, які через рух фінансових ресурсів приймають участь у реалізації публічних функцій.

Investment motives, ownership advantages and institutional distance: An examination of Russian cross-border acquisitions

We apply the OLI framework, first, to examine the motives of Russian cross-border (CB) M&A activity in the period 2007–2013 and, second, to analyze the ownership preferences of Russian multinationals abroad. We test our first set of models using panel data of 322 country/year observations and the second set of models using cross-sectional firm-level data of 318 M&A deals. Our analysis shows that traditional investment motives provide a limited explanation of what attracts or deters Russian acquirers abroad. We extend our base-model to include institutional distance and find that it plays a critical role on Russian CB M&A activity. As a second step, we employ state ownership as a specific type of institutional ownership advantage and discover that partial state ownership discourages Russian firms from pursuing full-ownership in CB M&As. Moreover, Russian multinationals benefit from internalization advantages (full M&A ownership) in tandem with location advantages derived from natural resource endowments.

State ownership, political connections and entry barriers: evidence from China

ABSTRACTPrivate enterprises may encounter high industrial barriers in China because of government administrative restrictions. We analyse the effect of partial state ownership on a privately controlled company’s participation in industries with state-imposed barriers. The results indicate that state ownership in privately controlled enterprises has a significantly positive effect on participation in high barrier industries. After controlling for partial state ownership, we find that personal political identity of entrepreneurs, a previously investigated dimension of political connections, becomes less important in explaining private enterprises’ participation in barrier industries. We also find the effect of state ownership on access to barrier industries will become weaker when local economy is more developed.

Institutional environment, political connections of partial state ownership, and performance

Purpose – The purpose of this paper is to examine whether substantial differences in institutional environment in China lead to different levels of demand for political connection. Design/methodology/approach – Using a data set of 296 listed private sector enterprises (PSEs) in China, the authors empirically investigate the effects of institutional environmental factors upon political connection. Findings – The authors find that the lower the level of regional property right protection, the more powerful the government intervention, and the slower the economic development, the more motivated the PSEs were to build relationship with the government via partial state ownership. However, the degree of local corruption was not correlated with the demand for political connection. The authors also find that partial state ownership in PSEs exerted a positive effect on performance. Originality/value – Deviating from previous literature that has been mostly concerned about the economic consequences to firms caused by political connections, this paper examines the reasons for political connection among Chinese PSEs. The authors introduce a new dimension of political connection, namely, partial state ownership in PSEs.

Shared Governance: Institutional Investors as a Counterbalance to the State in State Owned Multinationals

Abstract State owned multinational enterprises (SMNEs) are entities that are partly or wholly owned by the state and that engage in foreign direct investment. SMNEs with partial state ownership share equity ownership with private investors, some of which may be institutional investors. We argue that equity ownership by institutional investors can provide a counterweight to state ownership, and their shared governance can improve SMNE strategic decision making on international diversification. Institutional investors, however, need strong formal institutions to perform their shared governance role effectively. Because formal institutions are typically weaker in developing countries, institutional investors likely play a less effective role in SMNEs located in developing countries. We test our arguments on the international diversification decisions of 253 listed SMNEs from 42 home countries over the 2002–2007 period, finding substantial support for our hypotheses. Our study offers new insights on the role of institutional investors in the international diversification of state owned multinationals.

Partial State Ownership, Political Connection, and Financing: Evidence from Chinese Publicly Listed Private Sector Enterprises

ABSTRACTThe government of China plays an important role in the external environment of private sector enterprises (PSEs), having a significant effect on their survival and development. Therefore, managing their relationship with the government becomes a key aspect of strategic decision-making and operating actions of PSEs. We extend the evidence of this by introducing a new dimension of political connection: partial state ownership of PSEs. Using a data set of 262 publically listed PSEs in China, we empirically investigate the effects of partial state ownership of PSEs on the access to bank loans.

The value of partial state ownership in publicly listed private sector enterprises: evidence from China

This article highlights a certain dimension of political connection, namely partial state ownership in private sector enterprises (PSEs). Using a dataset of publically listed PSEs in China, we empirically investigate the effects of partial state ownership of PSEs upon firm performance. We demonstrate channels through which the benefits of partial state ownership are realised in terms of easier access to resources such as credit and industries to which entry is restricted by formal barriers, which ultimately increases the performance of firms. We also find some evidence that political participation of private sector entrepreneurs, another dimension of political connection, becomes less valuable when partial state ownership of PSEs is present.

State ownership and bank equity in the Asia-Pacific region

Our study examines the effectiveness of worldwide banking regulations and government involvement in providing a balanced risk–reward trade-off to bank shareholders during both normal time periods and the periods of financial crisis. Ownership structure varies across world regions with government holding bigger stakes in the Asia-Pacific region and Latin America than in North America. Partial state ownership of banks, particularly in the Asia-Pacific region, helped avoid sharp losses during financial crises without sacrificing returns in normal periods. The restrictions on the types of activities reduce bank riskiness and wealth losses during the crisis period but they also stifle innovations and returns during normal time periods.

Popular Participation in the Public Services

The providers of the public services habitually enjoy the privilege of being a monopoly. At the current moment in the socio-economic history of Latin America, the cycle of concessions and privatisations having concluded, the public services have returned to partial or total state ownership. From the perspective of popular participation (and from other perspectives too), as I have already outlined in other works, this changes nothing for the user. Regardless of whom the shareholder is, popular participation in the public services is nearly zero. In traditional Marxism there was no difference between public and state-owned, but where this model cannot be applied the differences are very great. In the case of Argentina, where this model is not applied, popular participation is very limited. It is more than sufficient to visit the web sites of the companies or see the “public meetings” with users to understand that the participation of millions of users in sporadic events or in websites without the necessary information to enable participation is insufficient. For this reason, six reasons or principles are presented which show why popular participation in the public services is necessary. Four general directives for its application and execution are also presented. With this as a basis I present a concrete proposal. It is a hypothesis of work presented in two dimensions or actions to promote said participation. Implemented in this way, popular participation will allow a significant improvement in the quality of the institutions and in consequence, democracy.

Turning Off the Tap: Determinants of Expropriation in the Energy Sector

This paper analyzes the dependence of the decision of a government to expropriate foreign investment in the energy sector on macroeconomic factors and crude oil and natural gas prices. The contribution of the paper is two-fold. First, using data on eight countries that made recent steps to expropriate foreign investment in their respective energy sectors, we identify the factors that are significant for the decision. These factors are assumed to be invariant across countries. Second, we use our results to calculate the probability that the seven major petroleum exporters with at most partial state ownership will nationalize their respective energy sectors in the next month. The results of this paper can be used to design optimal exit strategies for companies invested in energy sectors in developing countries.

Privatization, partial state ownership, and competition

In practice, governments in transition and other economies often retain some shares in privatized firms. For a two-firm differentiated-product oligopoly, we show how partial state ownership affects the firms' subsequent investment and output behavior. Hence, we determine how the optimum retained state ownership share depends on product–market competitiveness and we find the conditions under which it would be preferable to sell the firms to a single owner. Partial state ownership is optimal if the proportionate welfare weight on government revenue is high, but less than unity. As product–market competitiveness rises, investment is first increasing and then decreasing.

Profile of the Czech communications market

The Czech Republic has made significant advances in the development of its communications industry during the post-1989 era. These advances include partial privatization and significant capital investment in the fixed line and mobile infrastructure, market liberalization moving toward ending of monopoly in most market segments, and creation of huge demand for communication services of all types among business and residential consumers. As in more developed countries, the communications market in the Czech Republic has grown increasingly complex over the past 10 years. Indeed, the Czech communications market has developed well beyond the point where it can be adequately described purely in terms of number of fixed lines installed, teledensity, and the waiting list for basic telephone service. Therefore, the factors that will be critical in the next stage of market development must also be considered. These factors include the commitment to finalize market liberalization and end even partial state ownership of incumbents, the ability to attract a wide range of local startups and international telecom companies as competitors to the incumbents and each other, and the ability of those competitors to offer a cross-section of services including voice, data, and video as bundled services directly to the end consumer. This profile examines the Czech communications market, describing the players, the main issues they face, and their strategies for future growth.

Enterprise-State Relations after Mass Privatization: Their Character in Mongolia

Mass privatization is the centerpiece of policies aiming to sever the old links between state and enterprise and to channel interactions into modern legal and regulatory forms. Thus, enterprise-state relations are an important indicator of the effect of mass privatization. We present a detailed picture of those relations for Mongolia, which has implemented a comprehensive voucher-privatization scheme. The state interacts with enterprises in multifarious ways, many inconsistent with the role of the removed regulator that is the objective of reforms. We find that intensity of interaction is strongly related to the size of state ownership. Indeed, our results suggest the incipient creation of two different privatized sectors, one in which there is partial state ownership, which accounts for a large proportion of enterprise-state interactions, and one in which there has been complete privatization, with enterprises far removed from the state.

The role of state enterprises in the transition from command to market economies

In transition from command to market economies total privatization has proved to be impossible to achieve, and a substantial part of large enterprises are likely to remain in full or partial state ownership. Hasty privatization has in many cases even proved to be destructive. There is a need to reconsider the basic approach to transition. Contrary to conventional wisdom prevailing in mainstream economics state-owned enterprises (SOEs) are not necessarily inferior to private firms in economic efficiency. J. Kornai's soft-budget constraint is reconsidered. Two models are suggested under which SOEs may prove to be viable in the long run and serve to promote a smoother physical transition. Under Model One (which is the general case) SOEs are largely separated from the state and operate on the basis of profit maximization. Under Model Two (which applies to certain industries) different objective functions are chosen for purposes of economic efficiency. Finally, preserving SOEs is seen as an alternative means of reducing inequitable income distribution at the source where primary incomes are created.