Bureaucrats in business: The roles of privatization versus corporatization in state-owned enterprise reform

This article provides evidence from a sample of 12 developing countries that countries which improved state-owned enterprise performance the most followed a comprehensive strategy of reforms, including a combination of privatization and corporatization. Further evidence that corporatization works better in combination with ownership and other reforms is provided through an analysis of government contracts with public managers, private managers and private owners. Contracts with private managers and owners did better than contracts with public managers in part because the property rights of the former gave them a larger stake in the outcomes. The article analyzes the political economy of state enterprise reform and finds that privatization and corporation have similar political costs and tend to succeed or fail together. Where reform was politically desirable, politically feasible, and credible, countries privatized and corporatized successfully. When countries were not politically ready to reform, alternative ownership strategies were not successful in improving performance.