State Logic and Governance

Abstract State owned enterprises (SOEs) are playing an increasing role in many national economies, particularly outside the advanced countries. These trends somewhat counter the established literature portraying SOEs as inefficient, bureaucratic, and poorly managed entities that perform worse across a variety of measures than privately owned firms (POEs). This chapter proposes a more nuanced view of the SOEs. We argue that their performance ultimately depends on the combination of 1) the objectives or the logics driving the governmental involvement in the enterprises (welfare state, developmental, or predatory) and 2) the quality of the firm-level governance, defined by the quality of the corporate governance and managerial labor market institutions. We combine the different state logics and the firm governance to propose a taxonomy with six distinct configurations, each generating distinct outcomes in terms of SOE relative to POE performance and their wider implications for national economic performance. We conclude with a pilot empirical exercise comparing some basic indicators of contemporary national economic outcomes in examples of each of our six configurations.