Is institutional traction a double edged sword? : a case of state owned enterprises

Abstract

State owned enterprises (SOEs) are responsible for redistribution to citizens of an economy on behalf of governments. They also play important roles for the governments in being their strategic arms for multiple objectives. Simultaneously, as commercial organizations in the world of business, they earn money for their governments, who are their owners. Therefore, they have a position with respect to their governments that they derive by being important to them. This position is associated with potential advantages. This position with potential advantages is termed as “institutional traction” in this paper. Normative literature on SOEs in the new world order emphasizes efficiency as an important end to achieve. We try to explore the effect of institutional traction of SOEs on their productivity, a measure of efficiency of SOEs. Also, competition and extent of private ownership are emphasized as new moderators to increase efficiency in SOEs. In this paper, therefore, we explore the effect of institutional traction on efficiency of SOEs, in the face of competition and extent of private ownership.