Institutional reforms, productivity and profitability: From rents to competition?

Abstract

This paper explores the divergent effects of institutional reforms on firm's productivity and profits, conditional on firm's ownership. To assess this empirically, we investigate the impact of various components of institutional reforms on the performance of individual firms from Central and Eastern European countries from 1998 to 2006. The impact of reforms on profitability vis-à-vis productivity differs, which we interpret as an indication that profitability is an ambiguous measure of performance: one needs to distinguish between unproductive rents and productivity-based quasi-rents. We find that liberalization measures have more impact on state-owned firms as compared with domestic and foreign owned firms.

Ownership identity, strategy and performance: Business group affiliates versus independent firms in India

“…At the same time, state-owned enterprises do not perform as well as private independent firms. This is consistent with both the general and Indiaspecific literature that compares performance of state-owned and private enterprises (Chibber & Majumdar, 1998;Driffield, Mickiewicz, & Temouri, 2013;Estrin, Kocenda, Hanousek, & Svejnar, 2009;Goldeng, Grunfeld, & Benito, 2008).…”

“…This could be on account of the well-understood multiplicity of strategic objectives of state-owned enterprises, whose management have continually to strike a balance between business and political objectives (Bai & Xu, 2005;Driffield et al, 2013;Estrin et al, 2009;Zif, 1981). Other explanations include the moral hazard problems caused by soft budget constraints, the weak contractual incentives and managerial capacity, especially in managing projects associated with risk-taking behavior (Driffield et al, 2013;Kornai, Maskin, & Roland, 2003;Shirley & Xu, 1998).…”

Ownership Control of Foreign Affiliates: A Property Rights Theory Perspective

“…In environments that are characterised by low institutional quality, it is the foreign partner that may be better protected from expropriation risks. Foreign partners may be in a stronger position than their local partners due to wider reputational effects of explicit or implicit expropriation (Driffield, Mickiewicz, & Temouri, 2013). While under corrupt governments such expropriation is possible, it may be less likely when the foreign partner has high ownership stake in the foreign affiliate.…”

Unveiling the role of multiple blockholders: Evidence from closely held firms

“…ORBIS supplies financial and ownership information on firms operating in an ample spectrum of industries. Such a database, extensively used in other previous studies (e.g., Driffield, Mickiewicz, & Temouri, 2013, 2014Lumineau & Malhotra, 2011), is built upon from statistical offices at the state level and business registers (Driffield et al, 2014). On the one hand, this feature assures good data reliability.…”