What Causes Privatization? Evidence from Import Competition in China

Qing HU; Wenjing LI; Chen LIN; Lai WEI

doi:10.1287/mnsc.2023.4847

What Causes Privatization? Evidence from Import Competition in China

Qing HU, Wenjing LI, Chen LIN, Lai WEI^*

^*Corresponding author for this work

FACULTY OF BUSINESS

Research output: Journal Publications › Journal Article (refereed) › peer-review

5 Citations (Scopus)

Abstract

In this paper, we identify product market competition as a driver of privatization. Using product market shocks caused by trade liberalization of China, which has the world’s largest state sector, we find that subjecting state-owned enterprises (SOEs) to higher competition leads to an increase in private ownership. This response is strengthened when SOEs operate in industries with large technology or productivity gaps from those in the frontier economies or when SOEs impose large fiscal burdens on local governments. Our findings are consistent with politicians’ incentives to boost economic growth for better career development and to shed burdens when rents decrease.

Original language	English
Pages (from-to)	3080-3101
Number of pages	22
Journal	Management Science
Volume	70
Issue number	5
Early online date	21 Jun 2023
DOIs	https://doi.org/10.1287/mnsc.2023.4847
Publication status	Published - May 2024

Bibliographical note

Publisher Copyright:
© 2024 INFORMS Inst.for Operations Res.and the Management Sciences. All rights reserved.

Funding

Funding: C. Lin acknowledges financial support from the National Natural Science Foundation of China [Grant 72192841]. Q. Hu acknowledges financial support from the Fundamental Research Funds for the Central Universities and the Renmin University of China [Grant 21XNF002]. W. Li acknowledges financial support from the Major Project of the Ministry of Education [Grant 22JZD007] and the National Natural Science Foundation of China [Grant 72132002]. L. Wei acknowledges financial support from the Research Grants Council, University Grants Committee [Grant 13501619].

Keywords

innovation
investment
operational efficiency
privatization
product market competition
state ownership

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1287/mnsc.2023.4847

Cite this

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title = "What Causes Privatization? Evidence from Import Competition in China",

abstract = "In this paper, we identify product market competition as a driver of privatization. Using product market shocks caused by trade liberalization of China, which has the world{\textquoteright}s largest state sector, we find that subjecting state-owned enterprises (SOEs) to higher competition leads to an increase in private ownership. This response is strengthened when SOEs operate in industries with large technology or productivity gaps from those in the frontier economies or when SOEs impose large fiscal burdens on local governments. Our findings are consistent with politicians{\textquoteright} incentives to boost economic growth for better career development and to shed burdens when rents decrease.",

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AU - HU, Qing

AU - LI, Wenjing

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AU - WEI, Lai

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N2 - In this paper, we identify product market competition as a driver of privatization. Using product market shocks caused by trade liberalization of China, which has the world’s largest state sector, we find that subjecting state-owned enterprises (SOEs) to higher competition leads to an increase in private ownership. This response is strengthened when SOEs operate in industries with large technology or productivity gaps from those in the frontier economies or when SOEs impose large fiscal burdens on local governments. Our findings are consistent with politicians’ incentives to boost economic growth for better career development and to shed burdens when rents decrease.

AB - In this paper, we identify product market competition as a driver of privatization. Using product market shocks caused by trade liberalization of China, which has the world’s largest state sector, we find that subjecting state-owned enterprises (SOEs) to higher competition leads to an increase in private ownership. This response is strengthened when SOEs operate in industries with large technology or productivity gaps from those in the frontier economies or when SOEs impose large fiscal burdens on local governments. Our findings are consistent with politicians’ incentives to boost economic growth for better career development and to shed burdens when rents decrease.

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KW - investment

KW - operational efficiency

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KW - product market competition

KW - state ownership

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What Causes Privatization? Evidence from Import Competition in China

Abstract

Bibliographical note

Funding

Keywords

UN SDGs

Access to Document

Other files and links

Trade-induced Competition and Corporate Transformation (貿易競爭和企業轉型)

Cite this

What Causes Privatization? Evidence from Import Competition in China

Abstract

Bibliographical note

Funding

Keywords

UN SDGs

Access to Document

Other files and links

Projects

Trade-induced Competition and Corporate Transformation (貿易競爭和企業轉型)

Cite this