INTRODUCTION: DOES OWNERSHIP MATTER? There has been a continuing controversy about the role and relevance of ownership as the major determinant of the performance of ﬁrms, industries and economies. Left-wing political parties often prefer state ownership of the means of production, which enables governments to intervene to determine prices, outputs, wages and employment throughout the economy. In contrast, right-wing political parties favour private ownership as a means of achieving eﬃciency objectives. They criticise state ownership for its ineﬃciencies, ﬁnancial losses, crowding-out eﬀects and its poor record on innovation. The implication is that these adverse economic eﬀects will be removed under private ownership. The debate between state and private ownership raises the general question of whether ownership is an important determinant of economic performance. This question needs answering in two stages. First, consideration needs to be given to whether economic theory oﬀers diﬀerent predictions about the impact of ownership on economic performance; and second, empirical work is needed to determine the accuracy of these predictions. Consider the following ‘story’. After the privatization of previously state-owned enterprises it is observed that both productivity and proﬁtability rise dramatically. The oﬃcial explanation oﬀered is that employees have become shareholders in the newly-privatized companies and that they want their companies to succeed; that their companies have been released from the detailed controls of central government and given the freedom to manage their companies; and that they have been exposed to the commercial disciplines of the customer...
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