The purpose of this paper is to investigate fundamental performance drivers in a state-owned enterprise (SOE) in the context of organizational theories.
Abstract
Purpose
The purpose of this paper is to investigate fundamental performance drivers in a state-owned enterprise (SOE) in the context of organizational theories.
Design/methodology/approach
This paper is based on a case analysis investigating how several factors, considered in the context of organizational theories, have combined to influence sustained performance at the Botswana Telecommunications Corporation (BTC). The study analyses both quantitative and qualitative data pertaining to an 18-year period from 1995 to 2012.
Findings
The paper supports the widely held view that agency and resource-based theories explain good performance, but challenges the popular view that political influence is always self-interest driven. A concept of positive public choice, under which such influence is driven by stakeholder interests and sustainability emerges. The case reveals that a selective approach to stakeholders defined how BTC crafted its good performance in a politically conducive environment.
Practical implications
Based on the research findings, a framework unifying political intervention with stakeholder interests needs to be developed and formalized with a link to SOE objectives. The framework would have clear performance measures linked to it, adequately monitored under a governance structure constituted from well-incentivized boards and managers with adequate strategic corporate resources under their control. The paper proposes such a framework.
Originality/value
The paper reveals an unexplored area of potential research, i.e. a positive public choice perspective under which societal interests are modeled with enterprise sustainability through political processes often blamed for poor performance.
Details
Keywords
The purpose of this paper is to examine empirical evidence on factors that influence performance of state owned enterprises (SOEs). With a focus on power utilities, the paper…
Abstract
Purpose
The purpose of this paper is to examine empirical evidence on factors that influence performance of state owned enterprises (SOEs). With a focus on power utilities, the paper investigates how such several factors interact with each other to influence ultimate performance.
Design/methodology/approach
Data on the SOEs constituting the sample is predominantly obtained from the audited annual financial statements and other publicized reports of entities for a 20-year period spanning from 1994 to 2013. The audited annual financial statements provide quantitative data whilst the rest of qualitative information is available from narratives in the annual reports. The study takes liquidity, board strength, extent of stakeholder presentation on board and government’s involvement in pricing as proxy variables for resource-based agency, stakeholder and public choice theories, respectively. Using performance as the dependent variable, the study variables are modeled in a regression model.
Findings
The paper finds that good SOE performance could be explained in terms of the agency and resource-based theories, where the authors found strong boards and good liquidity profiles to be positively related to good performance. A wider stakeholder representation on SOE boards correlates negatively with performance. Similarly, the higher the level of government involvement in the tariff setting process the weaker the performance results. Based on the results, the paper concludes that SOEs performance is underpinned by a plethora of organizational issues: agency, public policy, stakeholder and resource-based issues. These issues must therefore inform the appointment of SOE management and also their performance contracts.
Practical implications
The study suggests that SOE governance structures should be centered around four main unifying themes; agency, stakeholders, resources and shareholder engagement. From an agency perspective, board appointments should first be based on merit and stakeholder representation comes in as a subset. Resources availability should be paired with objective imperatives and engagement with political leadership should be limited to matters of policy through a regulatory and legal framework.
Originality/value
This study provides some practical insights from both an administration and policy perspective. First, it reveals the importance of and a linkage between both adequate resources and strong boards, but also the need to find the right balance in managing stakeholder interests SOEs face. The study does not necessarily support the popular view of completely eliminating government interference in SOE affairs, but rather advances optimal political influence through regulatory and legal frameworks without giving up ownership rights.