An alternative to privatization of transition economy state-owned enterprises : the case of China
Southern New Hampshire University
Recent literature has focused on privatization in addressing the issue of making state-owned enterprises (SOEs) more competitive in the global marketplace. As a result, a number of SOEs have been privatized in many transition economies. Unfortunately, there have not been major performance improvements in the aftermath of privatization within these contexts. Therefore, we are interested in exploring whether privatization is an incomplete or maybe even erroneous solution to making transition economy SOEs more competitive. Using China as an illustration, this paper analyzes the possibility of employing contractual incentives as an alternative strategy in conquering SOE inefficiency, and proposes that a well-designed incentive system will work as an effective countermeasure as opposed to straightforward privatization in solving the SOE problems in transition economies.
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