Academic journal article International Journal of Comparative Sociology

A Structural Analysis of the Value-Added Effects of Enterprises: A Re-Assessment

Academic journal article International Journal of Comparative Sociology

A Structural Analysis of the Value-Added Effects of Enterprises: A Re-Assessment

Article excerpt


In both developed and developing societies, state-owned or public enterprises play multiple roles in economic development. In some instances, these roles are c[early defined and amenable to assessment. In other instances, especially in developing areas, these functions are either loosely stated or not defined at all, such that efforts to assess how well they perform become exercises in futility. In these latter cases, capturing whatever effects these enterprises are able to create improves the odds of conducting a holistic or a more complete assessment of their economic performance.

The purpose for this paper is to demonstrate the use of a path analytic model to examine effects created by state-owned enterprises or their economic contributions to society's output. To accomplish this goal, data previously applied to other econometric models are used to emphasize the practical application of this methodology. The intent is to determine whether improved results might emerge from applying a path analytic model to the same data since path analysis accounts for direct and indirect effects.


The debate on how contributions made by state-owned enterprises to society should be measured has not subsided. The past decade, for instance, witnessed concerted drives to enhance productivity, operational efficiency and accountability in public sector organizations (Government Accounting Standard Series 1992, 2000; The Gore Report 1993; Kearns 1995). The goal had been to turn public sector organizations from pure production goals to efficiency objectives and to make them sensitive to prices, costs, and consumer demand (Lee and Nellis 1990). Several views emerged on mechanisms for achieving such goals. While improved performance remained the primary focus in those efforts, configuring generalizable frameworks for a systematic scrutiny of government economic activity became equally challenging.

This paper does not seek to rehash much of the work done over the past two decades in this area. (1) The paper is neither aimed at reformulating nor restructuring the debate on the overall performance of government. For, it is known in a general way that some government programs perform far below their expected potential. Further, a thorough analysis of the outcome of government economic activity over the past two decades provided data and answers to several of the questions regarding organizational performance, economic efficiency and viability (Neves, Wolf, and Benton 1986; Dollar 1990; Jefferson, Rawski, and Zheng 1992; Plane 1992; Lee and Nellis 1990; Doamekpor 1998).

In previous research work involving state-owned enterprises, Dollar (1990), Nellis (1986), and Perkins (1988), focused on allocative efficiency, financial performance, impact on resources, financial viability and total factor productivity. Plane (1992) examined performance using ordinary least squares and other regression-related methods. Doamekpor (1998) examined contribution to growth using the residual analysis approach. Caves and Christensen (1980) focused on efficiency using a case study method and productivity index analysis, in which measured quantities of output and input including shares of revenues and expenditures from output and input were applied. Swanson and Wolde-Semait (1988), Floyd et al. (1988), and Nair and Filippides (1988) examined the proportion of gross national output attributable to state-owned enterprises and considered questions of economic efficiency and economic viability. Lee and Nellis (1990), Prasnikar, Svejnar, and Klinedinst (1992), and Dollar (1990) examined enterprise reform programs and privatization issues in China and socialist enterprises following efforts world-wide to enhance productivity, profitability, accountability, and economic viability. In fact, most of these studies (Nellis 1986; Plane 1992; Doamekpor 1998; (2) Nair and Filippides 1988; Swanson and Wolde-Semait 1988; Prasnikar, Svejnar, and Klinedinst 1992) used cross-sectional data involving several countries to arrive at varying conclusions on different aspects of state-owned enterprises' economic activities. …

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