Academic journal article Journal of Comparative International Management

Economic Liberalization, Entrepreneurial Development and Manufacturing Priorities in Ghana (1)

Academic journal article Journal of Comparative International Management

Economic Liberalization, Entrepreneurial Development and Manufacturing Priorities in Ghana (1)

Article excerpt

Recent studies on privatization in emerging economies have shown significant efficiency and performance improvements of privately owned enterprises over state-owned enterprises (SOEs). However, the ownership source of the efficiency and performance improvements observed in the privately owned enterprises has not been examined. Secondly, the extent to which privately owned enterprises are increasing their efficiency, productivity, and competitiveness in the competitive business environment in Sub-Saharan African emerging economies have not received any attention. This study examines the enterprise ownership source of privately owned enterprises' efficiency and performance improvements using firm-level data from the manufacturing sector of Ghana. The results show that manufacturing efficiency and quality improvements observed in the privately owned enterprises could be traced to the activities of privatized foreign-domestic joint venture enterprises. However, as market competitive intensity increases, wholly domestic-owned enterprises emphasize manufacturing efficiency and quality improvements more than foreign-domestic joint venture enterprises. Implications for policy are discussed.

Introduction

With the economic transformation of many emerging economies from state-controlled capitalism towards entrepreneurial capitalism, economic liberalization and privatization of state-owned enterprises (SOEs) are seen as central mechanisms in promoting efficiency, productivity growth, entrepreneurial development and international competitiveness. The implementation of economic liberalization and privatization policies imply the transfer of corporate ownership from the state to private entrepreneurs and with it the evolution of new challenges about the strategic organization of activities. Many studies have investigated the impact of privatization and economic liberalization policies in emerging economies. The economics, finance, and public policy literatures have focused on the efficiency and performance differentials between privately owned enterprises and SOEs (Boubakri and Cosset, 1998; D'Souza and Megginson, 1999; Galal, Jones, Tandon, and Vogelsang, 1994; Megginson, Nash, and Van Randenborgh, 1994; Vining and Boardman, 1992). Strategy and organizational researchers have turned their attention to the theoretical and empirical examination of the transformation of firms from state-owned enterprises to private ownership and how they affect the organization of firm activities in emerging economies. The few empirical studies have focused on the impact of foreign acquisition of privatized SOEs on post-privatization performance (Uhlenbrnck and De Castro, 2000); the effects of country characteristics of privatized firms on firm strategy and performance (DeCastro and Uhlenbruck, 1997); the performance differentials between SOEs and private enterprises (Ramaswamy, 2001); and the effect of strategic choices in explaining the performance changes in newly privatized firms (Andrews and Dowling, 1998).

Despite the importance of economic transformation to the development of corporate entrepreneurial capabilities in emerging economies, questions relating to how privately owned enterprises are increasing their efficiency, productivity and competitiveness in the newly created business environment have received little attention. Although a number of studies have shown that privately owned enterprises are more efficient and profitable than SOEs (see the meta-review of 153 studies by Villalonga, 2000), the studies did not properly control for the ownership source of the efficiency and performance improvements. Are the efficiency and performance improvements in the privately owned enterprises due to the activities of the privatized foreign-domestic partner joint venture enterprises (FDJVs) and wholly-foreign owned enterprises (who have privileged access to superior resources in the form of capital, technology, and managerial skills and expertise) or that of wholly domestic-owned private enterprises (WDOEs) which have not been previously owned by the state? …

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