THE LIFE CYCLE OF STATE OWNERSHIP

Abstract

Background and Objective: This article aims to explore the life cycle of state ownership, especially with reference to state-owned enterprises. This is important for the reason that, despite calls from many quarters of the world that states should relinquish their ownership of SOEs as a result of their numerous corporate governance problems, these enterprises still remain, as evidenced by the number of new and existing SOEs compared with those privatised and internationalised.

Materials and methods: This article consolidates stand-alone elements of SOEs life cycle in the contemporary academic discourse on SOEs and makes recourse to experts’ and role-players’ insights to attempt to explain the life cycle of SOEs, from entry to exit.

Results: In this context, this paper extends the theory of the corporate life cycle by illustrating that even though SOEs still remain despite calls for states to relinquish ownership, SOEs like private sector enterprises (PSEs) do exit. However, rather than outright winding up, as in the case of PSE exits, SOEs exit using different forms of strategies, including privatisation and more recently internationalisation.

Practical implication: The life cycle of state ownership is important in modelling the problematic (corporate) governance of state enterprises and informing their theoretical life cycle.

Conclusion and summary: The conventional wisdom, in line with contemporary academic discourse, is that the staying power displayed by SOEs is sustained by the assistance of their owning states, as SOEs are usually too important and big for states to fail. Although this conclusion appears correct, this paper further shows that in addition to states providing assistance to SOEs at the entry and development stages, once SOEs are established, they undergo a developmental stage in the form of restructuring, and that in contrast to what is believed in many quarters of the world, as sustained by the stand-alone prior research on the elements of
the SOE life cycle in the academic discourse on SOEs, SOEs actually exit. It concludes by identifying a topical and important area for further research.