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Does innovation explain the performance gap between privatized and private firms?

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  • Ullah, Barkat
Abstract
In this study, using a unique firm-level survey database, I investigate innovation for privatized former state-owned enterprises (SOEs) versus originally private firms (private at inception) in 30 Eastern European and Central Asian (ECA) countries. Besides using an invention-based narrow definition of innovation, I use an imitation and adaptation-based broad definition of innovation. I find that origin of the firm matters for its innovativeness; privatized former SOEs in transition economies are less innovative than originally private firms. The results hold after controlling for important firm and country characteristics affecting firm innovativeness. Using alternative, patent-based innovation measures provides support to the main findings of the study. These findings on the relation between firm origin and innovation provide a possible explanation for the underperformance of privatized firms compared to private firms.

Suggested Citation

  • Ullah, Barkat, 2021. "Does innovation explain the performance gap between privatized and private firms?," Journal of Economics and Business, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:jebusi:v:113:y:2021:i:c:s0148619519303832
    DOI: 10.1016/j.jeconbus.2020.105946
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    More about this item

    Keywords

    Firm innovation; Privatization; Firm growth; Transition economy;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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