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Abstract. A privatization wave has swept the world, starting in the U.K. in the early 1980s and then progressing to other developed and lessdeveloped nations. This study examines how the country characteristics for the formerly state-owned enterprises relate to the nature of the privatization deal and the strategy of the acquiring firm. In particular, this paper examines how country characteristics affect government privatization policies and, in turn, firm strategy. Results indicate that there are differences with respect to the characteristics of privatization and government policies that translate into differences in firm strategy in former communist, less-developed and developed countries.
INTRODUCTION
Privatization of state-owned enterprises (SOEs), i.e., the transfer of firm ownership from governments to private investors [Vickers and Yarrow 1988], has become an important tool of economic policy, especially in less-developed and former communist countries [Nankani 1990]. For free market economies, privatization is largely a philosophical issue. For less-developed and former communist countries, it also involves development imperatives [Vernon 1988]. Since the mid-1980s, there has been a significant increase in the number of privatization deals [Young 1987], in particular in less-developed and, more recently, post-communist economies.
Most research on privatization has been essentially evaluative and has focused on the societal benefits of privatization [Donahue 1989; Ramamurti 1992]. The economics and finance literatures have discussed methods for privatizing (e.g., the voucher system, liquidation) [Frydman and Rapaczynski 1992; Vickers and Yarrow 1988], while management research has recently added to work in economics in attempting to determine the outcomes of privatization [Goodman and Loveman 1991; Parker and Hartley 1991].
Pro-privatization arguments suggest not only that reductions in government ownership should improve a country's economy, but also that competitive environments and capital-market discipline increase the efficiency of privatized SOEs [Aharoni 1986; Goodman and Loveman 1991; Perry and Rainey 1988]. However, empirical research on this point and on the question of the most effective methods of privatizing has yielded conflicting results [Cook and Kirkpatrick 1988; Hutchinson 1991; Parker and Hartley 1991; Berger 1991; Targetti 1992; Rondinelli 1994]. Reasons for these discrepancies might include, (I) an overreliance on anecdotal data as the basis for policy and recommendations, (2) a lack of rigorous theoretical and cross-disciplinary approaches, and (3) an emphasis on public policy outcomes of privatization, to the neglect of firm-level...