The Inferior Performance of State Owned Enterprises: Is it Due to Ownership or Market Structure?

Abstract

We analyze differences in performance between private companies (PCs) and state owned enterprises (SOEs), with an emphasis on the effects of market structure. We use a comprehensive panel covering all registered companies during the 1990s in Norway, a country where SOEs play an important role in regular markets. Return on assets as well as costs relative to sales revenue are used as measures of performance in models that investigate markets where SOEs and PCs actually compete with each other. After controlling for other factors that may affect performance, we find that SOE-performance is markedly lower than that of PCs. We also find that performance is positively related to the market share of companies and market concentration rates.

Keywords: Firm performance, market structure, Norway, state ownership

JEL Classification: G32, G34, L20