State-Owned Firms: Still Inefficient

14 August 2007 at 12:02 am 1 comment

| Peter Klein |

Generalissimo Francisco Franco is still dead, and state-owned firms are still inefficient. A survey of over 12,000 Chinese firms finds that “even after a quarter-of-century of reforms, state-owned firms still have significantly lower returns to capital, on average, than domestic private or foreign-owned firms.” This from “Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China” by David Dollar (great name!) and my former Berkeley classmate Shang-Jin Wei. “By our calculation,” they write, “if China succeeds in allocating its capital more efficiently, it could reduce its capital stock by 8 percent without sacrificing its economic growth.”

The paper is light on theory and interpretation, but there is a substantial literature on the problems of state ownership to which one can easily refer (good starting points here, here, and here.)

Entry filed under: - Klein -, Classical Liberalism, Institutions, Management Theory.

Bryan Caplan’s New Book Economic Freedom and Entrepreneurial Activity

1 Comment Add your own

  • 1. Marcin Tustin  |  15 August 2007 at 5:24 pm

    The title sounds familiar. An interesting question is what was the stated goal of such firms was. I suspect that maximising returns to capital was not one of those goals. In that case, this tells us little other than that managers do not optimise with regard to something which they are not supposed to, and which does not give them personally anything.

    A more interesting study would be to see if Chinese firms had maximised returns all other inputs, or with respect to labour inputs, or if they maximised outputs of goods, or what.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts


Former Guests | posts


Recent Posts



Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

%d bloggers like this: