Experience with Privatisation: A New Institutional Economics Perspective

Does privatisation or corporatisation under state ownership produce better performance in cases where institutions are weak? This paper hypothesises that privatisation will dominate corporatisation in regulated industries when it increases competition or contestability or motivates private owners to invest and maximise profits. It might also dominate if it makes use of reputation for enforcing contracts. The paper illustrates the argument using data from four case studies of telecommunications and water in Africa and calls for more research on a larger sample in order to test the theory.