Essays on privatization in the context of gradual reform: The case of China

This thesis studies the privatization of China's large and medium-size industrial enterprises. This thesis is comprised of three papers. The first paper investigates two questions: What are the determinants of privatization of China's large and medium-size industrial enterprises, and which kind of state-owned enterprises are privatized first? A two-stage optimization model of manager-initiated privatization process is built and two sets of factors---five firm-specific factors and three market factors---that potentially affect the probability of a firm's privatization are identified. The model is then tested with a unique dataset that spans 1995 to 2001 and is provided by the National Bureau of Statistics (NBS) of China. The predictions of the model are robustly supported by the data.;The second paper investigates the effect of a specific form of privatization, the share-holding reform, on firm performance. During the 1980s and 1990s, many state-owned enterprises (SOEs) in China were converted to share-holding firms (joint-stock companies), or corporations. This paper examines the impact of the conversion of these SOEs on a range of measures relating to current and future performance. We find that such conversion contributes to overall increases in both current productivity and innovation. Compared with other research on the impact of privatization, this paper has the advantage of studying the effect of share-holding reform on the R&D behavior of the firms, which is crucial for the future productivity and profitability of the converted firms.;Since the early 1980s, China has adopted twin policies of "reform" and "openness". By studying the effect of export activity on the probability of privatization of China's SOEs, the third paper tries to answer the following question: How do these two policies interact? Are they mutually supporting or do they operate independently? This paper finds a positive effect of a firm's participation in international markets on the probability of the firm's privatization. Thus, the relationship between exporting and privatization implies that openness is a positive inducement to institutional reform.