Public goals and private incentives: Privatization and its consequences for the theory of the firm

The dissertation explores the theoretical challenges and consequences privatization poses for the researchers and the theory of the firm. The main assertion of the thesis is that the latest theories of the firm, namely agency theory, transaction-cost economics, and information economics do not explain, predict, or justify privatization.; Privatization programs underscored the shortcomings of three fields in the economic theory: (1) transaction-cost economics and agency theory; (2) the status and the role of the public enterprise in the economy; and (3) the role of ownership in information economics. To support the main claim, the dissertation attempts to demonstrate that the theories examined do not distinguish between a private firm with a large and diffuse ownership structure and a public enterprise. This demonstration is based on a comparison of a private firm and a public enterprise in terms of several characteristics the analysis establishes. The dissertation's main organizing principle is the concept of privatization. With its help, the logic and the structure of the dissertation can be easily determined and reviewed. The first step in the logic of this thesis is to develop the concept of privatization. After defining the concept, the analysis turns to the objects of privatization. Since public enterprises have mostly been the targets of privatization programs in the European democracies, the second step is a characterization of public or state-owned enterprises. Chapter 3 offers a comparison of private and public companies with the help of the conceptual framework of transaction-cost economics. Moreover, since privatization is a transfer of ownership, the status of the ownership concept is examined in the above mentioned theories of the firm. Chapter 4 describes the agency relationship in a more formal fashion. The research was directed in such a way that it would supply results and thoughts for future research.