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Welfare effects of state-owned multinational enterprises: A view from agency and incomplete contracts theory

Asmund Rygh (Alliance Manchester Business School, University of Manchester, Manchester, UK)

International Journal of Public Sector Management

ISSN: 0951-3558

Article publication date: 5 March 2018




The purpose of this paper is to theoretically investigate the potential welfare effects of state-owned enterprises’ (SOEs) international operations.


The paper is conceptual, applying standard economics state ownership theory based on agency theory and incomplete contracts theory to different forms of SOE cross-border operations.


When private firms are risk averse or financially constrained, or when writing complete contracts and making credible commitments are not possible, state ownership can achieve objectives such as international operations supporting domestic industrial policy, addressing social objectives in another government’s territory and addressing transnational market failures. Welfare effects may, however, also depend on home-host country relationships.


This is the first application of standard economics state ownership theory to state-owned multinationals. The analysis shows that key conclusions from the state ownership literature in a domestic setting can be extended to international operations, and highlights new theoretical issues arising from SOEs going beyond their home jurisdiction to that of another government.



The author thanks the editors, the three anonymous reviewers and Ingrid Leknes for their essential inputs which greatly helped improve the paper. The author also thanks Gabriel R.G. Benito, Trude Gunnes, Carl Henrik Knutsen, Alexander Schjøll and participants at the 2014 Annual Meeting of the Norwegian Association of Economists (Forskermøtet), BI Norwegian Business School (Oslo, Norway) and at the 2014 FIBE Annual Meeting, Norwegian School of Economics (Bergen, Norway) for helpful comments and discussions on an early draft.


Rygh, A. (2018), "Welfare effects of state-owned multinational enterprises: A view from agency and incomplete contracts theory", International Journal of Public Sector Management, Vol. 31 No. 2, pp. 207-220.



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