ABSTRACT
This chapter identifies, at a fundamental theoretical level, the impacts of privatization on the operations of an enterprise. It aims to present the delineation of various characteristics of an activity's structure and environment that point to either public or private forms of control as the most effective in accomplishing society's aims. The chapter argues that at a fundamental level the intrinsic differences between public and private enterprise must ultimately be based on incentives, and these in turn are based on the available information. The labels "public ownership" and "private enterprise suggest two discrete and very different ways of structuring economic activity and utilizing productive assets. The corresponding simple view of privatization is that it inevitably and significantly alters the way in which resources are allocated. The conclusion that privatization typically has a major impact on the allocation of resources is probably correct.
