ABSTRACT
Public enterprise is a hybrid and any analytic framework must reflect the contribution of both parents. Public enterprises respond to both markets and ministers, and analysis must incorporate both market and hierarchical factors. In sum, analysis of public enterprises requires specification of both market and ministerial factors. The framework for analyzing market factors is well developed in the industrial organization literature. The traditional industrial organization approach is characterized by the structure-conduct-performance paradigm. Institutional factors are most often implicit in the industrial organization literature. The more recent explanatory approaches to the existence of public enterprises, particularly Borcherding , therefore include the institutional factors, building heavily on Williamson’s penetrating insights. The market failure justification for the existence of public enterprises only explains why markets would not work but not why public enterprises would do better than private firms in such markets and, if so, why public enterprises would be chosen over other policy instruments such as regulation or taxes.
