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How much state ownership do hybrid firms need for better performance?

Small business economics, 2022-10, Vol.59 (3), p.845-871 [Peer Reviewed Journal]

The Author(s) 2021 ;The Author(s) 2021. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 0921-898X ;EISSN: 1573-0913 ;DOI: 10.1007/s11187-021-00556-8

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  • Title:
    How much state ownership do hybrid firms need for better performance?
  • Author: Nguyen, Bach ; Do, Hoa ; Le, Chau
  • Subjects: Academic staff ; Access ; Adequacy ; Business and Management ; Business ownership ; Companies ; Developing countries ; Emerging markets ; Entrepreneurs ; Entrepreneurship ; Governance ; Government subsidies ; Industrial Organization ; LDCs ; Legitimacy ; Management ; Microeconomics ; Organizational performance ; Ownership ; Plain language ; Policy making ; Politics ; Private sector ; Small business ; Transition economies
  • Is Part Of: Small business economics, 2022-10, Vol.59 (3), p.845-871
  • Description: Hybrid ownership—sharing partial business ownership with the state—is a new form of political connections that entrepreneurs in developing countries may employ to improve their access to key resources. This study investigates hybrid ownership as a strategic decision of entrepreneurs running small businesses in Vietnam—a transition economy. Utilising the resource dependence theory and legitimacy viewpoint, we propose and evidently show that increased state ownership in hybrid firms leads to improved performance. However, increasing state ownership beyond a minority share threshold harms firm performance due to the presence of agency costs. Also, the involvement of the state in firm governance reduces the benefits gained from having state ownership. Plain English Summary Is the more the better? How much state ownership really matters for hybrid firms to enhance their performance? More state ownership means more access to resources and privileges; but too much state ownership may reduce firm efficiency due to its poor governance. Analysing more than one million observations of small businesses in Vietnam, this study offers three insightful implications. First, for academics, institutional conditions should be considered when investigating political connections, especially in an emerging market context. Second, for practitioners, political connections in the form of hybrid ownership when being held at an adequate level can boost firm performance. However, an exceeding level of state ownership in hybrid firms may become harmful. Third, for policymakers, we suggest that forming hybrid business ownership with the private sector helps firms make use of state-owned resources. This collaboration is a win-win solution as long as the state ownership remains at an adequate level.
  • Publisher: New York: Springer US
  • Language: English
  • Identifier: ISSN: 0921-898X
    EISSN: 1573-0913
    DOI: 10.1007/s11187-021-00556-8
  • Source: Springer Open Access Journals
    ProQuest Central
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