Enterprises and Government: Dual Pillars in Endogenous Growth

This article examines the dual-track mechanism of private and state-owned enterprises (SOEs) in driving endogenous economic growth, specifically within the framework of endogenous growth theory (EGT). While Adam Smith's classical theories emphasized the efficiency of profit-seeking behavior in private enterprises, modern economic theories suggest that market failures can hinder optimal resource allocation, even in private firms. In contrast, state-owned enterprises are not inherently inefficient; with proper governance reforms, they can adapt to competitive market conditions and even enhance innovation and market competitiveness, particularly in strategic sectors. The study argues that the optimal ownership structure should not be static but evolve dynamically, responding to changing technological advancements, market structures, and national economic priorities. Through a case study of China's industrialization, the essay highlights how SOEs and private enterprises can complement each other, particularly during the early stages of industrialization. By balancing the strengths of both ownership types, the government can guide industrial development, stimulate innovation, and mitigate the risks associated with market failures. The essay concludes that an effective industrial policy should focus not on the ownership type itself but on leveraging the comparative advantages of both private and state-owned firms to foster long-term economic growth and development.