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Knowledge transfer incentives and optimal privatization via rival’s partial equity ownership

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  • Lai, Fenghui
  • Wang, Dazhong
  • Yang, Nan

Abstract

This study considers the government’s optimal strategy for partial privatization of a public firm via private rival’s partial equity ownership when incentivizing the private firm to transfer cost-reducing knowledge matters. When facing majority shareholding constraint, it is optimal for the government to privatize the public firm at a degree that exactly incentivizes knowledge transfer if knowledge value is intermediate, otherwise no privatization is optimal. Privatization increases social welfare but decreases consumer surplus. We also discuss the case when the government faces no minimal shareholding constraint.

Suggested Citation

  • Lai, Fenghui & Wang, Dazhong & Yang, Nan, 2021. "Knowledge transfer incentives and optimal privatization via rival’s partial equity ownership," Economics Letters, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002470
    DOI: 10.1016/j.econlet.2021.109970
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    References listed on IDEAS

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    More about this item

    Keywords

    Knowledge transfer; Partial privatization; Partial equity ownership;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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