Corporatization

Corporatization is the process of transforming and restructuring state assets, government agencies, public organizations, or

The move towards neoliberal economic reform and New Public Management public service reform in the 1980s led to privatization of public functions in many countries.^[6] Corporatization was seen as a half-way house on the road to privatization.^[1] These state-owned enterprises are organized in the same manner as private corporations, with the difference that the company's shares remain in the ownership of the state and are not traded on the stock market.^[5] Corporatization is today often seen as an end in itself in order to introduce autonomy in organizations, hoping that this brings efficiency gains.^[7]

The

Some argue that the trend towards corporatization has sped up due to the financial crisis,[4] although there is evidence that there has been a trend towards corporatization since at least the start of the century.^[3]

Reasons and effects

Corporatization can be used to improve efficiency of public service delivery (with mixed successes), as a step towards (partial) privatization, or to alleviate fiscal stress.

(Potentially) improving efficiency

A key purpose of corporatization is externalization.^[1] The effect of corporatization has been to convert state departments (or municipal services) into public companies and interpose commercial boards of directors between the shareholding ministers / city council and the management of the enterprises.^[5] Such externalization creates legal and managerial autonomy from politicians, which could potentially increase efficiency, as it safeguards the firm from political exploitation. However, corporatization can also fail to bring efficiency (or cause inefficiency), because this autonomy reduces the government's ability to monitor its management. Whether corporatization is beneficial may depend on the nature of the service that is corporatized, where autonomy may be less beneficial for more politicized and complex services.^[7]

Step towards privatization or hybridization

Although corporatization is to be distinguished from privatization (the former involves publicly owned corporations, the latter privately owned ones), once a service has been corporatised it is often relatively easy to privatise or part-privatise it, for example by selling some or all of the company's shares via the stock market.

Corporatization is also a means to alleviate fiscal stress, as corporations can become standalone organizations that do not count towards municipalities' budgets.[1]^{[3][4][9][10]}

Prevalence

Corporatization of state enterprises and collectively owned enterprises was a major component of the

On a national scale, major areas of services which have been corporatized in the past include:^[citation needed]

• National railroads, the initial impetus to corporatization of functions that had belonged to national and local governing bodies began in the sphere of national
  railroad
  construction in the mid-19th century.
• Corporatized highways, for example
  toll roads
  .
• Corporatized electricity
• Telecommunications

Local level

On a local scale, major areas of services which have been corporatized include:^[7][12]

• Corporatized water, for example, the Dutch water supply companies are publicly owned corporations (mostly by municipalities, but also by regional governments). For involvement of private corporations in water supply, see water industry and water privatization.
• Bus services
• Refuse collection
• Housing development
• State employment services
• Theaters and cultural institutions

Further reading

• Citroni, G., Lippi, A., & Profeti, S. (2013). Remapping the state: inter-municipal cooperation through corporatization and public-private governance structures. Local Government Studies, 39(2), 208–234.
• Ferry, L., Andrews, R., Skelcher, C., & Wegorowski, P. New development: Corporatization of local authorities in England in the wake of austerity 2010–2016. Public Money & Management, 38(6), 477–480.
• Grossi, G., & Reichard, C. (2008). Municipal corporatization in Germany and Italy. Public Management Review, 10(5), 597–617.
• Tavares, A., & Camoes, P.J. (2007). Local service delivery choices in Portugal: A political transaction costs network. Local Government Studies, 33(4), 535–553.
• Voorn, B., Van Genugten, M.L., & Van Thiel, S. (2017). The efficiency and effectiveness of municipally owned corporations: a systematic review. Local Government Studies, 43(5), 820–841.
• Voorn, B., Van Thiel, S., & Van Genugten, M.L. (2018). Corporatization as more than a recent crisis-driven development. Public Money & Management, 38(7), 481–482.

See also

Examples:

• New Zealand Electricity Market

References