Government Characteristics and the Legitimacy of State Ownership: A Cross-National Analysis

The legitimacy challenges experienced by state-owned companies are often described as resulting from intrinsic deficiencies of state ownership as compared with private ownership. However, this perspective cannot explain cross-national differences in the attitudes toward state-owned companies—that is, why liabilities associated with state ownership have much more detrimental impact on their legitimacy in some countries than in others. In exploring factors that may account for cross-national differences in the legitimacy of state ownership, we focus on government characteristics that are likely to influence public attitudes toward state ownership: the political orientation of the government, its ability to maintain the rule of law, and its effectiveness in providing public services. Using the data from 95 countries, we demonstrate that the legitimacy of state ownership is greater in countries with authoritarian governments and in countries with governments incapable of maintaining the strong rule of law. As for the government effectiveness in providing public services, its relationships with the state ownership legitimacy are nonlinear—at the low levels of public services, their improvements are associated with a more favorable perception of state ownership, but this positive effect gradually fades away and turns negative when the quality of public services increases beyond the average values.