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Boards of Directors and State-Owned Enterprises’ Innovation

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Book cover Governance Structures and Mechanisms in Public Service Organizations

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

Abstract

In the wake of the global financial crisis of 2008–2009, many industrialized States have increased their stakes in corporations (State-owned enterprises) worldwide. Therefore, the idea of governments as value-creating institution is increasing and questions concerning innovation are even more pressing. Indeed, there has been a great deal of both scholarly and professional interest in innovation believing that it is essential to public sector effectiveness. Theoretical insights from the innovation literature, agency and resource-based theories are done seeking to add knowledge on the relationships between governance mechanisms and State-owned enterprises’ innovation. The analysis is on a sample of 88 Norwegian State-owned enterprises mainly operating in the service sector. The results show that some characteristics of the board of directors (e.g., composition, board working-style and board members’ knowledge and competences) significantly influence innovation types. Implications for theory and practice and future research directions are discussed.

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Notes

  1. 1.

    For example, some authors suggest that the British State suffers from hyper-innovation (Moran 2003).

  2. 2.

    They are initially indicated as ancillary innovations (Damanpour 1987), organization-environment boundary innovations.

  3. 3.

    According to Roland et al. (2001) the value added share of SOEs in the business sectors in Norway is the highest of all European Union (EU) and European Economic Area (EEA) countries. In 1998, the share was 29.0%, up from 27.0% in 1991, which is approximately double of what we find in Sweden and Greece, the nations ranked below Norway. In the EU, the average SOE share of value added was only 9.0%. The Norwegian pattern is partly related to the dominance of SOEs in the oil industry, but State ownership is definitely present in many other sectors as well (OECD 2003).

  4. 4.

    The 25 largest companies (11.0% of the total number of companies) represent almost 86.0% of the total market value of the listed companies. Statoil, the national oil and gas company, alone represents more than 40.0% of the total market value. The five largest companies represent 64.0% of the market value, and the ten largest companies represent more than 75.0% of the market value (Rasmussen and Huse 2011).

  5. 5.

    Norsk Hydro, a major Norwegian corporation with a considerable State ownership, was recently split, and the oil and gas parts were merged into Statoil (StatoilHydro), the fertiliser part into Yara International and the aluminium part remained in Norsk Hydro.

  6. 6.

    We use a set of n-1 dummy variables as tools to represent an n-group variable (ownership structure and industry type).The last group (Less than 50.0% State or Local government ownership and others) served as the baseline (or reference group) to which we compared the others. Furthermore, we created dummy variables (0/1) to represent each of the other groups. Each dummy was coded so that it has the value “1” if a case is within that group, and “0” if not. We used three dummy variables for the ownership structure and three for the industry type. Dummy variables are useful because they enabled us to use a single regression equation to represent multiple characteristics of the ownership structure and of the industry and to interpret the regression coefficient for each dummy variable in terms of how each group of characteristics compares to the baseline.

  7. 7.

    There is a formal requirement in Norway indicating that directors in SOEs might be preferably outside directors (OECD 2010).

  8. 8.

    These services are responsive to the needs and aspirations of individuals and communities, which treat users with respect and dignity, and which enable greater individual and collective engagement (and greater self-organization) in the achievement of desirable social outcomes (Albury 2005).

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  1. Department of Business Studies, University of Rome “Tor Vergata”, Via Columbia 2, 00133, Rome, Italy

    Andrea Calabrò

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Calabrò, A. (2011). Boards of Directors and State-Owned Enterprises’ Innovation. In: Governance Structures and Mechanisms in Public Service Organizations. Contributions to Management Science. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-2750-7_5

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