by Sergio Mariotti and Riccardo Marzano

Opportunities and challenges for state‐owned enterprises (SOEs) to expand their activities abroad and to climb the rankings of the world‐class multinational corporations have been emerging. However, these enterprises often lack the experience required for internationalization and suffer from the inward‐looking orientation and political interferences of their national governments. Under these conditions, the co‐ownership with a foreign proactive industrial partner can be an effective strategy for SOEs to overcome the difficulties in entering foreign markets. To empirically evaluate this claim, in a recent GSJ paper, we followed up 110 energy and telecommunications enterprises headquartered in 20 OECD countries from 1995 to 2017. We tracked the evolution of their ownership structures as well as the progress in their internationalization degree. Our analyses indicate that the ability of foreign industrial partners to increase the chances of SOE successful internationalization through co-ownership hinges on some features of the institutional contexts in which SOEs are embedded. We single out two institutional traits we deem relevant to the interactions between state owners and foreign industrial co-owners and the resulting SOE internationalization processes: government effectiveness and variety of capitalism. In particular, we find that foreign industrial co-owners are a plus when governments are ineffective in getting things done, and the local institutions are liberal and shareholder-centric. Conversely, in institutional contexts characterized by effective governments and coordinated, stakeholder-centric market economies, foreign industrial co-owners are of little use to foster SOE internationalization.

Why SOE internationalization processes should be favored by foreign industrial partners and not by other investor types? First, industrial partners are relational, long-term oriented shareholders. They establish solid relationships with invested enterprises by acquiring large stakes that allow them to have representation in the boardroom and be directly involved in strategic issues and decision-making processes. Differently from transactional owners which only have arms-length relationships with invested firms, relational owners build trust and mutual understanding and develop a cooperative behavior through their engagement with co-owners and the management team in setting corporate policy. This creates the opportunities for SOEs to access industrial co-owners’ networks and resources and to benefit from relevant interfirm externalities. Second, being foreign actors, they are outsiders with respect to the country in which the SOE is embedded. This circumstance makes them more inclined than domestic co-owners to curb politicians’ self-serving behaviors and to offset the governments’ propensity to exercise conservatism aimed at stabilizing domestic social welfare.

If foreign industrial co-owners are in such a good position to spur SOE internationalization, why are they a plus only when governments are ineffective and local institutions are liberal rather than coordinated? Ineffective governments are more likely to be plagued with political rent seeking, less able to monitor public managers, and short on resources to be used in the implementation of SOE internationalization strategies. Liberal market economies (like United States and United Kingdom) sustain laissez-faire policies that hinder any support for SOEs, also on the grounds that state ownership should be aimed at mitigating the effects of market failures and should not reflect any strategic orientation to creating multinational state-owned players. In these contexts, foreign industrial co-owners can furnish resources that governments are unable to provide, curb excessive political interference, monitor managers and help governments stabilize their commitment to strategic choices.

On the other hand, effective governments are more able to counteract political rent seeking, to properly select and support SOE management teams and can provide SOEs with government-related advantages in order for internationalization strategies to be formulated and successfully implemented. In the same vein, in coordinated market economies (like Germany and the Scandinavian countries), the state’s inclination to strategic reasoning makes the access of SOEs to government-related advantages more likely. By contrast, the alignment of objectives and convergence on incentive-compatible internationalization strategies are unlikely to occur when co-ownership involves a strategically active state and a relational foreign co-owner. In this case, the coexistence of two (or more) probably conflicting strategic directions may exacerbate divergences in the decision-making. In such a scenario, the gains from potential improvements in the SOE corporate governance and access to resources and capabilities made available by foreign relational co-owners may be largely negligible, or they may even crowd-out those provided by the state.


Mariotti, S. and Marzano, R. (2020), Relational ownership, institutional context, and internationalization of state-owned enterprises: When and how are multinational co-owners a plus? Glob. Strat. J.