Explaining the Variance in the Performance Effects of Privatization

Agency and public choice theories of privatization indicate that a privatized firm's performance will improve on average, but they do not include an explanation of the observed variance in this result. We argue that organizational and contextual variables need to be considered in order to explain that variance. We develop a model and propositions about the changes that privatization triggers in the firm's management, governance structure, goals, incentives, control, strategy, and organization.