Determination of public utilities performance

Abstract

Organizations under public ownership have earned the dubious distinction that nonperformance is the hallmark of public ownership and even any improvement can at best be only ephemeral. Several agencies based and democracy based theories have explained why they cannot perform. But no study has addressed the significant variations in their performance and tried to explain these variations in terms of motivations of the owner-government and the agent-manager. This paper addresses this question. Public ownership is not a homogeneous concept and the agent manager's discretion, which largely determines the strategic behaviour of the organization is conditioned by the type of demands the government puts on the organization and the diligence with which the government's goals are pursued. The paper explores the connection between the expectations of the external actors, the owners and resource providers ^and the firm's managers on the strategy formulation of the organization which in turn shape the structure, controls, incentives and processes of the organization, which ultimately determine the performance. The paper draws from the study of two electric utilities in India and one in Thailand, all of them being State owned.