In theory, the question of who owns a business is not so relevant in the capitalist economic model but in reality? Researchers from the Graduate School of Management at St. Petersburg University (GSOM SPbU) Andrei Panibratov and Daria Klishevich in their new article analyze why state-owned enterprises (SOEs) attract increasing attention from scholars and practitioners alike, and why the debate on SOEs often focuses on the issue of state capitalism.

 

Back in the year 2011, The Economist wrote about a new phenomenon, multinational SOEs from China, India, Brazil, and Russia, also known as BRICs, the core of emerging economies. SOEs began to actively go abroad, although traditionally they rather focused on their domestic markets. Today, ten years later, SOEs from emerging markets are not only among the active international players, but in some cases have become the largest multinational companies that determine the development of their national and sometimes even foreign economies. Cross-border investment deals realized by SOEs from emerging economies face heated public discussions. One of such deals was the acquisition of the giant Swiss agricultural holding Syngenta by the Chinese ChemChina in 2017 for sensational $ 13 billion. “It's important to understand that this is a financial transaction,” said Erik Fyrwald, Syngenta's Chief Executive, shortly after the deal. So what drives SOEs in their international strategies — commercial interests or political agenda of governments?

 

Andrei Panibratov and Daria Klishevich have just published the paper "Emerging market state-owned multinationals: A review and implications for the state capitalism debate" in the Asian Business and Management journal. The authors analyzed articles from the leading journals in international business, strategic management and political economy published since 1996 and suggested two main findings. First, the variety of forms of multinational SOEs increases over time. State ownership and control can be manifested to a greater or lesser extent, and this, in turn, affects companies’ strategic decisions. For example, a large share of state ownership results in companies being less effective in their international strategies: the State is notoriously not the most efficient owner of firms. In addition, SOEs with a large share of state ownership sometimes pursue political goals in their international strategies. For example, they can internationalize to ideologically close ("friendly") countries, as well as invest in industries that are strategically important for the State. Minority share of state ownership makes SOEs international strategies more similar to the ones private firms pursue. Shareholder value maximization turns out to be the starting point and, at the same time, the goal of international expansion.

 

The second important finding that the authors bring forward is that despite the fact that the influence of the home-market on state-owned companies is quite large, the type of political regime plays an especially important role when they choose their strategies. This determines whether state-owned companies will support the political agenda of governments in their international strategies or not. At the center of this discussion is the concept of state capitalism, proposed by Ian Bremmer in 2009: state capitalism is a system where State is the main actor on the market and uses it for political purposes. This can be, for example, the support of friendly governments, or vice versa, creating problems for unneighborly countries. State capitalism and the role of political regimes became a leading topic of research on state-owned firms in the late 2010s, driven by geopolitical unrest and the increased influence of nation-state rhetoric.

 

What should we study about multinational SOEs in the future? GSOM scholars believe that the role of such companies in the global economy will remain significant, especially considering further strengthening of China, and it is important to take a closer look at how short-term and long-term political strategies of governments affect the internationalization of SOEs. Another promising area for future research is the international strategies of "old" and "new" SOEs. The former were originally created as state-owned firms, the latter are private companies that later were nationalized (due to environmental changes such as financial crisis, regime change, or Covid-19 pandemic). The year 2020 showed that the national States (Russian State is not exception here) are returning to the forefront of the world economy, so the research of the strategies of SOEs is becoming increasingly important.