This article evaluates the organizational characteristics, defined as returns to scale and most productive scale size, for a sample of 67 Indian state-owned enterprises in comparison with 63 private and 27 foreign-owned enterprises. State-owned units suffer from decreasing returns to scale with diseconomies being associated with their large size. The average most productive scale size of the state-owned firms is considerably smaller than average actual size, establishing the need for a break-up of existing units into many smaller units so as to gain efficiencies. A policy of restructuring these organizations before privatization will enable privatization to be eventually more successful.
Review of Industrial Organization – Springer Journals
Published: Oct 15, 2004
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