The optimal proportion of state-owned shares in an industry chain

    Xiao Kong   Affiliation
    ; Chaoqun Sun   Affiliation
    ; Jiali Liu   Affiliation
    ; Junlong Chen   Affiliation


This study focuses on the mixed-ownership reform of state-owned enterprises in an industry chain. By constructing an oligopoly model considering the proportion of state-owned shares and product differentiation, this study examines the impacts of the balance of state-owned shares and product differentiation in four scenarios, and analyzes the proportion of state-owned shares to maximize the social welfare of the industry chain. The results reveal a synergistic relationship between the balance of state-owned shares and product differentiation. The equilibrium results vary in different industry chain links and competition modes. The implementation of mixed ownership by upstream enterprises will help improve the overall efficiency of the industry chain. Complete nationalization may be optimal and an upstream monopoly can be realized under certain conditions.

Keyword : industry chain, mixed ownership, the proportion of state-owned shares, share cost

How to Cite
Kong, X., Sun, C., Liu, J., & Chen, J. (2022). The optimal proportion of state-owned shares in an industry chain. Technological and Economic Development of Economy, 28(5), 1502–1526.
Published in Issue
Sep 19, 2022
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Aghion, P., VanReenen, J., & Zingales, L. (2013). Innovation and institutional ownership. American Economic Review, 103(1), 277–304.

Ahmed, R. R., Kyriakopoulos, G. L., Streimikiene, D., & Streimikis, J. (2021). Drivers of proactive environmental strategies: Evidence from the pharmaceutical industry of Asian economies. Sustainability, 13(16), 9479.

Alfina, K. N., & Ratnayake, R. M. C. (2019). Supply chain optimization in the tire industry: State-of-the-art. In F. Ameri, K. Stecke, G. von Cieminski, & D. Kiritsis (Eds.), IFIP Advances in Information and Communication Technology: Vol. 567. Advances in production management systems. Towards smart production management systems (pp. 59–67). Springer.

Aravossis, K. G., Kapsalis, V. C., Kyriakopoulos, G. L., & Xouleis, T. G. (2019). Sustainability, 11(14), 3946.

Bachiller, P. (2017). A meta-analysis of the impact of privatization on firm performance. Management Decision, 55(1), 178–202.

Bárcena-Ruiz, J. C., & Garzón, M. B. (2018). Privatisation and vertical integration under a mixed duopoly. Economic Systems, 42(3), 514–522.

Bárcena-Ruiz, J. C., & Garzón, M. B. (2020). Partial privatization in an international mixed oligopoly under product differentiation. Journal of Economics, 131(1), 77–100.

Boubakri, N., Cosset, J., & Saffar, W. (2017). The constraints on full privatization: International evidence. Journal of Corporate Finance, 42, 392–407.

Boubakri, N., El Ghoul, S., Guedhami, O., & Megginson, W. L. (2018). The market value of government ownership. Journal of Corporate Finance, 50, 44–65.

Carson, J. Sievert, J., & Williamson, R. (2020). Nationalization and the Incumbency Advantage. Political Research Quarterly, 73(1), 156–168.

Chang, W., & Chen, F. (2016). Strategic managerial delegation and industry policy competition in vertically-related markets. International Review of Economics Finance, 43, 429–442.

Chen, C. H., Mai, C. C., Liu, Y. L., & Mai, S. Y. (2009). Privatization and optimal share release in the Chinese banking industry. Economic Modelling, 26(6), 1161–1171.

Chen, J., Liu, J., Mo F., & Xu L. (2019a). The optimal proportion of employee stock in the duopoly competition. Transformations in Business & Economics, 18(3C), 512–529.

Chen, J., Shi, J., & Liu, J. (2022). Capacity sharing with sustainable revenue-sharing contracts. Technological and Economic Development of Economy, 28(1), 76–100.

Chen, J., Tang, H., & Liu, J. (2019b). Duopoly, optimal proportion of state-owned shares and international cross-ownership. Revista de Cercetare Si Interventie Sociala, 64, 352–365.

Chen, J., Wang, M., Gao, Y., & Long, Y. (2019c). Duopoly, mixed ownership, and the optimal proportion of employee stocks in state-owned enterprises in China. Managerial and Decision Economics, 40(5), 550–558.

Chen, J., Wang, X., & Chu, Z. (2020). Capacity sharing, product differentiation and welfare. Economic Research-Ekonomska Istrazivanja, 33(1), 107–123.

Chen, J., Wei, Z., Liu, J., & Zheng, X. (2021). Technology sharing and competitiveness in a Stackelberg model. Journal of Competitiveness, 13(3), 5–20.

Chen, R. R., El Ghoul, S., Guedhami, O., & Nash, R. (2018). State ownership and corporate cash holdings. Journal of Financial and Quantitative Analysis, 53(5), 2293–2334.

Chen, T. L. (2017). Privatization and efficiency: a mixed oligopoly approach. Journal of Economics, 120(3), 251–268.

Cho, S., Kim, D., & Lee, S. H. (2022). Free licensing strategy and ex-post privatization policy with passive ownership. Economic Modelling, 106, 105676.

Chu, Y., Tian, X., & Wang, W. (2019). Corporate innovation along the supply chain. Management Science, 65(6), 2445–2466.

D’ Souza, J., & Nash, R. (2017). Private benefits of public control: Evidence of political and economic benefits of state ownership. Journal of Corporate Finance, 46, 232–247.

Dolgui, A., Ivanov, D., Sethi, S. P., & Sokolov, B. (2019). Scheduling in production, supply chain and Industry 4.0 systems by optimal control: Fundamentals, state-of-the-art and applications. International Journal of Production Research, 57(2), 411–432.

Dong, Q., Bárcena-Ruiz, J. C., & Garzon, M. B. (2018). Partial privatization of state holding corporations. The Manchester School, 86(1), 119–138.

Ebina, T., & Shimizu, D. (2019). Sequential mergers and competition policy under partial privatisation. Australian Economic Papers, 58(4), 375–397.

Fang, L., Lerner, J., & Wu, C. (2017). Intellectual property rights protection, ownership, and innovation: Evidence from China. Review of Financial Studies, 30(7), 2446–2477.

Guan, J., Gao, Z. M., Tan, J., Sun, W. Z., & Shi, F. (2021). Does the mixed ownership reform work? Influence of board chair on performance of state-owned enterprises. Journal of Business Research, 122, 51–59.

Jain, R., & Pal, R. (2012). Mixed duopoly, cross-ownership and partial privatization. Journal of Economics, 107(1), 45–70.

Kim, S., Lee, S., & Matsumura, T. (2019). Corporate social responsibility and privatization policy in a mixed oligopoly. Journal of Economics, 128(1), 67–89.

Kroll, H., & Kou, K. (2019). Innovation output and state ownership: Empirical evidence from China’s listed firms. Industry and Innovation, 26(2), 176–198.

Lambertini, L., & Pignataro, G. (2019). On the social (sub) optimality of divisionalization under product differentiation. Journal of Economics, 128(3), 225–238.

Liu, Q., Wang, L. F. S., & Chen, C. L. (2019). Upstream privatization in mixed markets with retailer’s efforts. North American Journal of Economics and Finance, 48, 338–345.

Matsumura, T., & Okamura, M. (2015). Competition and privatization policies revisited: The payoff interdependence approach. Journal of Economics, 116(2), 137–150.

Ohnishi, K. (2011). Partial privatization in price-setting mixed duopolies with complementary goods. Modern Economy, 2(1), 45–48.

Pagliari, R., & Graham, A. (2019). An exploratory analysis of the effects of ownership change on airport competition. Transport Policy, 78, 76–85.

Saha, B. (2009). Mixed ownership in a mixed duopoly with differentiated products. Journal of Economics/ Zeitschrift fur Nationalokonomie, 98(1), 25–43.

Saha, B., & Sensarma, R. (2011). Mixed ownership, managerial incentives and bank competition. Bulletin of Economic Research, 63(4), 385–403.

Saraji, M. K., Streimikiene, D., & Kyriakopoulos, G. L. (2021). Fermatean fuzzy CRITIC-COPRAS method for evaluating the challenges to Industry 4.0 adoption for a sustainable digital transformation. Sustainability, 13(17), 9577.

Sato, S., & Matsumura, T. (2019). Dynamic privatization policy. The Manchester School, 87(1), 37–59.

Scott-Samuel, A., Bambra, C., Collins, C., Hunter, D. J., McCartney, G., & Smith, K. (2014). The impact of Thatcherism on health and well-being in Britain. International Journal of Health Services, 44(1), 53–71.

Singh, N., & Vives, X. (1984). Price and quantity competition in a differentiated duopoly. The Rank Journal of Economics, 15(4), 546–554.

Tan, Y., Tian, X., Zhang, X., & Zhao, H. (2020). The real effect of partial privatization on corporate innovation: Evidence from China’s split share structure reform. Journal of Corporate Finance, 64, 101661.

Warner, M. E., & Bel, G. (2008). Competition or monopoly? Comparing privatization of local public services in the US and Spain. Public Administration, 86(3), 723–735.

Wu, F., & Ma, J. (2015). The complex dynamics of a multi-product mixed duopoly model with partial privatization and cross-ownership. Nonlinear Dynamics, 80(3), 1391–1401.

Wu, S., Chang, Y., & Chen, H. (2016). Imported inputs and privatization in downstream mixed oligopoly with foreign ownership. Canadian Journal of Economics-Revue Canadienne d’économique, 49(3), 1179–1207.

Xu, L., Lee, S., & Matsumura, T. (2017). Ex-ante versus ex-post privatization policies with foreign penetration in free-entry mixed markets. International Review of Economics, 50, 1–7.

Zhang, X., Yu, M., & Chen, G. (2020). Does mixed-ownership reform improve SOEs’ innovation? Evidence from state ownership. China Economic Review, 61, 101450.