Privatization processes and the redefinition of corporate RandD boundaries

Although the economic and welfare consequences of privatization processes have been widely studied, less attention has been paid to understanding how these processes affect corporate research and development (RandD), and hence the innovative performance of the firm. We propose to address these issues by combining a policy level perspective with a firm level perspective centered around the role of corporate RandD and its changes. We use data from a few recent privatization processes to show how and by what processes RandD activities are affected in terms of amount and origins of funds allocated, scope of projects funded, and reliance on outside collaborations. In the light of these cases, we present a framework to characterize firm level effects of government divestment to guide managerial choices in restructuring corporate RandD and governmental action to proactively counterbalance post-privatization underinvestment risks.