Uses and misuses of state-owned enterprises as policy instruments in economic development

Different institutional arrangements can be used to manage and implement the same policy. In Canada, the two largest provinces, Ontario and Quebec and the federal government have used state-owned enterprises (SOEs) to... [ view full abstract ]

Different institutional arrangements can be used to manage and implement the same policy. In Canada, the two largest provinces, Ontario and Quebec and the federal government have used state-owned enterprises (SOEs) to stimulate domestic economic development but did it differently. In Québec, the government uses Investissement-Québec to conduct international prospection for investors, and help private companies export. Investissement Québec has also to implement the programs of the department of Economic Development (formerly Industry and Trade) through various (and sometimes problematic) governance arrangements.

The Canadian government, which has also a department of Industry, has chosen to delegate to at least two SOEs the same responsibilities. A first SOE, Export Development Canada, provides Canadian exporters with trade financing, export credit insurance and foreign market expertise. A second one, the BDC, is a financial institution (a business development bank in the official vocabulary) which offers financing and advisory services to Canadian entrepreneurs. And finally, regional agencies are in charge of regional economic development but are not studied in this research.

In Ontario, a third way of doing things, these activities are not delegated to agencies. The Department of Economic Development is in charge of most activities excluding international trade taken care of by the Department of Citizenship (Immigration).

These three governments work in the same Parliamentary tradition. The two provincial governments face a similar predicament in the global economy. To adapt, they have to transform their industrial base and manufacturing. Using for these case studies a “most similar systems” design (Przeworski and Teune, 1970), we want to study comparatively how different organizational structures can be used to pursue the same objectives. An important part of the literature on SOEs is currently on their international role. The cases selected here will allow to discuss this role. The study is based on interviews and documentary analysis. Statistics are used to illustrate the results achieved by the three governments. We think that such a research design should lead to interesting insights on how state-owned enterprises could be used as policy instruments. Such a study makes it possible to discuss further the issue of “why use state-owned enterprises?”