The past two decades have witnessed rapid growth in both the absolute number and the relative importance of public enterprises in developing countries.¹ Indeed, these enterprises “have come to dominate large segments of many LDC economies”.² It follows from this observation that an understanding of the technical choices made by these enterprises has now become essential to an explanation of employment, output and other major macroeconomic variables in these economies. The need for an adequate explanation of these choices is made more compelling by the observed “marked capital intensity of state enterprise investment relative to private-sector investment in the same economy. Investment in state enterprise sectors in many LDCs has been focused on projects that involve light use of the more abundant factor of production (labour) and heavy use of the scarcer factor (capital). This pattern has been documented in a series of studies for such countries as [the Republic of] Korea, Ghana, Brazil, India, Bolivia, Algeria, Colombia, Indonesia and numerous others.”³ What is striking about these findings is that they do not conform to what one might expect, namely, that in at least some of the countries mentioned, employment appears to be an important policy goal and this goal should presumably be closely reflected in the technical choices made by the public enterprises (as agents of the state) of those countries. The task of explaining why this expected outcome has not generally occurred is one major concern of this collection of essays.

The choice of technique is not, however, the only aspect of the technical behaviour of public enterprises that bears on the employment problem in developing countries. Although it dominated the literature during the 1960s and 1970s, the static choice of technique relates in fact only to the demand side of the problem. Yet, important implications for employment may arise also on the side of the supply of technologies. These supply-side issues are rooted in the widespread dependence of developing countries on technical change occurring in the advanced countries. In particular, “while there appears to be a certain amount of technological choice today, the continued concentration of technical change on advanced country technology is likely to result in increasingly inappropriate techniques - the choice of technology available in the future will be increasingly circumscribed, and irrelevant to the needs of the world’s poorest.”⁴ If, on the other hand, developing countries successfully acquire their own technical capabilities, they may be in a position to adapt imported technologies or even to develop their own more appropriate alternatives (in the sense, among other things, of being relatively labour using). Such alterations in the available shelf of technologies (especially when they are combined with policies that alter the selection of techniques in the same direction) will tend to have favourable implications for employment and earnings. Indigenous technical capabilities may also lead to exports of technology and of local designs of consumer and capital goods, a possibility which, again, carries direct and powerful implications for employment. There are, finally, a series of potential indirect employment effects of the acquisition of technical capabilities. In the domestic production of capital goods, for example, the skills generated may be diffused to sectors that make use of these goods. “Given the frequent process interruptions attributable to poor maintenance and repair, such a diffusion of skilled workers would permit an increase in the use of plant and unskilled workers.”⁵

If there are therefore numerous links between employment and indigenous technical capabilities, there are also reasons to expect public enterprises to play an important role in the process by which these capabilities are acquired. For these enterprises - unlike those that are privately owned - are theoretically in a position to take account of the social (as opposed to the private) costs and benefits that the process often entails. More specifically, “The social benefit of increased technological mastery… generally exceeds the benefit which an individual firm can expect to capture; there are many avenues by which technological mastery can diffuse to other firms, and not all of these avenues are under the control of the firm that finances the initial acquisition. In addition, the firm may value the benefits that it does capture at less than their true social worth; likewise, the cost of acquiring technological mastery as seen from the firm’s perspective may exceed the true social costs. Unless influenced by some form of public intervention, a firm acting alone may therefore not find it in its individual interest to take advantage of opportunities to increase domestic technological mastery as much as social objectives would dictate.”⁶ In practice, direct intervention through public enterprises has played an important part in the indigenisation efforts of several large countries and it is the analysis of this experience that comprises the second major focus of the volume. Two aspects in particular are emphasised by the case studies dealing with the supply side of the technological behaviour of public enterprises (though the emphasis on each aspect varies from one case to another). The first is the manner in (and the extent to) which technical capabilities have been acquired and the second has to do with the economic consequences - including those for employment - that have followed from these acquisitions.

In analysing the foregoing dimensions of the technological behaviour of public enterprises, the various contributors employ a variety of different research methods. Some of the authors, for example, use cross-sectional comparisons between public- and privately owned enterprises in a given country, another looks in detail at particular public enterprises over time, while yet a further case makes a comparison across countries for a given industry. In part, these methodological differences derive from the choice of particular industries - in some of which, for instance, public enterprises form monopolies and thus have no private competitors with whom structured comparisons can be made. To some degree, however, the differences in method are dictated by the nature of the research questions themselves. In particular, a study of the process by which capabilities are acquired in a particular firm necessarily requires a longitudinal analysis (that is, one encompassing observations over a period of time). In contrast, the choice of technique which is made at a moment of time, can be analysed without such longitudinal data.