The Government As Venture Capitalist: Organisational Structure and Contract Design in Germany's Privatisation Process

This paper examines the role that organisation structure and contract design played in resolving economic and political problems that arose during Germany's privatisation process. We find that German officials structured organizations and contracts in a way that made credible the government...

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Bibliographic Details
Published in:European financial management : the journal of the European Financial Management Association 1999-03, Vol.5 (1), p.43-68
Main Authors: Dyck, I. J. Alexander, Wruck, Karen H.
Format: Article
Language:English
Subjects:
contracts
governance
government ownership
organisations
ownership structure
privatisation
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Summary:This paper examines the role that organisation structure and contract design played in resolving economic and political problems that arose during Germany's privatisation process. We find that German officials structured organizations and contracts in a way that made credible the government's commitment to rapid privatisation. This credibility served to protect the process from political and social opposition. In addition, it enabled Germany to attract talented private sector managers to its privatisation effort. This began with the establishment of an independent privatisation agency, the Treuhand. It culminated with the creation of another set of independent organisations called Management KGs, to which the Treuhand outsourced part of its restructuring, management and privatisation work. The Treuhand provided funding to this effort, thus serving as a kind of venture capitalist.
ISSN:1354-7798
1468-036X
DOI:10.1111/1468-036X.00079