Multiple Owners, Divided Purposes: Governance and Performance of Regionally Owned Enterprises

Abstract

Regional governments own enterprises, and expect them to earn a return, deliver a public service and contribute to local revenue simultaneously. This study examines what the international evidence establishes about such enterprises, and what it does not, in order to specify what an Indonesian research programme would need to establish first. The method combines a structured review of research published between 2017 and 2024 with a targeted search of the Indonesian literature and an analysis of the principal structure these enterprises face. Four findings follow. Corporatisation is driven by administrative capacity and by fiscal position rather than by ideology, with grant dependence and debt predicting company creation and corporate leverage extending the owner government's borrowing capacity off balance sheet. Governance is structurally complicated by multiple principals, which produces free-riding on monitoring, duplicated oversight and lobbying, with increased agent autonomy as the outcome; board efficacy raises performance only indirectly, by relieving managerial role dilemmas. Performance evidence is genuinely divided: a systematic review finds these enterprises often more efficient than direct provision while cautioning that its conclusions are tentative, and a study of all 290 Swedish municipalities finds heavy reliance on them associated with more perceived corruption and higher taxes without better citizen satisfaction. Politicisation is measurable, with election-year hiring and post-election board turnover documented. The Indonesian evidence base, however, consists of small-sample provincial studies, and no verified national study of governance or performance exists.