The Role of State‐Owned Enterprises in an Artificial Monopoly Market: The Case of Turkey

• Author: Bora Coşar,Hakan Yilmaz,Erkut Altindağ
• Published date: 01 November 2019
• Date: 01 November 2019
• DOI: http://doi.org/10.1111/ajes.12299

The Role of State-Owned Enterprises

in an Artificial Monopoly Market:

The Case of Turkey

By Bora Coar*, Hakan Yilmaz†, and Erkut altinda‡

aBstraCt. State-owned enterprises (SOEs) benefit from many privileges

based on their unique structure, their substantial capital, and their

position in the economic system. Like all business corporations, they

have no fixed duration, which makes them effectively immortal. In

addition, they are adjuncts of the state, which enables them to survive

in noncompetitive markets with little effort. Therefore, under today’s

ruthless global market conditions, SOEs engage in unfair competition

with privately financed businesses. By relying on their identity as state

operations, they do not follow the rules of the market—they define

those rules. In addition to SOEs, which are direct arms of the state,

some privately financed businesses dominate markets in which the

state allows them to develop an artificial monopoly and thus increase

their power day by day. These artificial monopolies distort market

processes and create conditions that frequently give rise to corruption.

This study examines the problems associated with monopolies, with a

special emphasis on establishing more efficient market structures for

SOEs in Turkey. The original mission of SOEs was to balance markets

through regulation and to be transparent and accountable to the

American Journal of Economics and Sociology, Vol. 78, No. 5 (November, 2019).

DOI: 10.1111/ajes.12299

© 2019 American Journal of Economics and Sociology, Inc

*Assistant Professor, Department of Management and Organization of Beykent

University, stanbul. Latest article: “The Moderating Role of Management of Differences

in the Effect of Support Culture on Competitive Advantage.” Interests: organizational

theory, critical theory, postmodernism, management, sociology, economics. Email:

boracosar@beykent.edu.tr

†Vice president of an international bank; 18 years of professional experience in

finance sector. PhD in Business Administration and Organizational Management,

Istanbul Commerce University. Recent article on conflict management, cynicism, and

citizenship behavior. Three other articles in review. Email: hakanyilmaz@hsbc.com.tr

‡Assistant Professor of Economic and Administrative Sciences at Beykent University,

Turkey. His papers have appeared in Social Behavior and Personality: An International

Journal and The European Journal of Health Economics. Interests: family firms, strategic

management, technology management. Email: erkutaltindag@beykent.edu.tr

1172 The American Journal of Economics and Sociology

public. Simply striving to meet those criteria would go a long way

toward preventing the abuse of power and unfair competition. In

addition, SOEs and artificial monopoly markets distort public

institutions by promoting rent-seeking behavior that corrupts politics

and blocks innovation from potential competitors. Privatization has

been employed by international financial institutions in recent

decades, but it has mostly transferred monopolies from the public

sector to private owners, which has made the problem worse and

done little to enhance competition. Establishing genuinely competitive

economies will require a new political culture around the world.

Introduction

State-owned enterprises (SOEs), which are operated directly by gov-

ernment officials, have become one of the most important economic

actors of our time. Their power and influence are increasing in a

globalizing world. In addition, there are many private businesses that

operate without government management but with implicit support

from the state or in partnership with the state. In this article, we

will classify as SOEs all businesses that are substantially state owned.

Some markets are dominated by privately owned businesses that are

in close partnership with the state or its leaders. We shall refer to them

as “exo-competitive” enterprises because their activities lie largely out-

side the sphere of competition. Our emphasis will be on SOEs, which

have become crucial global powers in many key sectors, but particu-

larly in energy, mining, transportation, and communications. PDVSA

in Venezuela or ICBC and SINOPEC in China are examples.

SOEs have many privileges and large quantities of capital due to

their unique structure. They hold an unfair advantage over privately

financed competitive businesses under global market conditions. Not

only do SOEs have economic power as enduring corporations with

the financial power of the state behind them. They also have political

power because they are involved in establishing the rules of the mar-

ket by drawing upon their state identity. This situation enables some

markets to be openly monopolistic, while others retain the appear-

ance of competitive markets even as a state-managed business guides

the conduct of all market participants. SOEs first mature in domestic