Good governance for government-controlled industries: an exploratory study on local public transport companies

Abstract

This paper examines how public governance in government-controlled industries affects the ownership structure and economic viability of service providers. The study considers the case of a regulated industry – the local public transport services - in one specific country – Italy – characterized by high decentralized autonomy over public governance choices across different levels of government. Although a relatively large management literature deals with corporate governance issues in public services, there is a paucity of research on the relationship between public governance and industry performance. The study gives evidence that public governance affects the ownership structure and the competitive position of service providers. Despite liberalisation reforms, the ownership concentration in most of the companies contracted for the urban transport service is still in the hands of local governments (i.e. in-house contracting). To date, private shareholders act mainly in small companies contracting for extra-urban services or fixed urban routes. Hence, the success of public governance reforms has been partial. These findings provide empirical support for the strong influences of public governance in local public-transport services and the presence in the Italian market of competition models and selection mechanisms based on strong government-political influence rather than market-driven management decisions.