64negative example of government ownership is public venture capital investments. Previous studies on government equity investments in entrepreneurial firms show the inefficiency of public venture capitalists as owners in fostering portfolio The Entrepreneurial State: An Ownership Competence Perspective

65companies’ performance (Cumming et al., 2017; Grilli & Murtinu, 2014, 2015), unless they syndicate with private financiers and leave them the leadership and the due diligence of portfolio deals. In sum, despite some theoretical arguments suggesting advantages of government ownership, the evidence suggests that making government a shareholder, especially when it takes an active role, is not conducive to improved firm governance and performance. For this reason, any purported national or social advantage deriving from government ownership must consider the expected harm to firm performance, including investments in value-creating technological and organizational innovations.

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Ownership Competence

How does ownership competence inform the debate about the role of the state in guiding entrepreneurial and innovative processes? It is well known that ownership provides incentives to create economic value (Erturk et al., 2010; Villalonga & Amit, 2006) and that problems arise where property rights are ill-defined or costly to trade. The property-rights approach to the firm shows how, by assigning residual claims and control rights, ownership provides incentives for monitoring (reducing agency costs), improves coordination, and stimulates investments in resources that support team production. However, as emphasized in the recent work by Foss et al. (2021), the ability of owners to create economic value depends not only on their incentives for doing so, but also on their ability. Because ownership conveys residual control over resources (Hart, 1995), the owner’s unique idiosyncratic competence drives their ability and efficiency to access resources, invest them in productive projects and activities, and creatively combine, deploy, and recombine resources to maximize value creation. Thus, different owners display different levels of ownership competence (Alchian, 1961). Different categories of owners show a different distribution of competence levels (Bennedsen et al., 2007). What is the direct consequence of this nonuniform distribution of competences? The consequence is that the above advantages about ownership vary across owners and owner categories, such that a key decision for an