Antecedents and Consequences of Corporatization: An Empirical Analysis of German Public Hospitals

The idea of privatizing or corporatizing public enterprises to improve organizational performance is a central tenet of the new public management movement. Yet while privatization represents a well-established subject of inquiry, corporatization remains a research field scarcely trodden, leaving the public debate bereft of sound empirical evidence. Building on the contingency theory, principal-agent theory, and corporatization literatures, the purpose of this study is to help bridge this research gap by empirically assessing the postulated relationships on the antecedents and consequences of corporatization. Choosing public hospitals as research subjects, it builds on a comprehensive longitudinal dataset and proceeds in four steps: calculating efficiency scores using data envelopment analysis; investigating the antecedents of corporatization with logistic regression; constructing an appropriate control group consisting of noncorporatized public-law hospitals using genetic matching; and comparing changes in efficiency between corporatized and noncorporatized hospitals by means of a difference-in-difference approach. The results indicate that public-law hospitals were significantly more likely to be corporatized under certain circumstances, namely, in areas with a higher degree of spatial competition, during the years around a major change in the reimbursement system (2003-2005), and if they were legally dependent entities. In contrast, having lower baseline efficiency had no significant effect on the likelihood of corporatization. Furthermore, corporatization had a significantly positively effect on the efficiency of previously public-law hospitals. This effect was higher for hospitals that had been legally independent than for those that had been legally dependent. In sum, corporatization is likely an effective alternative to privatization, a finding that leads to a range of implications for practice and research.