Economics, ideas or institutions? Agencification through government-owned enterprises in illiberal contexts: The case of Hungary

Published date01 April 2024
AuthorGyörgy Hajnal,Aron Hajnal
Date01 April 2024
Subject MatterArticles
Public Policy and Administration
2024, Vol. 39(2) 171192
© The Author(s) 2022
Article reuse guidelines:
DOI: 10.1177/09520767221144346
Economics, ideas or
institutions? Agencif‌ication
through government-owned
enterprises in illiberal contexts:
The case of Hungary
Gy ¨
orgy Hajnal
Institute of Social and Political Sciences, Corvinus University of Budapest, Budapest, Hungary
Centre for Social Sciences, Hungarian Academy of Sciences Centre of Excellence, Budapest, Hungary
Aron Hajnal
Institute of Social and Political Sciences, Corvinus University of Budapest, Budapest, Hungary
Corporate state agencies (CSAs) are government/state-owned enterprises (GOEs) that
perform publictasks. The main objectiveof this article is to better understandthe drivers of
governmentschanging reliance on CSAs in performing public tasks. We pursue this
ambitionin a particularcontext: one characterizedby the illiberal transformationof political
and state institutions. Based on a review of the applicable but thus far largely disconnected
streams of research we proposed and subsequently tested several hypotheses using a
unique data set of Hungariancorporate state agencies thatexisted between 1995 and 2014.
The empirical analysis revealed, f‌irstly, that in line with theories rooted in mainstream
economics,economic factors do affect governmentsreliance on thistype of agencies (albeit
to a limited extent). Secondly, we conclude that organizational myths such as the myth of
central controlof Viktor Orb´
ans governments explain a large proportion of changes in
our outcomeof interest. However, notably, we foundno direct empirical support for either
the effect of illiberal transformation of government or administrative reform doctrines.
Corporate state agencies, agencif‌ication, government-owned enterprises, Hungary, myth
of central control, illiberalism
Corresponding author:
Gyorgy Hajnal, Institute of Economic and Public Policy, Corvinus University of Budapest, Fovam ter 8,
Budapest 1093, Hungary.
Governments rely on various kinds of organizations to perform public tasks. The term
agencyrefers to at least partially autonomous organizations that are part of the public
domain, perform public tasks, and are usually funded by public means(James and Van
Thiel, 2011: 209). GOEs are, in contrast to the more common types of agencies that are
governed by public law, run by the central government (for a typology of agencies, see
James and Van Thiel, 2011). Our research targets one specif‌ic, thus far only scarcely
researched, subclass of GOEs: corporate state agencies(CSAs), as we coin them, are
positioned at the intersection of the two aforementioned sets of government organizations.
That is, they are agencies operating in GOE form.
The theoretical ambition of this study is to identify and test theories that explain the
dynamics of CSAs, that is, governmentschanging reliance on this particular organi-
zational form in the context of a broad-scope illiberal transformation of the political
system. As CSAs are, by def‌inition, both agencies and GOEs our research is located at the
intersection of three thus far largely disconnected streams of scholarship. The f‌irst
body of scholarship is usually cultivated by scholars of (corporate) economics and
management. It intends to characterize and explain the existence of GOEs, their patterns
and dynamics, as well as the driving forces of their proliferation (for an overview, see
Bruton et al., 2015). The second body of scholarship strives to describe and explain the
scarcity or proliferation of different types of agencies (Overman and Van Thiel, 2015;
Verhoest et al., 2021). The key questions in this stream of research frequently tackle the
patterns in which, and the reasons why agencies are created, eliminated, or changed.
Despite the important conceptual and practical connections between these academic
discourses, only a few attempts have been made thus far to relate them to one another. The
(rather recent) intersections of the former two streams have focused primarily on con-
ceptualizing public mission in relation to GOEs (Sorrentino, 2020) and on the effec-
tiveness of municipally owned corporate agencies (P´
erez-López et al., 2015;Voorn et al.,
Attempts to formulate and test theories explaining governmentschanging reliance on
CSAs have been minimal. Bernier et al.s (2022) recent article on Canadian government
corporations (referring to what we call CSAs) constitutes an important exception in this
regard. However, their focus is specif‌ically on corporatization, which as we will argue
is only one among the many pathways through which reliance on CSAs may be affected.
Unlike much of the (modest) literature related to the proliferation of CSAs, we set out
to study the above phenomena in a non-Western context characterized by processes of
illiberal transformation of the political and administrative system. Scholarship focusing
on how emerging illiberal trends in governance shape (and are, possibly and partly, being
shaped by) public sector organizations, and central government apparatuses, in particular,
is nascent (for a signif‌icant exception see Bauer et al., 2021).
In particular, there have been, thus far, no systematic attempts at conceptualizing and
empirically examining the impact of illiberal reforms on agencies. The above gaps
constitute the primary justif‌ication of this study and def‌ine its primary theoretical am-
bition. The empirical focus of this study is post-communist Hungary. The temporal scope
172 Public Policy and Administration 39(2)

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