Data Analysis

This study aims to examine whether SOEs are successful vehicles for implementing the government’s objectives by focusing on two measurement models. The relation of the government and SOEs is the first model of analysis, referring to the study within SOEs in Canada by Hafsi (1985). The relationship of the government and SOEs becomes an indicator for classifying and examining the independence of SOEs in carrying out the real objectives. Next, the study focuses on measuring the implementation of the government’s objectives through SOEs’ business activities. The focus of this study is the government’s objectives and Indonesian SOEs’ business activities as a reflection of SOEs’ efforts to attain the government’s objectives. Financial performance indicators and quantitative tools are utilised to test the relations and implications of the objectives on SOEs’ performance.

This study focuses the analysis within three different stages, which are selected based on the propositions and hypotheses developed in Chapter 4. The first stage focuses on historical path analysis to analyse the evolution of the government’s objectives. The aim of this stage is to reconstruct the evolution of SOEs in relation to historical changes in the government-stated objectives for SOEs, and the effect on the current institutional structure. The second stage focuses on the cycle pattern model to analyse the relations among the objectives. The purpose of this stage is to examine how SOEs achieve the real objectives. Finally, the third stage examines and estimates the relations and implications of the objectives on SOEs’ performance. This final stage of analysis is conducted by applying two statistical tools.

The first stage of analysis in this study focuses on historical studies by emphasising the long history of economic changes under the historical path framework. The evolution of political and economic conditions is examined to identify their effect on the evolution of the government-stated objectives for SOEs. Institutional change theory offers a tool to understand national economic changes and the transformation of Indonesian SOEs. The sequence of events and patterns refers to the characteristics of path dependence studies, which focus on the sequence of time, institutional patterns, event chains, a wide range of social outcomes, large consequences from small events, and impossible to

reverse the timeline (Mahoney, 2000; Pierson, 2000). This characteristic gives this study the opportunity to emphasise the critical events to shape the analysis.

The second stage of the analysis is the quantitative method. Several studies have measured SOEs’ objectives and performance. For example, the cycle pattern study of SOEs in Canada focused on the relationship between the government and SOEs as an alternative to measuring the government’s objectives for SOEs. The cycle pattern model was developed based on Hafsi’s (1985) study, which emphasised three types of relationships: cooperation, confrontation and autonomy patterns as references for measuring the government’s objectives (Hafsi, 1985). In the cooperation stage, the value of the company is the value of the government. The growth of business has significant effects on operation activities when the SOE or firm is no longer influenced by the government and becomes an autonomous entity. The changes of the company’s pattern into autonomy make the company more independent in achieving its objectives. In this study, publicly listed and non- privatised SOEs without privatisation restrictions are in this category. In practice, some key variables also need to be included and considered, such as industry type, the government’s expectation and involvement in the business, political and economic environments (Zif, 1981) to classify the SOEs with special treatment from the government. The study of SOEs in Canada revealed that certain industries, such as utilities, transportation and communication, were still controlled by the government through prices and services (Sexty, 1980). In this study, SOEs with privatisation restrictions are categorised in this group.

This study will also focus on the political and economic environment as an indicator of analysis. The reason for using the political and economic environment is based on the findings of the previous literature study of SOEs, which demonstrated the influence of political and economic stability on SOEs’ performance (Bhatt, 1984). The domination of ideology provides a chance for the state to control the resources and determine the other objectives. Early studies about public enterprises’ performance showed that politics plays a decisive role for public enterprises to meet the government’s requirements (Bhatt, 1984; Vernon, 1984). The study also showed how often management enforces short-term planning and meets long-term planning. Political involvement potentially intervenes in SOEs with some short-term planning, as found in the study about SOEs’ planning, where most corporate planning tended to become budget-oriented instead of planning- oriented (Javidan and Dastmalchian, 1988). This condition has a significant influence on the relationship between the government and the company and performance. As a substantial relationship is often based on budget subsidies, corporate planning is also an opportunistic objective measurement because of the possibilities for SOEs to carry out other objectives. The universality of

time and condition commonly influences the other objectives, which are potentially confronted with the real objectives (Estrin and Pérotin, 1991). These indicators are also evaluated in this thesis. The third stage of analysis is quantitative analysis, which focuses on the relations and implications of objectives and performance. The quantitative analysis section focuses on measuring the implementation of the government’s objectives through SOEs’ business activities, as reflected in their performance. Financial performance indicators and quantitative tools are utilised to test the implications of the objectives. The evaluation begins by identifying the government’s objectives, particularly those that present the effects on SOEs’ performance and business activities. Meanwhile, the process of change is employed to identify the evolution of SOEs’ current structure and objectives, which may be helpful in supporting the analysis. In this process, the results from the historical path analysis and content analysis are used as a foundation and framework for quantitative analysis. The next step is to test the implications of the objectives on performance using statistical parameters. Two-sample t-test is employed to evaluate whether the objectives show differences in SOEs’ financial performance. Meanwhile, regression model is used to test and estimate the relationship between independent variables (objectives) and dependent variables (SOEs’ financial performance). The same model is utilised to examine and estimate whether the objectives are complementary or in conflict, and whether they affect SOEs’ performance. Chapters 10 and 11 detail the performance measurement tools.