The document summarizes a presentation on the partial privatization of water firms in Italy from 1994 to 2009. It provides the following key points: 1. Mixed ownership water firms emerged in Italy during this period, with some firms being only partially privatized rather than fully privatized. 2. The first mixed ownership water firm was established in Alto Valdarno, Tuscany in 1994 through a negotiated agreement. This helped spark the formation of advocacy coalitions that supported further partial privatizations. 3. Reforms in 2001 and 2003 expanded the range of privatization options, leading to more water franchises being awarded to mixed ownership firms as these options diffused through policy networks of water professionals.

1. 5th Annual Conference of Competition and Regulation in Network Industries
Residence Palace, Brussels, Belgium
November 30, 2012
Explaining the Partial Privatization
of Public Service Provision:
The Emergence of Mixed Ownership
Water Firms in Italy (1994-2009)
Dr Alberto Asquer
DeFiMS, SOAS, University of London
Department of Economic and Management Sciences, University of Cagliari (Italy)

2. 1. Introduction
Mixed ownership of firms that provide public services may arise
from:
a) a transitory stage during privatisation process leading to full
private ownership;
b) an enduring ownership arrangement designed to share
ownership with private operators and investors.
Several explanations for privatisation exist (Bennett et al.,
2004; Sheshinski and Lòpez-Calva, 2003; Yarrow et al., 1986;
Vickers and Yarrow, 1991; Megginson and Netter, 2001; Davies
et al., 2005; Sappington and Stiglitz, 1987; Donahue, 1989).
But why are firm only partially privatised?

3. 1. Introduction
Mixed ownership firms may be explained by:
- market engagement and economies of scale available under
monopoly production (Warner and Bel, 2008);
- political orientation of the government and development of the
financial market (Pafilis, 2007);
- role of international organisations (Williamson et al., 2006);
- government's interest to retain a public policy tool (Brooks,
1987; Heald, 1988);
- governmental protectionism (Landy et al., 2007).
But they also give rise to issues related to conflicts of
interests when managers try and satisfy shareholders with
different expectations (Matsumura, 1998; Sappington and
Stiglitz, 1987; Eckel and Vining, 1985; Chen, 2009).

4. 2. Theoretical background
The decision to partially privatise can be conceived as the
outcome of a public policy-making process.
Kingdom's (1984) theory of public policy-making highlights the
role of
- situated interaction between policy-makers within particular
institutional and historical circumstances,
- the process dynamics of the flow of efforts and sequencing of
events in time, and
- changed context conditions and their relationship with abrupt
“shifts” of policy regimes from one partial equilibrium to another.

5. 3. The privatization of the water sector in Italy (1990's-2000's)
1994 2001 reform 2003 reform
water of local public of local public
reform services services
Generally, no award of water Some award Increased number of
franchises of water awards of water
franchises franchises
Water districts where especially municipal water firms operated
Award of water franchise to Various Some awards
MOF in Alto Valdarno, Tuscany awards of water
of water franchises
franchises to MOF
to MOF
Various awards
of water
franchises
to “in house” firms
1994 1999 2001 2003 2009

6. 3. The privatization of the water sector in Italy (1990's-2000's)
1994 2001 reform 2003 reform
water of local public of local public
reform services services
Generally, no award of water Some award Increased number of
franchises of water awards of water
franchises franchises
Water districts where especially municipal water firms operated
Award of water franchise to Various Some awards
MOF in Alto Valdarno, Tuscany awards of water
of water franchises
franchises to MOF
to MOF
Various awards
of water
franchises
to “in house” firms
1994 1999 2001 2003 2009

7. 3. The privatization of the water sector in Italy (1990's-2000's)
Case outcome (2009 data):
No. watershed areas established: 92
No. water franchises awarded: 67
(note, some were awarded to more than one firm within the
same watershed area)
No. Mixed ownership water firms: 27
(out of which, 14 whose shares were traded in stock
exchange)
No. “in house” water firms: 58

8. 4. Explaining the privatization of the water sector in Italy
Inertia part Alto Valdarno part Mixed ownership “Formal”
(1994-2001) (1994-1999) privatization part privatization part
(2001-2003) (2003-2006)
Explananda
Initial conditions
Policy content features
Policy process features
Historical context
conditions
Hypothesized social
mechanisms

9. 4. Explaining the privatization of the water sector in Italy
Inertia part Alto Valdarno part Mixed ownership “Formal”
(1994-2001) (1994-1999) privatization part privatization part
(2001-2003) (2003-2006)
Explananda No execution of the water Privatisation into mixed Privatisation into mixed Privatisation into “in
reform mandate ownership firms ownership firms house” firms
Initial conditions
Policy content features
Policy process features
Historical context
conditions
Hypothesized social
mechanisms

10. 4. Explaining the privatization of the water sector in Italy
Inertia part Alto Valdarno part Mixed ownership “Formal”
(1994-2001) (1994-1999) privatization part privatization part
(2001-2003) (2003-2006)
Explananda No execution of the water Privatisation into mixed Privatisation into mixed Privatisation into “in
reform mandate ownership firms ownership firms house” firms
Initial conditions Features of water
industry
Stakes of local
governments
Policy content features Privatisation as provided
by Act 142/1990
Policy process features
Historical context Autonomy of local
conditions governments
Hypothesized social Logic of appropriateness
mechanisms (March and Olsen, 1989;
March, 1994)

11. 4. Explaining the privatization of the water sector in Italy
Inertia part Alto Valdarno part Mixed ownership “Formal”
(1994-2001) (1994-1999) privatization part privatization part
(2001-2003) (2003-2006)
Explananda No execution of the water Privatisation into mixed Privatisation into mixed Privatisation into “in
reform mandate ownership firms ownership firms house” firms
Initial conditions Features of water Features of water
industry industry
Stakes of local Stakes of local
governments governments
Negotiated agreement
Policy content features Privatisation as provided Privatisation as provided
by Act 142/1990 by Act 142/1990
Policy process features Formation of an
advocacy coalition
Historical context Autonomy of local Autonomy of local
conditions governments governments
Policy orientation of
Tuscany's DS party
Hypothesized social Logic of appropriateness Committed interpretation
mechanisms (March and Olsen, 1989; (Weick, 2001)
March, 1994)

12. 4. Explaining the privatization of the water sector in Italy
Inertia part Alto Valdarno part Mixed ownership “Formal”
(1994-2001) (1994-1999) privatization part privatization part
(2001-2003) (2003-2006)
Explananda No execution of the water Privatisation into mixed Privatisation into mixed Privatisation into “in
reform mandate ownership firms ownership firms house” firms
Initial conditions Features of water Features of water Features of water
industry industry industry
Stakes of local Stakes of local Stakes of local
governments governments governments
Negotiated agreement
Policy content features Privatisation as provided Privatisation as provided Privatisation as provided
by Act 142/1990 by Act 142/1990 by 2001 local public
services reform
Policy process features Formation of an Activation of water
advocacy coalition experts policy community
Historical context Autonomy of local Autonomy of local Autonomy of local
conditions governments governments governments
Policy orientation of 2001 constitutional
Tuscany's DS party reform
Hypothesized social Logic of appropriateness Committed interpretation Attribution of
mechanisms (March and Olsen, 1989; (Weick, 2001) opportunities and threats
March, 1994) (McAdam et al., 2001)
Network diffusion
(Hedström and
Swedberg 1998;
Coleman et al., 1957)

13. 4. Explaining the privatization of the water sector in Italy
Inertia part Alto Valdarno part Mixed ownership “Formal”
(1994-2001) (1994-1999) privatization part privatization part
(2001-2003) (2003-2006)
Explananda No execution of the water Privatisation into mixed Privatisation into mixed Privatisation into “in
reform mandate ownership firms ownership firms house” firms
Initial conditions Features of water Features of water Features of water Features of water
industry industry industry industry
Stakes of local Stakes of local Stakes of local Stakes of local
governments governments governments governments
Negotiated agreement
Policy content features Privatisation as provided Privatisation as provided Privatisation as provided Privatisation as provided
by Act 142/1990 by Act 142/1990 by 2001 local public by 2003 local public
services reform services reform
Policy process features Formation of an Activation of water
advocacy coalition experts policy community
Historical context Autonomy of local Autonomy of local Autonomy of local Autonomy of local
conditions governments governments governments governments
Policy orientation of 2001 constitutional 2001 constitutional
Tuscany's DS party reform reform
Hypothesized social Logic of appropriateness Committed interpretation Attribution of Attribution of
mechanisms (March and Olsen, 1989; (Weick, 2001) opportunities and threats opportunities and threats
March, 1994) (McAdam et al., 2001) (McAdam et al., 2001)
Network diffusion
(Hedström and
Swedberg 1998;
Coleman et al., 1957)

14. 5. Conclusions
Multiple conditions jointly affect the course (path and outcome) of
the privatisation process. Within the present case:
The emergence of mixed ownership firms is related to:
1. Past events related to negotiated agreement to partially privatise;
2. Formation of an advocacy coalition supporting partial
privatisation;
3. Political orientation favouring partial privatisation;
And the diffusion of mixed ownership firms is related to:
1. Policy change concerning range of privatisation options;
2. Activation of policy network of water professionals;
3. Constitutional reform protecting sub-national governments'
policies from central government interference.

15. Thank you