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Liberal economic policies in general and privatization in particular have spread around the globe in recent decades (Bortolotti et al. 2003). While in the beginning it was mainly the industrial sector that was affected by the sale of public enterprises, governments have also applied divesture programs to traditional public services such as telecommunications, the post and water services (Clifton et al. 2003). These network-based utility sectors1 are typically considered natural monopolies and therefore affected by market failure (Majone 1997: p. 144). With the emergence of neoliberal ideas, public enterprises were no longer seen as an effective instrument for responding to market failure and privatized in order to meet macroeconomic objectives such as economic growth or the reduction of public debt (Bortolotti and Siniscalco 2004). Privatization in network-based utility sectors often began with a restructuring process, transforming administrative bodies or public corporations into joint stock companies (i.e. formal privatization). Formal privatization has typically led to the divestment of public shares (i.e. material privatization).2
Privatization is now considered "an established policy" in the OECD world (Meseguer 2009: p. 111). When explaining the timing and the extent of privatization, the existing research literature has primarily focused on domestic and external factors. Right-wing parties, a high level of public debt and an institutional arrangement with a low number of veto points are assumed to accelerate the privatization process. Furthermore, international factors such as globalization and Europeanization as well as technological progress are seen as fostering the retreat of the state (Boix 1997; Bortolotti and Siniscalco 2004; Schneider and Häge 2008). However, the majority of the studies neglect possible spatial interdependencies among countries and assume that governments choose policy strategies independently of each other. However, it is plausible that governments emulate the strategies adopted by neighboring countries, succumb to the peer pressure of their reference group or learn from best practice. In a nutshell, privatization has "diffused rather than [being] reproduced independently as a discrete event in each country and sector" (Levi-Faur 2005: p. 28). This paper examines to what extent and under what circumstances the privatization of network based utilities results from policy diffusion across the OECD world.
Privatization in the telecommunications sector is significant for several reasons. First, diffusion processes seem most...