Differences between Public and Private Sectors

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When we examine public sector versus private sector, plenty of differences come to mind. In defining each, we learn a private sector in an economy consist of all businesses and firms owned by ordinary members of the general public. It also consists of all the private households in which people live. The public sector in an economy is owned and controlled by a government. It consist of government businesses and firms and goods and services provided by the government such as the national health service, state education, jobs, roads, public parks and law and order.

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Throughout this paper, we will examine other differences that exist amongst public sector and private sector such as policy decisions and beneficiaries. The Differences between Public Sector and Private Sector Often you hear news analysts talk about the public and private sectors. While most people usually have an idea what these two terms entail, there are complex differences between the two, which are also useful to learn about. Houston (2000) states, “in spite of virtually universal agreement among scholars that public organizations have more goal complexity and ambiguity, public managers do not differ from business managers in response to survey questions about such matters. Public managers do not differ from business managers on perceptions about organizational formalization, in spite of a chorus of assertions that government agencies have more red tape and rules than private firms have. Public managers do, however, show very sharp differences in response to questions about constraints under personnel and purchasing rules. ” First, when we it comes to the public sector it is basically made up of organizations which are owned and operated by the government. Within the United States, the public sector consists of government agencies like federal and state offices.

When a private individual speak of the public sector, they are typically referring to a public authority, or public body. Any federal institution that is associated with health care, police services, prison services, local and central government management, and all their departments, are also considered as a part of the public sector. Rainey and Bozeman (2000) states, “organizations are made up of a complex of important dimensions and issues; researchers have developed bodies of research on these dimensions, which include goals, structure, motivation and many others. The comparisons of public and private organizations have been influenced by these patterns, drawing on conceptual and methodological developments in these areas. For example, researchers have compared business firms to public agencies on measures of work satisfaction among members of the organization and on their perceptions of organizational structure, using concepts and empirical measures that organization theorists had developed to measure satisfaction and structure. ” Next, there is the private sector. This sector is generally made up of organizations which are ‘private’, which means that they are not owned by, nor part of, the government. All small businesses, corporations, profit and non-profit organizations, partnerships, charitable organizations and middle to large entrepreneurships, are considered as part of the private sector. The specific examples are retail stores, credit unions, local businesses and non-government operated banks. So, what is the difference between the public and the private sector in regards to the way that they operate? Those who are in the public sector are known for supplying services to the ublic, and they are not competing with any other institution for profit. On the other hand, private sectors seem to have a goal of outshining their competitors, and maximizing their revenue. According to Perry and Rainey (1988), “Privately owned and funded organizations are asserted to be more heavily influenced by their economic markets, and they are more autonomous from government oversight. ” They also state, “Governmental regulation and government contracts can bring heavy governmental control to bear on some private firms.

On the other hand, government organizations that are funded through market sales or user charges often have concomitantly greater autonomy from governmental controls. ” Majority of public sectors are managed under a bigger chain of command and control, while private sectors mostly operate in a corporate setting. As for the differences with their policy decisions, the activities in the public sector have a goal of adhering to what is indicated by law, while the private sector is driven by the rules of shareholders and corporate owners. Schmidt (2008) states, “The research agenda of companies is more focused and targeted and therefore perceived as easier to handle for managers. Also, the decision-making process is different. Managers of private enterprises can faster and easier change orientation, focus and targets. This implies, according to some managers, that the instrumentation used in the private sector is different from the one used within public research. ” [pic][pic]Finally, the beneficiary of the services provided by the public sector, is the general public. These goods and services are sometimes provided free and in other cases consumers have to pay a price. The goal of public sector activity is to provide services that benefit the public as a whole. This is because it would be hard to charge people for the goods and services concerned or people may not be able to afford to pay for them. Therefore, the services tend to be those considered very important to modern life that for moral reasons their universal provision is usually guaranteed, and they are associated with fundamental human rights. Helping others with a specific need or want is their way of defining a service.

An example of a service which is not generally considered an essential public service is hairdressing. As for the private sector, it is mostly the consuming public who utilizes the goods and services that they offer in exchange for profit. A private sector is not controlled by the state. There are various legal structures that exist for private sector business organizations, depending on the jurisdiction in which they have their legal residence. Individuals can conduct business without necessarily being part of any organization. According to Burger and Stare (2010), “The challenge remains how to simultaneously boost employment and efficiency in private services, while curbing the employment in public services without jeopardizing their performance. Exploiting the innovation potential in private and public services as well as the interfaces between the two may contribute to solving the problem. ” In conclusion, most studies show there is a small amount of evidence that the participants have sufficient knowledge of real public-private differences. Seemingly, when it comes to researching the differences between public and private sectors there are many comparisons that can be made amongst the two. Vuori (2007) states, “Sector differences in the management of public and private organizations are likely to be inherently misleading because the procrustean dualism of their categories will tend to blank out important phenomena. Public and private managers both find themselves operating in environments, which we describe as spaces that combine both market and political forces. While there are plenty of differences between public and private sectors, there are similarities between them too. Most public sector entities require some form of bureaucracy to implement the policies that guide the provision of the public good or service. Many Private Sector entities find that as they grow, creating some form of bureaucracy allows them to realize efficiencies and improve profitability. Bureaucracies, when implemented properly, can create a mechanism that helps either the private sector entity or the public sector entity to function in a consistent and predictable manner with defined roles.


David J. Houston, “Public Service Motivation: A Multivariate Test”, Journal of Public Administrative Research and Theory, Vol. 10, No. 4; 713-728 (2000). Hal G Rainey; Barry Bozeman, “Comparing public and private organizations: Empirical research and the power… ” Journal of Public Administration Research and Theory; Apr 2000; 10, 2; ABI/INFORM Global pg. 447. James L. Perry and Hal G. Rainey, “The Academy of Management Review”, Vol. 13, No. 2 (Apr. , 1988), pp. 182-201. Evanthia Kalpazidou Schmidt. (2008). Research management and policy: incentives and obstacles to a better public-private interaction. The International Journal of Public Sector Management, 21(6), 623-636. Retrieved August 25, 2010, from ABI/INFORM Global. (Document ID: 1545187541). Vuori, Jari, “Public and private manager: Does the difference really matter? ”, (2007); Leading the Future of the Public Sector: The Third Transatlantic Dialogue University of Delaware, Newark, Delaware, USA. Burger, A. , & Stare, M.. (2010). Public and private services transformation in the CEECs. The Service Industries Journal, 30(4), 479. Retrieved August 25, 2010, from ABI/INFORM Global. (Document ID: 1922870961).

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