A team of American economists examines the effects of governmental decentralization in Mongolia, using data, gathered in mid-1996, from 251 large privatized enterprises that have either local or central government ownership or are completely private. Focusing on enterprise-state relations, the authors investigate governmental involvement in corporate bodies, soft budgets, subsidies, state purchases, lobbying, and dispute resolution, and present evidence on how such relations vary with ownership and level of government. Discussion and analysis cover the effects of devolution of state supervisory power on enterprise-state relations in light of the differing constraints and incentives facing local and national politicians.