The increased uncertainty, volatility and complexity under which local governments operate, coupled with significant reductions in public spending, have put great emphasis on how organizations cope with shocks, especially... [ view full abstract ]
The increased uncertainty, volatility and complexity under which local governments operate, coupled with significant reductions in public spending, have put great emphasis on how organizations cope with shocks, especially financial ones.
Public sector financial management literature has used the financial and sovereign debt crises as an opportunity for reviving the long-standing academic interest in this area (Levine 1978, 1979; Levine and Posner 1981; Schick 1980). Building on this literature, studies of governmental responses to the crises and austerity have been developed (Baker 2011; Cepiku and Bonomi Savignon 2012; Dougherty and Klase 2009; Klase 2011; Sacco et al. 2011; Scorsone and Plerhoples 2010; Raudla, Savi and Randma-Liiv 2013; West and Condrey 2011), providing detailed accounts and classifications of reactions, therefore ensuring an accumulation of contextual and descriptive knowledge on response strategies. However, less attention appears to have been devoted to the role of organizational contexts, conditions, capacities and histories, which may affect, and in turn be affected by, such responses to shocks. The concept of resilience allows bridging this gap by looking at responses to crises from a long-term perspective, but also drawing attention to the dynamic relationship of external factors and organizational variables and illuminating their role in dealing with uncertainty related to shocks and disturbances (Shaw 2012).
So far, there has been a dearth of practical operationalization of resilience, and a lack of conceptualization of governmental “financial resilience”, ie, governments’ capacity to absorb and adapt to shocks. The paper aims at investigating governmental financial resilience and its relevance for governmental performance, especially in times of austerity and crisis, by identifying and exploring (i) its dimensions, combinations and dynamics, highlighting possible patterns of financial resilience, (ii) its determinants, explanatory factors and obstacles, and (iii) the organizational consequences (on culture, performance, etc.) of different dimensions and patterns of resilience.
The study is conducted through a quantitative research design approach and is based on a survey that included several hundred local governments from Germany, Italy and UK. Also archival financial data and published reports are used. Our final purpose is to provide a building block in the operationalization of financial resilience, emphasizing what capacities and capabilities have been used and developed in response to the austerity period within local governments and how they contribute to explain, maintain, improve or worsen governmental performance and vulnerabilities, and what, in turn, their antecedents may be. From a theoretical perspective, it helps informing public management accounting literature that has mostly focused on the role of accounting systems in efficiency oriented managerial reforms, by highlighting the need for re-focusing performance and financial management systems on aspects including anticipation, flexibility, adaptability and the adoption of a long-term perspective. Under a managerial perspective, the study aims to provide support to policy makers in setting guidelines or incentives for strengthening local government resilience, and to local governments in developing their internal capacities and processes, as well as their monitoring systems and scorecards to take into stronger consideration the dimensions of resilience, which are often overlooked in current systems.
