Effects of three forms of local government service provision on transparency, accountability and innovation

This paper compares three organisational forms of local government service provision and their effects on transparency, accountability and innovation. The three selected forms are in-house provision, inter-municipal company... [ view full abstract ]

This paper compares three organisational forms of local government service provision and their effects on transparency, accountability and innovation. The three selected forms are in-house provision, inter-municipal company delivery and delivery by municipal limited company. The purpose is to compare traditional in-house delivery with two types of externalized corporate delivery in order to find out if and how arm’s length governance may influence selected economic (i.e. innovation) and political variables (i.e. transparency and accountability). Further, the paper explores the operating logics of these forms in terms of hierarchy, market, and network. However, we also hold the door open for the existence of compound or hybrid forms consisting of two or all three of these mechanisms.
A basic idea behind NPM-inspired reforms has been that arm’s length service delivery will improve transparency, accountability and innovation in public organisations, compared to in-house service delivery. However, two to three decades of experience and research do not provide convincing or at least not final answers to these questions. Some observers claim that we now are entering a neo-Weberian period, which is supposed to restore transparency and accountability and remedy the disintegrating and other negative effects of NPM. Other scholars maintain that the neo-Weberian idea of «returning to the past» where public organisations were supposedly more integrated, neglects the immense growth in size and complexity of the public sector. Therefore, one has to live with this complexity and instead develop cooperative networks built on trust and relational contracting. According to this perspective, neither market nor hierarchy can solve the challenges of public service delivery, at least not alone.
It might be tempting to link the three operating logics to the three organisational forms we have presented (hierarchy to the in-house form, market to limited companies and network to inter-municipal companies), but that would obviously be too simple. Therefore, we suppose that and seek to find out if these mechanisms may be present in all three organisational forms, although in varying degrees and mixtures.
To provide data for this paper we perform three case studies of municipal service provision; one case with in-house delivery, a public law inter-municipal company, and a private law municipally owned limited company. Our methodological approach is based on interviews with key persons (in the municipalities, the companies and the media) and documentary material (written documents and home pages of municipalities and companies; media reports and discussions). We concentrate on a single type of public utility service, waste management. Although this choice might limit our perspective, it makes it easier to compare the effects of the three organisational forms.