The Moderating Effects of Social Capital on the Effectiveness of Institutional Designs for Government-Third Sector Collaboration: Two Case Studies

The third sector is the center of the discourse and institutional design of social service delivery. We use the term “regime” to encompass institutional designs for government-third sector collaboration in service... [ view full abstract ]

The third sector is the center of the discourse and institutional design of social service delivery. We use the term “regime” to encompass institutional designs for government-third sector collaboration in service delivery, ranging from trust-based self-organizing coordinating mechanisms, to contractual arrangements and to centralized coordinating mechanisms. Regime change from centralized coordinating mechanisms to contractual arrangements might give rise to increased fragmentation and accountability issues. Nonprofit service operators may interact with each other in certain ways to minimize externalities of choices and achieve better coordination in terms of service provision and quality standards. Therefore, the question of how social capital in the third sector might contribute to public accountability lies at the core of understanding effective government-third sector collaboration.

We did two case studies to explore how social capital in the third sector moderated the effectiveness of new regime—contractual arrangements—in resolving principal-agent problems. The design and subsequent adjustments of the institutional arrangements for the provision of two social services—residential care homes for the elderly (RCHEs) and integrated family service centres (IFSCs)—were analyzed. While RCHEs are operated by a mix of nonprofit and private organizations, IFSCs are operated by a mix of public agencies and nonprofit organizations. In addition to centrally organized measures to reduce principal-agent problems arising from managing RCHEs such as licensing and competitive bidding, self-organizing institutions such as accreditation also emerged as complementary measures. For IFSCs, the embeddedness of service delivery network cultivated through long-term government-third sector partnerships is critical to the resolution of principal-agent problems. In both cases, social capital, particularly network embeddedness, played an important role in buffering the negative effects of contractual arrangements on the public accountability of service delivery network.