Corporatization in local government: Promoting cultural differentiation and hybridity?
| Published date | 01 June 2022 |
| Author | Dag Magne Berge,Harald Torsteinsen |
| Date | 01 June 2022 |
| DOI | http://doi.org/10.1111/padm.12737 |
SYMPOSIUM ARTICLE
Corporatization in local government: Promoting
cultural differentiation and hybridity?
Dag Magne Berge
1
| Harald Torsteinsen
2
1
Faculty of Business Administration and
Social Sciences, Molde University College,
Molde, Norway
2
Department of Social Sciences, UiT The
Arctic University of Norway (University of
Tromsø), Tromsø, Norway
Correspondence
Harald Torsteinsen, UiT Harstad, 9480
Harstad, Norway.
Email: harald.torsteinsen@uit.no
Abstract
Corporatization implies disintegration of public authority,
leading to not only structural but also cultural differentia-
tion of government, transforming it into a fragmented and
hybrid governance system consisting of an authority and
multiple autonomous or semi-autonomous operators. This
article addresses corporatization at the local government
level in Norway, exploring if and how this change in formal
structure triggers the emergence of separate cultures in the
operator entities. Described as an institutionalization pro-
cess, new norms, cognitions and identities seem to develop
in these entities, creating a sense of ‘us’(the municipal
company) and ‘them’(the municipality), thus strengthening
the regulative separateness through normative and cultural-
cognitive elements. Findings from our multiple-case study
indicate that this process may be relatively fast and strong,
transforming local government into a system comprising
various hybrid types, especially segregated and assimilated
types. The stronger the structural differentiation is, the
stronger cultural differentiation seems to be.
1|INTRODUCTION
During the last couple of decades, corporatization has emerged as one of the most prominent and permanent fea-
tures of new public management (NPM) in the public sector, including local government (e.g., Aars & Ringkjøb, 2011;
Received: 30 June 2020 Revised: 26 March 2021 Accepted: 30 March 2021
DOI: 10.1111/padm.12737
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which
permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no
modifications or adaptations are made.
© 2021 The Authors. Public Administration published by John Wiley & Sons Ltd.
Public Admin. 2022;100:273–290. wileyonlinelibrary.com/journal/padm 273
Erlingsson et al., 2015; Ferry et al., 2018; Grossi et al., 2015; Grossi & Reichard, 2008). Corporatization may be
defined as moving a function from political and hierarchical line control within a local government and placing it into
a wholly- or partly owned corporate entity (rephrasing Ferry et al., 2018, p. 477). The process implies splitting up
local government into separate organizational entities of which many hold their own legal personality, transforming
it into a multi-actor hybrid system or network. A fundamental rationale behind all agentification reforms
(Torsteinsen & Van Genugten, 2016), including corporatization is that autonomy will improve organizational perfor-
mance. In this respect, corporatization is seen as a particularly effective strategy due to the managerial and legal
autonomy given to public companies (Voorn et al., 2017).
On the other hand, corporatization implies a radical form of structural differentiation creating new formal bor-
ders and arm's length relations within local government. To what extent will this development lead to an ensuing
process of cultural differentiation, stimulating growth of separate organizational cultures and identities? In other
words, may the price for potential increase in performance be increased fragmentation in local government, not only
structurally but also culturally and politically?
In this exploratory multiple case study,we address culturaldifferentiation in termsof the institutionalization process
linking structural change and performance, a process that seems to have been underresearched andundertheorized in
corporatization studies. Our research question is: How and why does the structural differentiation of local government
caused by corporatization, lead to cultural differentiation, accentuating the distance between authority and operator?
Theoretically, we first utilize the perspective of institutional logics (Friedland & Alford, 1991; Thornton
et al., 2012) to explore to what extent the space for organizational and individual agency grows with increasing
agentification, that is, when we move from internal service provision through increasingly autonomized forms of cor-
poratization. Second, to operationalize what an “institution”is, we draw on Scott's three-pillar conception, compris-
ing the regulative, the normative, and the cultural-cognitive pillars (Scott, 2014). Third, the introduction of new
institutional logics into an existing organization will probably make it more hybrid. To describe and analyze this phe-
nomenon we use Skelcher and Smith's categorization of hybrid types (Skelcher & Smith, 2015), that is, the seg-
mented, the segregated, the assimilated, the blended, and the blocked types. Finally, many classical publications
explore the effects of structure on individual behavior (Egeberg, 2012). The basic idea is that structural design trig-
gers institutionalization, representing infusion of values (Selznick, 1957), mobilization of bias (Schattschneider, 1975)
and shaping of preferences and identities (Aldrich, 1999; Pollitt, 2007; Simon, 1999). However, culture and identity
formation do not seem to hold a prominent place in corporatization research beyond being mentioned in general
terms, for example as a barrier to entrepreneurship (Tremml, 2020), a supplement to formal (Krause &
Swiatcsak, 2020) or output control (Krause & Van Thiel, 2019), or a support for strategic governance (Daiser &
Wirtz, 2021). Our theoretical contribution to the research field, therefore, is to combine classical insights with more
contemporary perspectives of institutional logics and hybridization, while empirically contributing by exploring the
“missing link”of institutionalization.
This article proceeds first, by presenting the theoretical framing of our research question, and second, by
explaining the analytical framing of the study in a Norwegian context. Third, we describe the methodological
approach, and fourth, we present and analyze our empirical findings before finally, discussing the findings and
concluding.
2|THEORETICAL FRAMING
In this article, we conceptualize corporatization as an agentification process (see Figure 1) leading to structural differ-
entiation of local government, transforming it into a local governance network consisting of an authority and multiple
corporate operators (service providers) holding varying degrees of managerial and legal autonomy. First, the author-
ity of a traditional local government comprises two separate although complementary principals (e.g., Svara, 1999),
the politicians who represent the democratically legitimated power center, that is, the municipal council, and the
274 BERGE AND TORSTEINSEN
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