Dealing with multiple principals in at arm's length organizations: A qualitative study of Dutch municipally owned corporations
| Published date | 01 June 2022 |
| Author | Bart Voorn,Marieke Genugten |
| Date | 01 June 2022 |
| DOI | http://doi.org/10.1111/padm.12746 |
SYMPOSIUM ARTICLE
Dealing with multiple principals in at arm's length
organizations: A qualitative study of Dutch
municipally owned corporations
Bart Voorn | Marieke van Genugten
Institute for Management Research, Radboud
University, Nijmegen, The Netherlands
Correspondence
Bart Voorn, Institute for Management
Research, Radboud University, Postbus 9018,
6500 HK, Nijmegen, The Netherlands.
Email: bart.voorn@ru.nl
Abstract
While we have increasing knowledge of causes and effects of
municipal corporatization, we know relatively little about gov-
ernance of municipally owned corporations (MOCs). The litera-
ture has pointed to various governance problems that can
occur when MOCs are owned by multiple municipalities. We
conduct six case studies into Dutch jointly owned MOCs to
understand governance problems that occur in these MOCs
and coordination mechanisms used to overcome these prob-
lems. We find various governance problems, including free-
riding and duplication in governance and lobbying of MOCs.
We also find coordination mechanisms in place that help
bridge differences in interests between municipalities, wherein
local civil services play a particularly large role. The result is a
level of consensus and stewardship in MOCs, regardless of
context. However, this is undermined by interventions of
municipal councils of individual municipal owners in private-
law MOCs, and the conflict of interest of the municipal execu-
tive board as both principal and agent in public-law MOCs.
1|INTRODUCTION
Corporatization in local government is increasingly common (Andrews et al., 2020; Bergh et al., 2019; Citroni
et al., 2013; Ferry et al., 2018; Grossi & Reichard, 2008; Voorn et al., 2018). Increasingly, local public services are
Received: 30 June 2020 Revised: 12 March 2021 Accepted: 28 April 2021
DOI: 10.1111/padm.12746
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use,
distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
© 2021 The Authors. Public Administration published by John Wiley & Sons Ltd.
Public Admin. 2022;100:291–307. wileyonlinelibrary.com/journal/padm 291
transferred to at arm's length organizations, with varying degrees of autonomy from local administrations (Van
Genugten et al., 2020). Various causes have been proposed for corporatization, including fiscal stress (Andrews
et al., 2020; Citroni et al., 2013; Grossi & Reichard, 2008), political blame-shifting (Bourdeaux, 2004), political pres-
sures and ideology (McDonald, 2014), the possibility of more business-like public service delivery (Voorn
et al., 2020), and the option of user fees (Tavares & Camões, 2007).
However, one less-often named reason for local corporatization is that it may be required for cooperative local
public service delivery. Intermunicipal cooperation can bring scale economies and facilitate expertise sharing, and so
is a popular way to deliver local public services worldwide. When local governments deliver public services inter-
municipally, a common way to do so, particularly in Europe, is to use jointly owned at arm's length organizations
(Bel & Warner, 2015; Citroni et al., 2013); likewise, many public–private partnerships take an institutionalized form
(Da Cruz & Marques, 2012). The cooperative motive for corporatization should not be understated: in the Nether-
lands 71.2% of municipally owned corporations (MOCs) are intermunicipally owned, and 23% have both public and
private shareholders (Voorn et al., 2019a). The percentage of intermunicipally owned MOCs is similarly high in Swit-
zerland and some Nordic European countries (Grossi & Reichard, 2016; Torsteinsen & van Genugten, 2016). More-
over, the use of intermunicipal MOCs is growing, especially in Europe (Bel & Warner, 2015; Citroni et al., 2013).
Joint service delivery through intermunicipal corporations is not without problems (Bel & Seb}
o, 2021; Voorn
et al., 2019b). Corporatization under multiple ownership can bring collective action problems in governance, includ-
ing lobbying and insufficient monitoring and steering, which can cause inefficiencies (Voorn et al., 2019b). Given the
prevalence of shared ownership of MOCs, it is critical to understand to what extent municipalities encounter these
potential problems and how they coordinate to overcome them.
The research question of this article is: to what extent do municipalities encounter problems of collective action
in steering and monitoring inter-MOCs, and how do municipalities coordinate to resolve or mitigate them? We
explore this question by conducting case studies of six inter-MOCs in the Netherlands. We aim to find emerging pat-
terns in the governance problems that municipalities encounter and the coordination mechanisms used in jointly
owned MOCs to overcome them.
The remainder of this article is organized as follows. Section 2provides background on MOCs. Next, Section 3
describes governance problems in joint service delivery described in the literature. Following, Section 4describes
our methods and case selection. In Section 5, we describe the findings of our case study. Finally, Section 6discusses
our findings, proposes implications, and provides recommendations for future research.
2|BACKGROUND
2.1 |Municipal corporatization
For most of public administration history, local public services were primarily administered directly by the govern-
ment bureaucracy or by the private sector. However, this “binary”choice between public and private service delivery
became unsatisfactory for practitioners over time. Since the 1980s, concerns about (in)efficiency of government
bureaucracy caused policymakers to reconsider “bureaucratic”forms of public service delivery (Dunleavy &
Hood, 1994), and since the 1990s, practitioners and academics found that private forms of public service delivery
did not always increase efficiency either, primarily because of frequent market concentration problems and informa-
tion asymmetries between practitioners and incumbents when contracting-out (Dijkgraaf & Gradus, 2007;
Ohemeng & Grant, 2008). Local governments, trapped between government inefficiency and market concentration,
considered alternatives.
One common option became the possibility of delivering public services in a way that “balanced politics with
professionalism,”through MOCs (Voorn, 2019). MOCs offer a “middle ground”in the “pendulum shift”between
public and private service provision (cf. Warner & Aldag, 2019; Wollmann & Marcou, 2010), allowing policymakers
292 VOORN AND van GENUGTEN
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