Incentive power and authority types: towards a model of public service delivery
| DOI | 10.1177/0020852309365674 |
| Author | Dario Barbieri,Domenico Salvatore |
| Date | 01 June 2010 |
| Published date | 01 June 2010 |
| Subject Matter | Articles |
Dario Barbieri is Post-doctorate Fellow at the Department of Institutional Analysis and Public Manage-
ment, Università Bocconi, Milan, Italy. Domenico Salvatore is Assistant Professor at the Department
of Management, Università Parthenope, Naples and researcher at Fondazione SDN, Naples, Italy.
© The authors, 2010. Reprints and Permissions: http://www.sagepub.co.uk/journalsPermissions.nav
Vol 76(2):347–365 [DOI:10.1177/0020852309365674]
International
Review of
Administrative
Sciences
Incentive power and authority types: towards a model of
public service delivery
Dario Barbieri and Domenico Salvatore
Abstract
Substantial research has been conducted concerning the efficiency and efficacy of
different modes of public service delivery and contracting out. This article develops
a model of service delivery choice taking into account the distinction between
public, private and non-profit organizations and the characteristics of the service
to be delivered. Transaction Costs Economics has mainly debated the attributes
of the technology involved in production and the required investments. In this
article, considerations on the organizational nature of the actors participating in
the process are added to this framework, pointing out that features of the internal
structure and of the external mode of social control of organizational forms make
them more suitable for providing certain services rather than others. The model is
based on two dimensions: incentives power and authority types. Evidence from
the contracting-out debate is used for discussing the implications of the model for
the feasibility and efficiency of organizations in the service delivery.
Points for practitioners
Politicians and public managers daily face the challenge of choosing the best way
to manage the delivery of public services to the citizenship. Our research aims at
supporting this decisional process, taking into account the nature of the service
and of the organization delegated to deliver the service. The incentives provided
by different organizational structures and the authority types involved should be
considered. Our model suggests that low or high political authority and low- or
high-powered incentives can lead to the contractualization to private, public or
non-profit organizations. When incentives are high-powered and political authority
is low, the service delivery should be privatized.
348 International Review of Administrative Sciences 76(2)
Keywords: contracting out, outsourcing, public administration, public
management, public sector reform
Introduction
Contracting out by public organizations has been a central issue in public manage-
ment studies because it has been adopted in many countries by governments believ-
ing that external organizations can bring cost savings to the production of goods and
services traditionally produced by the public sector. Public services delivery choices
have been constantly investigated by public management scholars even if research
on contracting is sometimes referred to as ‘extensive and unsystematic . . . lacking
generalizability and explanatory power’ (Fernandez, 2007: 1120). Empirical studies
have found conflicting evidence concerning both the efficiency and efficacy of con-
tracting out by public organizations (Boyne, 1998).
One element that has often been overlooked in such studies is whether it makes
any difference for the efficiency and efficacy of the contracting-out process that the
organization providing the service is public, private or an NPO (non-profit organiza-
tion). In this article, this issue is approached from the perspective of New Institutional
Economics (henceforth NIE), which assumes that different organizational arrange-
ments offer a variety of incentive systems and authority relationships which may be
appropriate to each situation depending on the characteristics of the service object of
the transaction (Williamson, 1975). In an NIE perspective, public, private and non-profit
organizations differ in the incentives structure they offer and in the mode of social
control they are subject to and, thus, they may be compared in their relative ability
to perform different types of activities. NIE is an interdisciplinary stream of research
combining economics, organization theory and diverse other scientific approaches: it
started as a criticism of orthodox economics and is interested in the social, political
and economic institutions governing life. Even if some scholars (see Furubotn and
Richter, 1998) argue that the demarcation between NIE and neoclassical economics
is still under debate, the individualistic approach of NIE can be seen as a reaction
to the holistic vision of traditional economics: decisions in the NIE are considered
expressions of rational goals, plans and actions of individuals (Klein, 1999). NIE puts
its emphasis on introducing institutional realism into economic analysis.
Some public bodies own a degree of sovereignty traditionally not questioned by
(and not contracted to) the private actors, given the nature of their functions (for
instance, the judicial courts). Those bodies are usually established to provide a legal
framework to the operations of the economy and to allow its existence and the fair-
ness of the rules which regulate its functioning mechanisms. The choice of delivering
a service ‘in house’ or contracting it out is in fact a complex decision usually depend-
ing not (only) on questions of efficacy and efficiency but on other political variables
such as the ideology of the party in power. Indeed, political ideology often influences
contracting-out decisions. Nonetheless, the nature of the services to be provided
and of the institutions providing them can be used to develop a model of choice
of service delivery mode useful to public managers in order to take into account
the consequences of the choice on efficacy and efficiency and not (only) political or
ideological justifications.
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