Local government strategies in the face of shocks and crises: the role of anticipatory capacities and financial vulnerability
| Author | Ileana Steccolini,Sanja Korac,Martin Jones,Carmela Barbera,Iris Saliterer |
| Published date | 01 March 2021 |
| Date | 01 March 2021 |
| DOI | 10.1177/0020852319842661 |
| Subject Matter | Articles |
Review of
Administrative
Article
Sciences
International Review of Administrative
Local government
Sciences
2021, Vol. 87(1) 154–170
!
strategies in the face
The Author(s) 2019
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of shocks and crises:
DOI: 10.1177/0020852319842661
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the role of anticipatory
capacities and financial
vulnerability
Carmela Barbera
University of Bergamo, Italy
Martin Jones
Nottingham Business School, UK
Sanja Korac
Alpen-Adria-Universitaet Klagenfurt, Austria
Iris Saliterer
Albert-Ludwigs-Universitaet Freiburg, Germany
Ileana Steccolini
Essex Business School, UK
Abstract
This article, building on governmental financial resilience literature, and using data from
a survey of over 600 local governments in Germany, Italy and the UK, looks at the role
that external shocks, anticipatory capacities and associated perceived vulnerabilities
play in determining different organizational response strategies (i.e. ‘bouncing back’
versus ‘bouncing forward’ strategies) at times of crisis. In the face of shocks, higher
perceived vulnerabilities will especially be associated with bouncing back strategies,
Corresponding author:
Sanja Korac, Alpen-Adria-Universitaet, Universitaetsstrasse 65–67, Klagenfurt 9020, Austria.
Email: Sanja.Korac@aau.at
Barbera et al.
155
whereas the presence of anticipatory capacity will be associated with bouncing for-
ward strategies.
Points for practitioners
The present study reveals the crucial role of perceived vulnerabilities and anticipatory
capacities for local governments that face shocks and crises. While organizational
responses in the sense of bouncing back (e.g. retrenchment, buffering, downsizing, cut-
backs) are strongly linked to the associated vulnerabilities, the implementation of bouncing
forward strategies (e.g. transformation, repositioning, reorientation) turns out to mainly
be dependent on anticipatory capacities, which enable organizations to better recognize
potential shocks before they arise. This emphasizes the importance of developing wider
anticipatory capacities within local governments as a key element to cope effectively under
difficult conditions, as well as to build and nurture a financial resilience culture.
Keywords
bouncing back, bouncing forward, anticipatory capacities, crises, financial resilience,
Germany, Italy, shocks, UK, vulnerability
Introduction
In recent years, governments have faced a combination of multiple environmental
shocks that have resulted in direct and/or indirect financial consequences. The
relevance of these phenomena is reflected in an emerging body of research that
has focused on how governments respond to crises and shocks. Most contributions
in this area have described, classified and explored types of governmental responses
(e.g. Kickert, 2012; Kickert and Ysa, 2014; Overmans and Noordegraaf, 2014).
However, there is a relative paucity of research into the processes taking place at
the micro-organizational level, that is, of the organizational capacities, structures
and systems that are (put) in place to face shocks, as well as the role played by
organizational actors’ perceptions in affecting responses (Weick and Sutcliffe,
2001). Similarly, whereas in the past, general management and organization liter-
ature has pointed to the importance of perceptions, sense-making and anticipation
in coping with shocks (Somers, 2009; Weick et al., 2005), they appear to have
attracted less attention in current public sector literature.1
This article contributes to this literature by looking specifically at how govern-
ments’ responses to shocks are shaped by organizational perceptions of financial
vulnerabilities and the presence of anticipatory capacities, that is, capacities that
enable organizations to better recognize potential (financial) shocks before they
arise (Boin et al., 2010; Lee et al., 2013; Lengnick-Hall and Beck, 2005;
Linnenluecke and Griffiths, 2013; McManus et al., 2007; Weick and Sutcliffe,
2001; Whitman et al., 2013). In exploring the relationships among these variables,
156
International Review of Administrative Sciences 87(1)
resilience may prove a particularly useful conceptual lens, as shown by recent
studies analysing how governments deal with the shocks and disturbances that
affect their financial condition (see Barbera et al., 2015, 2017; Davoudi, 2012;
Linnenlucke and Griffiths, 2010; Mamouni-Limnios et al., 2014; Shaw, 2012;
Steccolini et al., 2017; Sutcliffe and Vogus, 2003). Resilience is a multifaceted
concept, yet two main features have been highlighted as defining it. On the one
hand, it refers to the capacity to react to crises, bouncing back to an original state
(Boin et al., 2010: 8; Linnenluecke, 2017: 6; Meyer, 1982); on the other hand, it
refers to the capacity to anticipate and cope with the unexpected, bouncing forward
through the enhancement of, or development of new, capabilities (Meyer, 1982;
Somers, 2009).
This article draws on the conceptual framework of governmental financial resil-
ience developed by Barbera et al. (2017) and is based on multiple case studies in
three country contexts, further consolidated through the analysis of about 30 addi-
tional cases across eight countries worldwide (Steccolini et al., 2017). This frame-
work explains how different patterns of financial resilience result from the
deployment and development of internal anticipatory and coping capacities, as
well as their combinations and interactions with environmental conditions and
perceived financial vulnerabilities.
Building on these previous qualitative findings, which identified the important
role that the presence (or absence) of anticipatory capacities and perceptions of
financial vulnerabilities have in shaping organizational responses to shocks, the
present article adopts a quantitative approach to explore in more depth the roles of
anticipatory capacities and perceptions about financial vulnerability. More specif-
ically, it explores the roles played by such factors in driving and explaining differ-
ent governmental responses to shocks, as well as how responses are affected by the
types of shocks themselves.
The research is based on a survey of German, Italian and UK local governments
(LGs), the governmental level nearest to citizens, which provide an array of ‘tan-
gible’ services and thus directly affect the quality of life of those they serve. LGs
have been significantly impacted by recent shocks affecting their finances. The
results show that in the face of shocks, higher perceived vulnerabilities will espe-
cially be associated with bouncing back strategies, whereas the presence of antic-
ipatory capacity will be associated with bouncing forward strategies.
The article is structured as follows. The next section briefly reviews the extant
literature and presents the conceptual framework and underlying hypotheses. The
third section describes the methods and the fourth section presents the results.
Finally, the fifth section discusses them and draws conclusions, also highlighting
implications for practice and research.
Conceptual framework and hypotheses development
Our study draws on the concept of governmental financial resilience, whereby gov-
ernments’ ability to anticipate, absorb and react to shocks affecting their finances is
Barbera et al.
157
the result of the interaction of environmental conditions, as well as organizational
dimensions (Barbera et al., 2015, 2017; Davoudi et al., 2013; Lengnick-Hall and
Beck, 2005; Linnenluecke, 2017; Linnenluecke and Griffiths, 2013; Nelson et al.,
2007; Somers, 2009; Steccolini et al., 2017; Sutcliffe and Vogus, 2003). Such con-
ditions and dimensions are discussed further in the following subsections, where
hypotheses are advanced and the conceptual framework is presented.
Responses to shocks (dependent variable)
Prior empirical research has shown that organizations pursue a variety of strategies
when coping with shocks and crises affecting their finances (see Beeri, 2012; Boyne,
2004, 2006; Hofer, 1980; Robbins and Pearce, 1992; Schendel et al., 1976). While
such strategies have been described and classified in various ways, they can be
traced back to two main approaches. Organizations may embrace bouncing back
(e.g. retrenchment, buffering, downsizing, cutback) strategies, including increasing
taxes and fees, deferring investments, reducing the costs, scope or size of the orga-
nization, and selling assets (Barbera et al., 2017; Steccolini et al., 2017). Other
organizations may embrace bouncing forward strategies (e.g. transformation, repo-
sitioning, reorientation). The latter emphasize self-sufficiency, entrepreneurship
and innovation by redefining the modes of service delivery and core activities, as
well as improving existing services or supplying new services either to current or to
new clients (Barbera et al., 2017; Steccolini et al., 2017). This article sets out to
explore the respective roles of such factors in explaining the types of responses of
LGs to recent shocks and crises (see Figure 1).
Perceived shocks
External shocks are events that have a significant impact on organizations, some-
times even materializing the threat of organizational failure. The impact can be
direct, such as eroding tax bases, or...
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