Environmental and Organizational Antecedents of Plural Sourcing of Public Services

Abstract

AbstractOrganizations use multiple governance modes (make, buy, ally) to produce their services. We consider plural sourcing as a portfolio of governance mode choices that a public service organization selects to provide its services, and investigate environmental and organizational factors that stimulate plural sourcing of public services. While studies of governance mode have usually relied on insights from theories of organizational economics (transaction cost, public choice, agency), we rely on insights from theories of organization management (strategic adaptation, structural contingency, organizational capability) to construct a theoretical framework and develop propositions on the determinants of plural sourcing. Theory is tested by a four‐panel dataset we constructed by merging data from three different sources within 1992–2007. The results using multilevel (hierarchical) logit identify conditions under which organizations choose to externalize, internalize, or co‐produce their services. We discuss the implications of our findings for sourcing of organizational activities and suggest ideas for future research.Evidence for Practice Plural sourcing is a governance form when an organization combines the three governance choices of make, buy, and ally in producing and delivering its products or services. Environmental and organizational characteristics variably influence government organizations’ choice of three service delivery modes – internalization, externalization, and cooperation. Organizations tend to choose a service delivery governance mode that is prevalent among members of their organizational population. The decision structure of organizations influences governance choice: when top decision‐makers are elected leaders, internalization tends to be preferred; when professional administrators decide, cooperation is favored; and when elected officials and professional administrators decide jointly, cooperation is more likely and internalization is less likely. Choice of public service provision is driven by both economic factors (community wealth, financial resources, and fiscal pressure) and institutional factors (political leadership, trends in provision mode, and non‐fiscal pressure).