Environmental and Organizational Antecedents of Plural Sourcing of Public Services

• Published date: 01 March 2022
• Author: Fariborz Damanpour,Fernando Sanchez‐Henriquez,Claudia N. Avellaneda
• Date: 01 March 2022
• DOI: http://doi.org/10.1111/puar.13321

Research Article

Environmental and Organizational Antecedents of Plural Sourcing of Public Services 325

Abstract: Organizations 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).

Globalization of business, advancements

in information and communication

technologies, and spread of markets, capital,

and sources of knowledge and information have

made organizational boundaries more permeable,

extending the management of organizations beyond

the boundaries of a single organization (Burton2013).

Complex boundaries require reliance on alternative

organizational forms to pursue strategies associated

with boundary options (Tushman, Lakhani, and

Lifshitz-Assaf2012). Organizational forms vary

in their costs and competencies, based on which

Williamson(1991) offered three alternative forms:

hierarchy, market, and hybrid. A match between

the attributes of transactions and organizational

form reduces costs and enhances organizational

effectiveness (Crook et al.2013). From the transaction

cost perspective, therefore, effective choice of

organizational form is a function of the attributes of

organizational transactions (Williamson1991).

The transaction cost theory has been the primary

theoretical perspective to explain selection of

boundary choices in both private and public

organizations (Williamson1981). This theoretical

perspective first considered firm and market as

primary structural alternatives and offered a choice

between two polar governance modes of make or

buy (Williamson1975). Make versus buy simply

portrays that transactions with certain attributes are

governed more efficiently by taking place within

the firm (e.g., a product and its components are

produced in-house), while transactions with other

attributes are more efficient by taking place in the

Fariborz Damanpour

Rutgers University, USA

Environmental and Organizational Antecedents of Plural

Sourcing of Public Services

Fernando Sanchez-Henriquez

Claudia N. Avellaneda

Universidad del Desarrollo, Chile

Indiana University, USA

Claudia N. Avellaneda is an Associate

Professor in the O’Neill School of Public and

Environmental Affairs at Indiana University.

She specializes in governance and public

management in developing countries, with

an emphasis on local and subnational

governments in Latin America. Specifically,

she investigates the drivers of municipal

and provincial performance by focusing

on the role of mayors’ and governors’

education, experience, networking, and

political support on social service delivery,

public finances, tax collection, and decision-

making.

Email: cavellan@indiana.edu

Fernando Sanchez-Henriquez

is an Assistant Professor of Strategy and

Innovation at Universidad del Desarrollo,

Chile. His main research interest focuses

on the different cooperation types in public

and private organizations and their effects

on organizational performance. His research

encompasses topics on innovation adoption

and generation process, with emphasis on

open innovation and the role of external

and internal knowledge networks. He

holds a Ph.D. in Management, majoring in

Science, Technology, and Management at

Rutgers University.

Email: f.sanchez@udd.cl

Fariborz Damanpour is a Professor

Emeritus in Management, Rutgers

University. His primary research area is the

management of technology, innovation, and

change. His articles are published in leading

academic journals in general management,

public administration, and technology

management. His most recent publications

are: “Outsourcing and insourcing of

organizational activities: The role of

outsourcing process mechanisms” (with

Magelssen and Walker),

Public Management

Review

, 2020; and

Organizational

Innovation – Theory

,

Research, and

Directio

n, Edward Elgar Publishing, 2020.

Email: f.damanpour@rutgers.edu

Public Administration Review,

Vol. 82, Iss. 2, pp. 325–337. © 2020 by

The American Society for Public Administration.

DOI: 10.1111/puar.13321.