Drivers of service delivery modes in Dutch local government: an analysis over time and across domains

Abstract

This study investigates the influence of service, financial and political characteristics on municipalities’ choices of four service delivery modes in the Dutch local government setting, thereby making a distinction between services in the physical and in the operational domain. It shows that, overall, use of inter-municipal cooperation and, to a lesser extent, municipality-owned firms increased substantially from 2010 to 2018. For use of private firms, we find remarkable differences. Whereas this use increased for the physical domain, it decreased for the operational domain. For both domains, we find that in-house production decreased substantially. We also find that the influence of especially transaction cost characteristics on the likelihood that municipalities choose a certain institutional form differs between 2010 and 2018, as well as between the physical and the operational domain. Points for practitioners Our finding that the use of in-house production decreased substantially from 2010 to 2018 suggests that municipalities are looking for mixed institutional forms, such as inter-municipal cooperation, to realize economies of scale. We observe that service delivery modes are especially driven by service characteristics, thereby stressing the importance of transaction cost motives in decisions about service delivery modes. However, our study also shows that financial and political characteristics have some influence. As the effects of the latter are not stable, we show that the way to implement reforms may vary over time and across domains.