How outsourcing affects the e-disclosure of performance information by local governments
Introduction
In the last thirty years, the public sector in many OECD countries has undergone major reforms under the influence of the new public management and reinventing government movements. The aim was to increase efficiency and effectiveness in the public sector by emulating the private sector's style of management and introducing some of the mechanisms and tools of private sector management into public administration (Hood, 1991; Osborne, 1993).
New emphasis was placed on performance measurement and external reporting, and public administrations were required to increase their accountability (Bouckaert & Halligan, 2008; Hood, 1991, Hood, 1995, Hood, 2007; Van Helden & Johnsen, 2002). Accountability has become an essential part of democratic governance (Bovens, 2005). It is effectively achieved by providing a reasonable level of public information disclosure (Van de Walle & Cornelissen, 2014). The internet has allowed significantly increased disclosure and created new opportunities for accountability (Armstrong, 2011; Briano Turrent & Rodriguez Ariza, 2012; Meijer, 2007; Rodríguez, Pérez, & Godoy, 2012; Yavuz & Welch, 2014). As accountability is a complex and ever-expanding concept (Mulgan, 2000), this paper benefits from a systematisation of this concept. As by Mulgan (2002), accountability can be addressed in terms of "who", "to whom", and "for what" questions. In this context, public managers are considered accountors, who focus on accountability by the accountees. Considering the nature of accountability, we can distinguish:
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Managerial (or organisational) accountability: public managers must be accountable to their superiors. It is usually based on strong hierarchical relationships and remains internal. Nevertheless, is a sine qua non for any external accountability (Bovens, 2005).
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Political accountability: public managers must be accountable to political fora, such as elected representatives or political parties.
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Democratic accountability: public managers must be accountable to the general public, which is related to openness and transparency.
Considering the object of accountability, we broadly distinguish between financial and non-financial accountability. Financial accountability is mainly about the resources spent. By contrast, non-financial accountability considers results and the accomplishment of public purpose (Behn, 2001). Non-financial performance information is especially important for useful reporting, but is more difficult to develop and thus less frequently reported by public organisations (Lee, 2008). Skouloudis, Jones, Malesios, and Evangelinos (2014) noticed the variety of terms coined to define disclosure practices that go beyond financial accountability. Within the broad concept of non-financial performance, we can distinguish information on social and environmental issues, sustainability, corporate social responsibility, and performance as a whole (i.e. information regarding inputs, outputs, outcomes, and efficiency), covering a broad concept of performance. By focusing on the disclosure of this information, the article captures a particularly challenging and important dimension of public accountability.
Another main trend in the public sector is modernisation. This trend introduced less centralised and more complex patterns of service delivery and the externalisation of public services (Hood, 1991; Pollitt & Summa, 1997; Rhodes, 1994; Torres & Pina, 2002). Over the last few years, outsourcing has become routine, and the public sector has shifted from being the provider of public services to managing their provision (Breul, 2010). Some studies have suggested a link between outsourcing and accountability: service delivery fragmentation undermines public accountability (Rhodes, 1994). Other studies have suggested that public administration remains responsible for fulfilling public needs and accountable for the management of public resources and the performance achieved (Grossi & Mussari, 2008). These studies have suggested that the relationship between externalisation and financial transparency has therefore been addressed (Cuadrado-Ballesteros, 2014). However, although some recent studies have investigated the determinants of performance information disclosure, the relationship between the disclosure of performance information in the context of accountability and the outsourcing of core activities remains an open question. This paper aims to address this issue with reference to e-disclosure by attempting to answer the following research question: Does outsourcing in service delivery affect voluntary e-disclosure of performance information in the public sector?
This paper uses the theoretical lenses of agency theory (Jensen & Meckling, 1976) and organisational information theory (Galbraith, 1974) to derive the study hypothesis. We test the hypothesis through an empirical analysis of a sample of 262 Italian municipalities. The analysis leads us to suggest that in Italian municipalities, there is a positive relationship between the level of outsourcing in service delivery and the voluntary e-disclosure of performance information. Our findings, therefore, unlike some findings in the literature (see for example Rhodes, 1994), suggest that outsourcing does not undermine public accountability.
Our study also provides a new perspective on the relationship between outsourcing and voluntary disclosure. We argue that although outsourcing increases environmental uncertainty and information asymmetry, and therefore risks undermining accountability, these changes are stimuli to which the organisation reacts through the use of mechanisms to reduce uncertainty and information asymmetry. The article therefore supports a contingency view, where public organisations adapt their disclosure level to fit the stimuli from the external and internal environment. This framework, which is analysed in more detail in the final few sections of the paper, can be used to study how outsourcing affects accountability and may also be useful to examine how stimuli affect the organisational environment.
The paper is organised as follows. Section 2 reviews the literature on the factors affecting the disclosure of performance information. Section 3 discusses the theoretical framework of the study and derives the study hypothesis. Section 4 presents an overview of the research method. 5 Results, 6 Discussion present and discuss the results. The final sections set out the implications of the paper for research and practice and provide some limitations of the study and further research directions.
Section snippets
Literature review
From the early 2000s, researchers have been increasingly interested in studying the determinants of non-financial performance information disclosure, including e-disclosure, and this interest has become more marked since 2010 (Bakar & Saleh, 2015). Some scholars have focused on the overall performance, or inputs, outputs, efficiency, and outcomes of the organisation (Brusca & Montesinos, 2016; Grossi & Mussari, 2008; Julnes & Holzer, 2001; Marcuccio & Steccolini, 2009; Smith, 2004). Other
Theoretical framework
There are, therefore, contrasting opinions regarding the role of service delivery fragmentation on accountability, and an absence of studies directly addressing how service delivery outsourcing affects performance information disclosure; this makes finding a theoretical basis to ground our hypothesis necessary. The relationship between outsourcing of service delivery and voluntary performance information disclosure can be explained by agency theory (Jensen & Meckling, 1976) and organisational
Italian context
To test H1, we analysed a sample of Italian municipalities. During the last few decades, Italy has undergone public sector reforms. These reforms have involved numerous changes, including the devolution of power and responsibilities from the central government to the local levels of government (regions, provinces, and municipalities). These reforms have also required a change from a compliance-based to a performance-based approach, and the adoption of private sector managerial principles and
Results
Our data showed that 19.1% of the sampled municipalities disclosed voluntary performance information on their websites. Appendix A (Table A1) shows the descriptive statistics and bivariate correlations. The correlation analysis suggests a statistically significant (p < .001) and positive correlation between performance e-disclosure by municipalities and the level of outsourcing in service delivery. This therefore supports H1.
Table 3 shows the results of the logistic regression analysis. The
Discussion
This study explored the relationship between municipalities' choice to deliver public services indirectly through outsourcing, and their likelihood of disclosing performance information through their websites. The results suggest that how municipalities deliver public services affects their decisions regarding e-disclosure. Our main finding is that municipalities that use more outsourcing in service delivery are more likely to disclose voluntary performance information on their websites, as
Implications
The present section reports the implications of the study for both researchers and practitioners.
The study makes a number of contributions to the literature. The main contribution, as aforementioned in the previous section, is changing the perspective from which to study the relationship between fragmentation in service delivery and democratic accountability. The article interprets organisations as dynamic and systemic entities, and the relationship as one of stimulus–response. This
Conclusion
This article has asked if outsourcing in service delivery affects e-disclosure of performance information in the public sector. To answer this question, the study adopted an interdisciplinary approach by referring to theories typically used by accounting scholars, such as agency theory and organisational information processing theory, in a public administration study. The main finding is that the decision to outsource public service delivery makes municipalities more likely to disclose
Fabio Monteduro is Associate Professor of Public Management and Coordinator of the Ph.D. track on Business Management and Accounting in the Department of Management and Law of the University of Rome Tor Vergata. His research interests are public management and governance, nonprofit management and governance, accountability, performance management and corruption.
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Fabio Monteduro is Associate Professor of Public Management and Coordinator of the Ph.D. track on Business Management and Accounting in the Department of Management and Law of the University of Rome Tor Vergata. His research interests are public management and governance, nonprofit management and governance, accountability, performance management and corruption.
Veronica Allegrini is subject expert in Business Government Relationships at the University of Rome Tor Vergata. Ph.D. in Public Management and Governance at the University of Rome Tor Vergata. Her research interests include public management and governance, performance management in public administration, accountability, information disclosure and corruption.