Environmental and Organizational Antecedents of Plural Sourcing of Public Services

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.