Striving for Collaborative Efficiency: The Steering Relationship between Local Governments and Inter-Municipal Corporations

Local governments increasingly engage in collaborative efforts. As a consequence of decreasing public budgets, cutbacks and decentralization from the national to the local level, in the Netherlands and abroad, municipalities organise more and more public services in inter-municipal corporations for efficiency gains. Inter-municipal corporations are organizations of which several municipalities have significant control, through full or partial ownership. Local governments face many challenges governing inter-municipal corporations (Grossi & Reichard, 2008; Van Thiel & Snijders, 2010). These include the dual role of the municipalities as owners of the corporation on the one hand and as contractors on the other hand. Moreover, the multiple owners of the corporation need to cooperate while protecting their local interests. In addition, each municipality has limited control over the service provided by the inter-municipal corporation and needs to monitor whether the goals of the corporation are sufficiently aligned with its own interests. There is as yet little systematic knowledge about the governance of these inter-municipal corporations. Therefore, in this paper we systematically analyse the steering relationship between 16 large Dutch municipalities and their inter-municipal corporations. To that end we use principal agent and principal steward theory (Jensen & Meckling, 1976; Davis et al., 1997), and the multiple principal problem (Dixit, 2002; Waterman & Meier, 1998). It is expected that if principals agree more on their common interests and form coalitions, they are in a better position to control the inter-municipal corporations, to align their common interests with those of the corporation, and to achieve efficiency gains. In the 16 cities we study in this paper, we collect data on the basis of holding reports and web pages of inter-municipal corporations, budgets of the municipalities, municipal policy documents and reports of local courts of audit on inter-municipal corporations, and interviews with key persons in the cities.