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Theorizing coordination: towards a novel theoretical framework

Paper prepared for EGPA Permanent Study Group VI

Governance of Public Sector Organizations

Edinburgh, 11-13 September 2013

Sorin Dan

Doctoral researcher

KU Leuven Public Management Institute

Parkstraat 45, Bus 3609

3000 Leuven, Belgium

E-mail: sorin.dan@soc.kuleuven.be

Tel: 003216323633

Abstract

This paper looks at coordination from a theoretical perspective. It looks at the most prominent

theories in the field of political science and public administration and asks what these theories

have to say about coordination. The goal is first to distill some main themes of coordination

from these theories. Then, second, on the basis of the theoretical overview, it introduces a

theoretical framework based on sociological institutionalism and principal-agent theory and

applies it to the study of national coordination of public hospitals in European healthcare

systems. It argues that this framework can significantly help us to understand governance

processes more generally and coordination problems in particular.

The research leading to these results has received funding from the European Union’s Seventh

Framework Programme under grant agreement No. 266887 (Project COCOPS), Socio-

economic Sciences & Humanities.

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Theorizing coordination: an introduction

Thinking about coordination can be traced back to as far as there are written documents about

government. As social and economic life became increasingly complex and differentiated,

interest in coordination has continuously grown. Studies looking at coordination emphasize a

number of problems in the scholarship and treatment of the topic. These problems range from

definitional and conceptual ambiguity and insufficient theorization to problems with

operationalizing the concept in empirical research (Alexander, 1995; Bouckaert, Peters and

Verhoest, 2010). One or more of these limitations are frequently mentioned both in the past

and the current literature on coordination. There have been few detailed pieces of work

dealing explicitly with coordination. However, since the practice, if not the concept of

coordination, has a long history, ideas about coordination are not new. Different schools of

thought embracing different theoretical traditions have been dealing with the topic in one way

or another. What can be noticed is that interest in the idea and practice of coordination has

grown and is blooming in the current era of integration and “joining-up”.

The first part of this paper looks at theories of coordination. We do this by taking this fragile

concept by its hand and walking with it in some of the central squares of the field of political

science and public administration. The first question which we seek to tackle is: What do

these major theories have to say about coordination? What are some of the main themes that

can be distilled from these theories that pertain to coordination? This section is inevitably and

intentionally pitched at a high level of abstraction. We do this because we believe that this is

missing from the current literature on coordination and in this sense aspire to contribute to this

literature. In a second part, based on this overview, we present a theoretical framework for the

study of coordination and then apply it to the healthcare sector, particularly to issues of

national (central) coordination of publicly-owned hospitals in European health care systems.

The theoretical approach to studying coordination cannot be separated from that of other areas

of research in political science and public administration (Bouckaert, Peters and Verhoest,

2010, p. 34). Theories in political science and public administration are relevant for

understanding what drives and hampers coordination in the public sector. Almost twenty

years ago, in one of the most detailed treatments of the topic, one scholar argued that what

was missing in the study of inter-organizational coordination (IOC) was not some grand

theory, but a focus on the “mechanics of coordination” (Alexander, 1995, p. 47). He argued

that “the research and study of IOC have neglected what we might call the ‘mechanics’ of

coordination. Instead, attention has tended to focus either on the relatively abstract and

general, or on the very concrete and particular.” In his view, the abstract and general

represented theories explaining why coordination occurs while the concrete and particular

stood for various tools of enacting coordination. What was missing, he argued, were the

structures of coordination – the intermediate level – or what is often referred to currently as

the mechanisms of coordination – following the now classical three-point typology of

hierarchy, market and networks.

Nevertheless, various scholars have stressed that “the general and abstract”, if present in

current scholarship, have somehow been left behind and decoupled from the more daily

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mechanics of coordination, which reigns supreme in much of the work on the subject (e.g.

Jennings and Krane, 1994). This view was shared by Alexander (1995) himself who claimed

that the starting point in tackling the study of coordination is the theory (or theories) behind

various conceptualizations of the term. These various theories can explain the different

understandings and explanations of the concept (p. 7). Omitting them may leave the reader

wondering what the basis is for the overall narrative, what particular theoretical lens

structures the narrative, and what assumptions are embedded in the narrative. The words of

Frederickson and Smith (2003, p. 3) speak specifically to this point:

“There is no more clever theorist than the scholar who claims to have no theory. Simply to

arrange the facts, describe the research findings, and claim no theory may appear to be safe.

But theory of some kind will have guided the selection of which facts to present, how to order

those facts, and how to interpret them. All theories have weaknesses, and denying theory

while doing theory has the big advantage of not having to defend those weaknesses. Denying

theory while doing theory helps to avoid the stereotypes of, say, decision theorists or rational

choice theorists […] These are all compelling reasons to avoid theoretical boxes and

categories, but these reasons do not diminish the centrality of theory in all of public

administration.”

The subject of coordination is a “nebulous” one, spanning various academic disciplines,

policy areas, organizational forms and theoretical traditions (Hood, 2005, p. 20). However,

there is no one single coherent theory of coordination (Malone and Crowston, 1994). The

theories that are more commonly used to tackle the topic are organizational and institutional

theory, rational choice theory and governance “theory”. The choice of these perspectives is

based on their centrality in the fields of political science and public administration, and by

extension to the more specific area of coordination. They also constitute a combination of

“old” and “new”, and a mix between structure and behavior. That these four theories are

central to the field of political science and public administration is no surprise. Many of the

theoretical summaries and handbooks in our field include these four theories (e.g. Bevir,

2011; Frederickson and Smith, 2003). While necessarily limited, we are confident that by

surveying these theoretical traditions we are casting the net wide enough to capture some of

the essential aspects of how coordination is approached theoretically in political science and

public administration.

Organizational, institutional theory and coordination

If there is one particular field of study that has been steadily concerned since its beginning

with matters of coordination that field is organizational theory. The obvious challenge in

distilling themes of coordination from this perspective is its long history of the practice of

coordination and multitude of orientations within the theory of organizations. At a

fundamental level it can be argued that coordination has always been an element of

organizations, though not the single or necessarily the most important one. The need for

creating structures and processes to coordinate intra and inter-organizational activities has

always existed, but methods of coordinating have changed. Organizational practice and

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theoretical developments have shaped the more “mundane” tasks of ensuring that the various

parts of an organization are connected in some way. As far as history goes, a chronology of

organization theory begins in 1491 B.C. during Exodus times when the father-in-law of

Moses, Jethro, advises Moses to delegate authority hierarchically over the various tribes of

Israel (Shafritz and Ott, 2001). A look at the same chronology reveals the rapid pace of

development of organizational theory since the beginning of the 20th

century with increasingly

more work in the second half of the century. As for its breadth, organizational theory

currently comprises at least nine perspectives: classical organization theory, neoclassical

organization theory, human resources theory (or the organizational behavior perspective),

“modern” structural organization theory, systems theory and organizational economics, power

and politics organization theory, organizational culture and sense making, organizational

culture reform movements and postmodernism and information age (Shafritz and Ott, 2001).

This convinced some scholars that there is no one single theory of organizations due to the

lack of theoretical coherence across the various schools of thought (Scott, 2001, v-vi).

Alexander (1995, p. 48) distinguishes two branches that look at inter-organizational

coordination: organization theory, on the one hand, and political science, policy science,

planning and public administration and implementation, on the other hand. He notes that the

former is more systematic and is a subset of the broader literature in inter-organizational

relations and behavior. This body of literature is mainly concerned with describing and

explaining inter-organizational behavior and processes of how coordination occurs. The latter

is less systematically developed and views coordination as a (usually) desirable goal, not just

as a subject of inquiry. An implication of this distinction for our purposes is that coordination

has received relatively more theoretical elaboration in the organizational theory perspective

(e.g. Mulford, 1984) than in the more practitioner and goal-oriented perspective common to

policy and administration research (e.g. Jennings and Krane, 1994).

Considering this distinction we now turn to survey how different schools of thought in

organization history have approached the subject of coordination. We pay particular attention

to showing how institutional and cultural perspectives have gained increasingly more

attention within organization theory, but these perspectives do not address coordination

specifically. We argue that in this respect there is room for contributing to the current

academic discussions on coordination using a sociological institutionalism perspective. An

analytical framework building on this discussion is then presented in the second part of the

paper.

Coordination occupies a central place in classical organization theory in the tradition of

scientific management, Max Weber or Luther Gulick. In an early essay, Gulick (1937, p. 3)

noted that “the theory of organization has to do with the structure of co-ordination imposed

upon the work-division units of an enterprise”. He memorably made a case for the need for

coordination: “When many men work together to build a house, this part of the work, the

coordinating, must not be lost sight of” (p. 5). Classical organizational theory was concerned

with the study of formal organizations particularly with how “coordinated interaction is

authoritatively achieved within formal organizations”. In this literature organizations are seen

as places of “imperative control” or “imperative coordination” (Weber, 1947 cited in Tsoukas,

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2003, p. 608). The aim of formal organizations was to foster rule-based compliance for

regulating behavior. In his foreword to Shafritz and Ott’s (2001) Classics of Organization

Theory, William Scott sets apart two grand themes of classical organizational theory: the first

one is coordination and the second one is cooperation. He describes the theme of coordination

as “enduring” and coordination as a structural component par excellence. The central question

was how to best find a balance between hierarchy and specialization, differentiation and the

division of labor in order to maximize coordination.

Classical management theory and science in the tradition of Frederick Taylor emphasized

productivity gains in production processes through an optimal design of work which needed

to be rigorously controlled and coordinated (Taylor, 1911). Henry Fayol’s (1916)

Administration Industrielle et Générale identified coordination as a separate function of

management. Coordination was understood as the design and operation of organizational

processes to bring separate elements together (see also Hood, 2005). The central goal

undergirding this literature was rationalization and optimization of industrial production. The

means to achieve this goal was through vertical control so that self-interested workers would

pursue not their own interest but the general interest of the organization. Needless to say, it

was assumed that goal conflict was part of the equation. Coordination was necessary due to a

high degree of division of labor and specialization which were – and still are – seen as

grounds for coordination problems today (e.g. Christensen and Lægreid, 2008, p. 97). In a

context of economic enterprises aiming at efficiency and profit maximization, coordination

was seen as a process, not as a goal in itself.

Mintzberg (1979) usefully summarized a large body of research in organization and

institutional theory, building on the work of Herbert Simon, James March and other

organizational theorists that came after the classical school and questioned its assumptions.

The key ideas as they pertain to coordination can be synthesized as follows (Malone and

Crowston, 1994, pp. 113-4). Activities or objectives that involve multiple actors need to be

assigned to various actors in a specific way. This involves decisions on how to manage

interdependencies between actors. A number of coordination mechanisms can be employed to

manage interdependencies, such as standardization of work processes, outputs and skills,

direct supervision and mutual adjustment (March and Simon, 1958; Mintzberg, 1979, pp. 3-

5). Standardization involves the use of consistent rules governing each activity. Under direct

supervision one actor assumes a leading role in managing interdependencies while mutual

adjustment relies on on-going adjustments between actors or groups. This body of literature

was concerned with organizational processes and structural configurations in formal

organizations, and with finding effective mechanisms to structure organizations. The

underlying assumption of the structural school as it relates to coordination was that problems

of coordination would result from organizational structures and from structures put in place to

effect coordination. The structure was the problem and it was the structure that above all else

had to be set right. In the “modern” structural school, control and coordination were essential

for promoting organizational rationality and achieving established objectives through rational

processes and behaviour in a system with clear rules and formal authority (Bolman and Deal,

1997).

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Subsequent schools of organizational theory began to question the central tenets of the

classical school. What followed had been a process of “institutionalization” within

organizational theory to the extent that it has become increasingly difficult to distinguish

organizational theory from institutional theory. Clearly there is much overlap: some elements

in institutional theory and new institutionalism – for instance the place of informal routines

and the role of culture – are also part of the organizational culture school within

organizational theory. What is clear, however, is that various criticisms were put forward that

challenged the classical school (e.g. Tsoukas, 2003, pp. 608-9). They include, first, the lack of

social embeddedness of organizations. Organizational structures, it is argued, are to some

extent a product of societal metaphors, symbols and myths. Second, the mainstream approach

to organizational theory focused on static structures and failed to explain how organizations

and organizational structures change within their embedded environment. Third, individuals

are “beings” possessing feelings and emotions that create bonds and epistemic communities

of practice where socialization occurs. This socialization takes place within the professions

characterized by their own culture and influence. This moves the focus from individual

explanations of social processes to group explanations. A particularly salient line of research

has been the role of the medical profession – as an archetype of the power that professionals

can wield. This view challenges what Tsoukas (2003, p. 613) calls the “ontological

individualism” of organizational theory which “obscured the collective nature of

organizations”. He argues that “a more rounded view of organizational life is possible when

we discard ontological individualism and begin to appreciate that inter-subjective meanings,

manifested in discursive practices, are constitutive of individuals; and, at a higher level of

analysis that societal self-understandings are constitutive of organizations.” (p. 613).

The role of informal norms and cultures has gradually received increasing attention leading to

the organizational culture and sense making school of thought and furthermore to

institutionalism in the mid-1980s in its historical and particularly its sociological strand (Hall

and Taylor, 1996; Peters, 1999; Powell and DiMaggio, 1991). Cultural perspectives have

influenced the study of coordination. Alexander (1995) devotes one chapter to analyzing how

coordination can be supported or obstructed by informal factors. These include kinship and

community, ideology and values, education, profession and “clans”. Informal links can act as

a glue fostering coordination but they may equally pose barriers to effective coordination in

case of conflicting or unrelated goals and interests, incompatible values or professional

boundaries. Institutions of various forms – both formal and informal – can coordinate

individual action and organize effort and create what March and Simon (1993, p. 2) call

“systems of coordinated action among individuals and groups whose preferences,

information, interests or knowledge differ”. According to Kilmann et al. (1985) cited in

Shafritz and Ott (2001, p. 361) “culture is to the organization what personality is to an

individual – a hidden, yet unifying theme that provides meaning, direction and mobilization”.

Sociological institutionalism provides the most detailed treatment of culture of all versions of

the new institutionalism. Cultural elements are not new, however. For instance, Max Weber

was concerned with how cultural values shape formal organizations while Emile Durkheim

was interested in how societal characteristics, including symbols and values, affect

institutions. Institutions provide ‘systems of meaning’ exerting dynamic influence on the

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members of institutions in one way or another. As Peters (1999, p. 107) notes “his view that

institutions must shape behavior is the dominant perspective within the sociological study of

institutions, with emphasis on the manner in which individuals within organizations become

habituated to accepting the norms and values of their organization”. A broader conception of

institutions in sociological institutionalism distinguishes it from institutional approaches in

political science. In the sociological view, institutions include “symbol systems, cognitive

scripts, and moral templates” that provide “frames of meaning” shaping behavior (Hall and

Taylor, 1996, p. 947). As Hall and Taylor point out this leads to a blurry relation between

institutional explanations and cultural explanations and a reconceptualization of what

constitutes culture to include routines, symbols and scripts in addition to attitudes and values

(see also Swidler, 1986). These are expected to influence the preferences and identity of

actors. A logic of appropriateness guides actors to behave in a way that fits the culture of their

organization or system.

Rational choice theory and coordination

The title of this section that looks at coordination from a rational choice perspective is slightly

imprecise. The basic, original assumptions of rational choice theory clearly form a distinct

lens to viewing social life and are worth discussing as such in relation to coordination. What

we do here, however, is to take a broader look at rational choice theory and include ideas from

theories that can only loosely be associated with the original, “pure” ideas of rational choice.

This means that we include views that preserve some of the original ideas about self-

interested, means-ends rationality, but qualify or soften the original claims of rational choice.

These views have been proposed in response to absolute rational choice claims. Rational

choice theory as an umbrella term that groups various theories around the assumption of

rational individual behavior is commonly related to neo-classical economics, agency theory

(or principal-agent theory), public choice theory, property rights theory and transaction cost

theory.

More than any other theoretical perspective on coordination, rational choice theory has

focused on how coordination can be achieved – the mechanisms of coordination – and has

embraced the market as the main, and sometimes the only, coordination mechanism.

Mainstream microeconomic theory assumes that coordination of market-based economic

action is realized through the “invisible hand” of the market. The interaction of sources of

supply and demand is expected to yield an optimal allocation of resources. Organizational

economics, however, starting with Coase’s seminal article (1937) The Nature of the Firm has

challenged the assumption that price theory provides the only possible method of

coordination. It claimed that hierarchy also needed to be considered. Under certain conditions

hierarchy may be a better way to ensure coordination than a market (Williamson, 1975, see

also Malone and Crowston, 1994, p. 113). Neither market nor hierarchy is a slogan that has

become increasingly common in the past decade (Bouckaert, Peters and Verhoest, 2010;

Fountain, 2001). Networks, fuelled by the development of the internet and modern

information and communication technologies, are seen as a third coordination mechanism

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(Gretschmann, 1986; Peters, 1998). Unlike Williamson (1975), who saw hierarchies and

markets as the only pure organizational forms, scholars argued that networks can give rise to

efficiencies and benefits not possible within the other two forms. Networks, they argue,

possess their own logic and a distinct comparative advantage (Powell, 1990; Powell et al.

1996; see also Fountain, 2001, p. 66). This discussion implies that coordination can be

fostered through a combination of the three mechanisms depending on country and sector-

specific conditions (Bouckaert, Peters and Verhoest, 2010).

The narrow rationality assumption of rational choice theory has been vividly challenged since

the bounded rationality school. Two broader lines of criticism have been advanced. The first

one concerns the reality of rationality and a second one focuses on the collectively

problematic effects of individual behaviour when the rationality assumption does hold (e.g.

Hay, 2004). On the one hand, the claims of mainstream rational choice theory are highly

deductive and predictive, and are based on a naturalist approach to social phenomena. Some

scholars have rightly challenged this narrow view and argued that economic action is

embedded in broader social structures that affect individual behaviour (Granovetter, 1985;

Perrow, 1986). This theme resonates with our previous discussion of “ontological

individualism” in organizational theory. On the other hand, what is important are the effects

of rational individual thinking and action on collective goals. In this respect public choice

theory occupies a central place, looking for instance at the collectively irrational effects of

budget-maximizing bureaucracies (Hay, 2004, p. 42). Public choice has been intimately

associated with NPM as originally envisaged. A key pillar of NPM – and a main target of

attack from NPM enthusiasts – was the monolithic, integrated bureaucracy which was deemed

inefficient, ever growing and slow to respond to local needs and a changing environment.

Downs (1967, p. 160) emphatically argued: “The increasing size of the bureau leads to a

gradual ossification of operations…the bureau becomes a gigantic machine that slowly and

inflexibly grinds along in the direction in which it was initially aimed. It still produces

outputs, perhaps in truly impressive quantity and quality. But the speed and flexibility of its

operation steadily diminish.” To respond to these perceived flaws, proponents of NPM

recommended the creation of semi-autonomous agencies operating at arm’s length from

government and enjoying some degree of management autonomy (James, 2003; Pollitt et al.

2004; Preker and Harding, 2003; Verhoest et al. 2012), and/or corporatization or privatization.

Another notable theme within rational choice theory related to coordination is the

identification of the free-riding problem (Hay, 2004, p. 42). Despite collectively positive

outcomes, self-interested rational actors have an incentive to non-participation. Self-interested

behavior hampers coordination giving rise to collectively, and possibly individually, sub-

optimal consequences. Relatedly, individual action and problems of coordination have been

approached from a game-theoretic perspective (Calvert, 1995; Schelling, 1960). In particular

Calvert (1995) discusses from a principal-agent perspective how institutions can address

coordination problems by specifying rules and standards, rewards and punishments and

through organizing effort. He argues that a coordination problem is characterized by more

than one individual sharing a common goal, the achievement of which is obstructed by the

decision of which goals to pursue, imperfect (incomplete) communication and disagreement

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over what decisions to make and which goals are best. This approach builds on neo-

institutional economics and the rational choice strand within neo-institutional theory. In this

view the narrow rationality assumption has been qualified under the influence of structure

over agency. The key focus from this perspective has changed from assuming universal self-

interested rational behavior to understanding the circumstances under which actors behave

rationally (Hay, 2004, pp. 43-4). If coordination is affected by individual, non-cooperative

behavior, then this question becomes highly relevant to explaining coordination processes

more generally and coordination problems in particular.

Principal-agent theory (or agency theory), more than any other strands within rational choice,

has been particularly concerned with issues of ensuring coordination. The key concern is what

governance (coordination) mechanisms to put in place to solve the agency problem –

imperfect information and conflicting goals between the principal and the agent. A main focus

of the theory is to design and adjust instruments that can foster coordination and reduce

information asymmetry and conflict between the principal and the agent. These include

outcome-based contracts to reduce agent opportunism, information systems and performance

indicators to hold the agents to account (Eisenhardt, 1989). This is the key aspect that

distinguishes coordination from a principal-agent theory perspective (commonly based on

hierarchy and some form of control) from voluntary market-based coordination common to

price theory. Agency theory combines price theory mechanisms (e.g. market incentives) with

hierarchical mechanisms (Shafritz and Ott, 2001, p. 246).

As one prominent representative of neo-institutional economics, principal-agent theory does

not necessarily assume absolute rationality. In her influential overview of agency theory,

Eisenhardt (1989, p. 59) points out that one of the “human assumptions” of the theory is

bounded rationality along with self-interest and risk aversion. The author claims that “agency

theory offers unique insight into information systems, outcome uncertainty, incentives and

risk”. She goes on to say that “agency theory is an empirically valid perspective especially

when coupled with complementary perspectives”. The author concludes that “the principal

recommendation is to incorporate an agency perspective in studies of the many problems

having a cooperative structure” (p. 57). We favor this recommendation and as we shall see

later when we discuss the theoretical framework we incorporate the key concepts of principal-

agent theory – in addition to concepts from sociological institutionalism – to explain

coordination problems in European hospital systems.

Governance “theory” and coordination

Governance as theory is still in its infancy, and much of the current scholarship in political

science and public administration hesitates to call governance a theory. While there is much

discussion on the merits and clarity of the concept of governance in the literature, what is

clear from the outset is that this body of literature has much to teach us about coordination.

Coordination is often discussed in the governance literature, and we need to distil what

exactly coordination means and how it is achieved from a governance standpoint. As one

author puts it, the major advantage of the concept of governance is that “it provides for a

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rather abstract frame in order to cover a broad array of institutional arrangements by which

the coordination, regulation and control of social systems and subsystems is enabled and

facilitated” (Schneider, 2004, p. 25). It is difficult to pin down exactly what governance

means and what it consists of. Unlike the “pure” versions of rational choice theory, which

claims to be highly deductive and predictive, governance is anything but that. It brings

together insights from various theoretical traditions and gives them a new feel and “hosts”

them in a new framework. Governance can contain, for instance, cultural elements borrowed

from sociological theory and in this sense it overlaps with neo-institutional theory. The

governance approach has become so pervasive in current social science theory to the extent

that it has “infected” old theories with a governance touch. It is not the purpose of this section

to summarize the large body of governance literature. Many other authors have attempted this

(Bevir, 2009; 2011; Chhotray and Stoker, 2009; Frederickson and Smith, 2003; Pierre and

Peters, 2000; Rhodes, 1996; Stoker, 1998). The goal is to discuss how coordination is

approached within this large and growing body of scholarship.

A relevant salient focus linking governance with coordination is, as in rational choice theory,

the interest in modes (or mechanisms) of governance. Command and control, steering and

rowing or self-steering by societal actors are some obvious modes of governing frequently

discussed in the governance literature. These same modes of governance refer to mechanisms

of coordination. In a discussion of the topic the three “classic” mechanisms – hierarchy,

market and networks – are both thought as coordination mechanisms (Bouckaert, Peters and

Verhoest, 2010; Hollingsworth, Schmitter and Streeck, 1994) and as governance mechanisms

(Bevir, 2011; Pierre and Peters, 2000). The level of generality, as shown below, can explain

this apparent interchangeable use of the terms, although it is far from clear which one is more

general – governance or social coordination. In other words, is coordination one of the

functions of the broader governance or, conversely, is governance a function of the broader

processes of social coordination? In an approach that views governance as a modern variant

of the theory of the state, coordination is a function of state governance (Schneider, 2004).

The state with its institutions has the goal to coordinate, control and integrate various parts in

complex societies. In more general terms, however, governance can be construed as a theory

of the various forms of social coordination (Bevir, 2009, p. 164; Schneider, 2004, p. 25).

The hierarchical mode of governance is contrasted to a socio-cybernetic view where no single

sovereign authority governs alone, but governs with other actors or governs other actors

collaboratively in networks. The role of the governing body is to foster these networks, to set

the stage and coordinate the overall process. Coordination takes precedence over control, and

is more intimately linked to the concept of governance. However, as Pierre and Peters (2000)

emphasize, the state perspective to governance does not become obsolete in the face of a

network-dominated social and political life. Their approach to governance is centered on the

state – not on networks or societal actors. In defense of their approach they argue that “the

role of the state is not decreasing as we head into the third millennium but rather that its role

is transforming, from a role based in constitutional powers towards a role based in

coordination and fusion of public and private resources” (p. 25). The state still maintains its

role in governance, though it is different from what mainstream state theory would posit. Two

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of the main functions of governance are steering and coordinating. Steering derives from

cybernetics – the science of control. Pierre and Peters (2000, p. 23) stress two related

problems related to steering as a governance function. The first one concerns the capacity of

governments to steer society in a multiple-actor environment. The second one refers to what

objectives governments can still steer towards in such a setting and who sets these objectives.

Discussing governance as practice as well as the constraints to govern, Chhotray and Stoker

(2009) show that governance is a political activity characterized by coordination and decision

making in a context of multiple interests and views. Governance and coordination are thus

closely intertwined.

Coordination is presented as one of the tasks of governance among others, including

(de)composition and coordination, collibration and steering and integration and regulation

(Eliassen and Kooiman, 1993, p. 66). Coordination can be both a driving force of governance

and one of the goals of governance (Bevir, 2009, p. 56). The need for coordination in a setting

with multiple interconnected actors leads to changes in governance structures and processes

as well as to the need for cultural change. Are public managers, educated and socialized in a

command and control setting, prepared to take a step back and sit on the table with other

actors on which they previously had hierarchical control over? Effective policy in such a

context involves effective coordination. The quality of coordination becomes a key factor

determining policy effectiveness. Coordination can equally be a goal of governance. If

coordination becomes an important determinant of effective policy then policy makers may

choose (and have chosen) to first tackle coordination problems before expecting effective

policy to occur. Coordination may not be the end goal, but it is an intermediate goal on which

policy outcomes may heavily depend.

Analytical-empirical approaches to the study of coordination in the public sector

Operationalizing coordination in empirical research is difficult to do and rare (Bouckaert,

Peters and Verhoest, 2010, p. 63). Research on coordination, regardless of sector, tends to be

more descriptive rather than explanatory or predictive (Beuselinck, 2008). One approach to

research coordination is the study of coordination strategies, mechanisms and instruments and

their change across countries, sectors or dynamically across time. This can range from a

higher level of abstraction – coordination policy or strategy – to practical instruments of

coordination. This approach can be termed coordination as a process. In this case the

operationalization of coordination consists of specifying and mapping coordination processes

by means of coordination mechanisms and instruments. For instance, Bouckaert, Peters and

Verhoest (2010) systematically investigate the relationship between specialization and

fragmentation in the public sector and mechanisms and instruments of coordination in seven

OECD countries across time. In another study, Beuselinck (2008) looks at initiatives aimed at

improving coordination and possible explanations for these initiatives across various

countries.

Another salient attempt to treat coordination in research can be termed a functional, goal-

oriented approach. Central to this approach is the identification or explanation of processes of

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coordination, broadly speaking, and a distinct interest in the benefits and costs (or problems)

of coordination. For example, Walston, Kimberly and Burns (1996) discuss the anticipated

benefits of vertical integration in healthcare in a North-American context, with a focus on the

healthcare entity level. To attempt to operationalize coordination problems – a key component

of this approach – it is necessary to clarify how they are different conceptually from other

related concepts. Many studies of coordination do not use the term coordination problems,

and prefer terms such as coordination needs, barriers or constraints to effective coordination.

For instance, Fountain (2013) emphasizes four institutional constraints to effective cross-

agency collaboration. These include stovepipes, a legislative process that sends ambiguous

messages, blurred lines of accountability and a budget process that inhibits shared resources.

Beuselinck (2008) surveys the literature on coordination and discusses the need for

coordination and barriers to coordination (see also Hudson et al., 1999; Jennings and Krane,

1994).

Some authors, however, refer specifically to coordination problems and distinguish between

redundancies, lacunae and inconsistencies (e.g. Peters, 1998). Huxham and Macdonald (1992)

and Huxham (1993) use almost the same concepts, and distinguish between repetition,

omission, divergence, and counter-production. In their perspective these are pitfalls of

individual action at the expense of collaborative action. The new element in this classification

is the inclusion of divergence. Divergence occurs when the actions of various individual

actors or institutions follow their own goals at the expense of common goals. Counter-

production (or inconsistencies or contradictions) is concerned with rules, laws, operating

procedures or actions – both formal and informal – taken by certain organizations that

contradict or negate the actions of other organizations. Repetition consists of partial or total

overlap of efforts aimed at reaching a certain goal while omission is concerned with actions

that are important to reaching a certain goal, but are overlooked.

The presence of coordination problems is neither new to the public sector nor easy to

overcome. The extent to which these problems are a matter of concern to politicians and

administrators varies geographically and across time. The politics of coordination undergoes

change (Peters, 1998). It is not entirely clear a priori how problematic these problems are at a

given point in time, and in what ways they can pose difficulties to efficiently and effectively

using tight resources and providing public services. The main argument in the fight to

rekindle interest and restore smooth coordination is that these problems can lead to sub-

optimal effects, especially at a group or system level.

Towards a theoretical framework

National coordination in healthcare, sociological institutionalism and principal-agent

theory

The previous theoretical foray has revealed the following key points on which we build our

own theoretical framework and, subsequently, apply it to study national coordination of

publicly-owned hospitals in European healthcare systems. First, institutional and cultural

13

approaches have increasingly gained in importance, but they have been less influential in the

study of coordination in the public sector. Examples, as we have seen, do exist, but it seems

that approaches anchored in ‘classical’ organization theory are still the most common.

However, as we have seen, institutional and cultural factors can have an impact on

coordination as it does on other social, political and administrative processes which have been

more thoroughly documented. Second, we have shown how group explanations through

epistemic communities – the professions – can enhance our understanding of what facilitates

or hampers coordination. Third, we argued that sociological institutionalism provides a useful

theoretical lens to understand the influence of institutional and cultural factors on governance

processes more generally and coordination problems in particular. Fourth, from a rational-

choice standpoint, we argued that principal-agent theory can act as a complementary

perspective to the study of national coordination by providing key insights into goal conflict,

imperfect information and coordination mechanisms. Now we turn to explaining in greater

detail our theoretical framework and its suitability for research into national coordination of

public hospitals.

The theoretical framework is presented in Figure 1. We are interested in explaining

coordination problems and assessing the possible effects of these coordination problems. We

seek to do this by making use of the central concepts of two theoretical traditions in public

policy and administration, namely sociological institutionalism and principal-agent theory. To

evaluate the merits of each of these two theories in explaining national coordination in

hospital systems, we make use of the case study approach based on congruence analysis.

Blatter and Blume (2008) and Blatter and Haverland (2012) distinguish between three types

of case study research on the basis of three distinct ways of drawing inferences: co-variation,

causal process tracing and congruence analysis. Co-variation is presented as the ‘classical’

way to conduct case-study research, and reflects a logic of inquiry that is closer to positivism

and research based on variables. Causal process tracing resembles a way of knowing that is

interpretive par excellence. It is focused on a deep understanding of the many ramifications

and causal configurations of a few cases. This approach gravitates around these cases.

Congruence analysis, by contrast, the authors argue, forms a distinct type of case study

research that is centered on theory. In the case of congruence analysis the main goal is

‘inference towards broad, abstract theories…the emphasis is on intensive reflection of the link

between every significant observation and one or more abstract concepts (without necessarily

covering every step of the process)’ (Blatter and Blume, 2008, p. 334).

We are interested in investigating the role of both formal and informal institutions,

particularly the role of cultural factors and how they affect coordination problems. To do this

we use insights from sociological institutionalism. The theoretical review of major theories

and coordination has shown how sociological institutionalism provides the most detailed

treatment of culture. This explains our choice. We seek to explore how formal institutions,

understood by means of the type of healthcare system and informal institutions – cultures –

affect governance processes in European healthcare systems, particularly coordination

problems. At this high level of abstraction the notions of institution and culture are central. In

this sense we build on previous research on comparative health policy which has made great

14

use of neo-institutional theory (e.g. Blank and Burau, 2004; Freeman, 1999; Immergut, 1992;

Tuohy, 1999). New institutionalism, in particular, with its inclination to explain change at

macro level over time, is often used as a theoretical framework in comparative health policy

and reform. Researchers using this theoretical lens have drawn insights from a common

theoretical tradition, and have used different concepts and foci to explain change in healthcare

policy. Therefore we need to articulate what concepts, institutions and cultural factors will

form the core of our argument. Culture, in particular, is notoriously difficult to conceptualize

and operationalize in research (Freeman, 1999; Schedler and Proeller, 2007). There is an

intimate link between institutions and culture. Healthcare institutions and systems are

characterized by certain cultural factors that presumably set them apart from one country to

another or from one organization to another. This explains our preference for the construct

“healthcare institutions and cultures”. We investigate these healthcare institutions and cultures

across our country case studies and in so doing we seek to explain coordination. We can

expect that different institutions and cultures will influence coordination in different ways in

different countries.

Some past research in comparative health policy has found multiple factors relevant to explain

change in healthcare policy. A case in point is Tuohy (1999) who explains major policy

change in three Western healthcare systems, the US, Britain and Canada, by means of the role

of political institutions, policy legacies, public opinion and cultural understanding, political

culture and parties, strategic judgment of leaders, and interests, of which those of the medical

profession occupied a central place. Blank and Burau (2004) discuss a variety of categories of

factors (social, cultural, political and religious, to name but a few) which can all have a role in

explaining healthcare policy change and outcomes.

We take a more focused approach compared to some of the work cited earlier. We focus on

explanations deriving from the healthcare system. A first institutional factor is the type of

healthcare system: for example a tax-based national system or a social insurance system. A

second institutional factor is the role of the medical profession. We treat the medical

profession as an institution. The same is the case for the type of healthcare system. Culture

reflects shared historical developments, routines, values, identities and beliefs. In our case, we

are interested in culture or cultures of the healthcare system, public hospitals in particular.

Again, as in the case of formal institutions, we study culture at the level of the healthcare

system. Freeman (1999, p. 91) argues that much benefit can be drawn from focusing on the

informal (cultural) in addition to formal institutional arrangements:

“As well as being sets of institutional arrangements, health systems are clusters of

assumptions, values, traditions, norms and practices. Institutions – organizations, rules,

routines, procedures and assumptions – themselves are cultural products; in turn they shape

cultures. Health systems are cultural systems.”

There are arguments for these choices. First, we acknowledge that there is growing interest of

treating health systems as “health care states” (Moran, 1999; 2000). This has become a

common way to say that healthcare is embedded in the political-administrative system.

Furthermore, as we have seen, it is very common to have lists of various factors explaining

15

healthcare developments and outcomes by looking at explanations in the broader socio-

cultural environment. While we acknowledge this, we see arguments in favor of a more

focused explanatory. By focusing on factors intrinsic to the healthcare system we argue for

the specificity of healthcare – a certain healthcare culture, certain healthcare institutions that

are different from other sectors, although they may not be entirely unique to the healthcare

arena. Tuohy (1999, p. 108; 117) found evidence for this approach. The author found different

developments in healthcare compared to other social policies. If social policy more generally

in a specific country is embedded in the same political administrative system, then one could

expect a similar path across various policies. This, however, was not the case, and the author

argued that there were unique factors common to health or to the healthcare system explaining

developments in health policy. Again, we do not ignore the complexity of social reality, and

appreciate the value of more holistic, multi-dimensional approaches to the study of

governance processes and coordination (see for example Beuselinck, 2008). However, as

argued earlier, we see the benefit of a more focused and theoretically-informed framework.

Role of the medical profession and type of healthcare system

These elements are not only relevant to change in health policy, but also to governance and

national coordination processes in particular. First, the type of healthcare system classified

based on the main funding mechanism, has much to do with the central governance of the

system of hospitals. Tax-based national systems are thought to be more integrated – or

coordinated – than social insurance systems or predominantly private insurance systems

(Blank and Burau, 2005, p. 131; Freeman, 1999, pp. 84-85; Rothgang et al. 2005). In our case

Norway is an example of a national tax-based system while Estonia and Romania are both

social insurance systems. It is reasonable to expect that the type of healthcare system is a key

element in healthcare governance, but the type of funding is only one of the major

characteristics of a healthcare system alongside provision and regulation. Therefore the

relation between the type of funding and governance processes is complex. Many

combinations and classifications of healthcare systems are possible starting from these ideal

types (see for example Wendt, Frisina and Rothgang, 2009). The functions of provision and

regulation are an integral part of our analytical framework. These are closely linked to reform

in healthcare systems: decentralization, autonomy and the governance and coordination

challenges that these pose.

The role of professions in a context of managerial reform constitutes a vast and vivid area of

research. The response of the medical profession to change in health policy has been

investigated and found relevant in the literature (Immergut, 1992; Tuohy, 1999). The nature

of professional expertise and information triggers the need for regulating the profession and

collaborating with it to obtain information that otherwise would not be available. Tuohy

(1999) in particular amply discusses the role of information and the importance of the medical

profession in understanding change in health policy. A principal-agent approach here seems

relevant due to the nature of medical information and possible conflicts between various

logics, for instance managerial versus professional or central consolidation and coordination

16

versus organizational autonomy. At the same time, however, the medical profession is an

institution, both in a formal sense and an informal, cultural sense. It is reasonable to expect

that there are differences from one country to another (and possibly within the same country)

in how the medical profession responds to governance processes – for instance through

resistance or collaboration. All of this would indicate that the role of the medical profession

is a key factor in explaining governance processes more generally and coordination problems

in particular. On the other hand, we use the key concepts of principal-agent theory that is

divergent goals between the coordinator and the coordinated and incomplete information

about the activity of the coordinated. The following reasons justify our choice of these

concepts. First, these are the core tenets of the theory. Second, it can be assumed that

divergent goals and incomplete information pose difficulties on the coordinator, and

potentially can be a source of coordination problems. Third, the various coordination

mechanisms and instruments used may be a locus of coordination problems. We include these

concepts in our analytical explanatory framework in the same way that we include key

concepts from new institutionalism.

17

FIGURE 1: ANALYTICAL FRAMEWORK: NATIONAL COORDINATION OF PUBLICLY-OWNED HOSPITALS

EXPLAIN IDENTIFY ASSESS

Decentralization of hospitals

Coordination problems Effects of coordination problems

Autonomy of hospitals Typology of coordination problems

1. Sociological institutionalism

-Healthcare institutions and cultures

Type of healthcare system (formal institutions)

Role of medical profession (informal institutions)

2. Principal agent theory

-Conflicting goals

-Incomplete information and monitoring

-Governance (coordination) mechanisms and instruments

18

Analytical-empirical approach

We first need to clarify how we conceptualize coordination. We prefer a simple definition that

focuses on the content of the concept. By coordination we understand:

The effective working together of the various parts of an entity, be it an institution or a

system.

Effective in our understanding involves working together that is characterized by two things:

1. Limited coordination problems, namely repetition, omission, divergence and

contradiction and

2. Limited negative effects from these coordination problems.

This definition, we believe, is intuitive and captures the essence of the concept. We follow the

approach to coordination that emphasizes the goals of coordination efforts, and assess the

state of coordination in a given organization or system of organizations by means of

coordination problems and their effects. We define coordination problems as specific

instances where poor coordination can be observed in practice – that is, the existence of

observable failures in the working together of an organization or system. We follow a

taxonomy of coordination problems used in the literature and distinguish between four types

of coordination problems: repetition, omission, divergence and contradiction (Huxham and

Macdonald, 1992; Huxham, 1993; Peters, 1998). By repetition we understand the partial or

total overlap of efforts aimed at reaching a certain goal. Omission is concerned with actions

that are important to reaching a certain goal, but are overlooked for one reason or another – in

organizational terms they fall between two (or N) stools. Divergence occurs when the actions

of various individual actors or institutions follow their own goals at the expense of common

goals. Contradiction as a type of coordination problem is concerned with rules, laws,

operating procedures or actions – formal and informal – taken by certain organizations that

contradict or negate the actions of other organizations.

For clarity a distinction is in order between what is known as the “problem of coordination”,

which is commonly referred to in the literature (Bouckaert, Peters and Verhoest, 2010; Hood,

2005; Peters, 1998), and the specific types of coordination problems defined earlier. The

problem of coordination is situated at a higher level of abstraction and denotes the general,

age-old, challenge of reaching coordination. Repetition, omission, divergence and

contradiction are examples of specific categories through which this general problem of

coordination manifests itself in organizational practice. The concept of coordination problems

is a key element of this thesis. The four-point typology can be used to distinguish between

different problems associated with coordination processes in national healthcare systems. It is

possible that differences exist between countries in how salient and consequential these

problems are. In some countries some of these problems (but not others) may pose greater

difficulties to health policy makers and planners than in other countries.

While this typology is useful, the question remains how these problems can be

operationalized and identified in empirical research. Coordination problems can be identified

19

and assessed by conducting interviews with relevant stakeholders and by means of

comparisons with good practices. This is particularly the case for comparative, cross-national

research which looks at healthcare systems in transition countries and compares them with

developed systems. The element of cross-national learning, despite evident contextual

variation, is not to be overlooked. The good-practices method can be used by analyzing

legislation, policy documents and empirical data to assess what is on the ground in a specific

country and to compare coordination problems with those in other countries. Coordination is

likely to trigger different interpretations from different actors. The same is true for

coordination problems. What is a coordination problem to one stakeholder, say, the Ministry

of Health, may not be a coordination problem to other stakeholders, say hospitals. For this

reason it is important to account for these various constructions in empirical research.

However, coordination or lack of it is not entirely a socially constructed concept and

organizational practice. It may differ from one stakeholder to another, but apart from these

there is also more “objective” ground for identifying coordination problems. This can be

achieved through studying processes and structures, and see how they work and fit together.

Similarly one can look at legislation and policy documents and see whether there are any

observable contradictions. Both approaches, we believe, need to be used for a more realistic

assessment of coordination problems and their effects.

The decision to build the argument around the idea of coordination problems is theoretically

and practically justified. In the public management academic and practitioner literature much

is being written about the perils of decentralization and autonomy reform. The loss of

coordination, it is argued, is one of these major perils. We argue therefore that for this

argument to be true the loss of coordination needs to be evaluated by means of actual

coordination problems and by means of the effects that these coordination problems may

have. It is for this reason that the concept of a coordination problem occupies a central role in

our approach. Additionally, from a more practical standpoint we argue that the usefulness of

research on coordination can be enhanced by focusing attention to ever-present and feared,

but seldom-assessed coordination problems. However, we do not close our eyes to instances

of coordination success, but the idea of coordination success can be tackled through the same

lens. We treat the lack of coordination problems as evidence of coordination success.

This approach resembles problem-oriented policy research. Similarly, it indicates an outright

decision to focus on a negative approach to coordination. Some clarification is necessary at

this stage. The decision to focus on identifying and assessing coordination problems in

national hospital systems does not exclude the idea of coordination success. The approach is

not necessarily biased towards “chasing” and solving coordination problems where

organizational practice has shown that problem-free coordination is extremely difficult, if not

impossible, to achieve in practice. It may also not always be desirable or efficient to reach a

state of perfect, problem-free coordination. Coordination problems are not dichotomous – you

have them or not – but a matter of degree. A full “eradication” of repetition, omission,

divergence or counter-production appears neither realistic nor, possibly, desirable. Some

repetition, for instance in providing a certain public service, may act as a backup to individual

failure (Huxham, 1993, p. 603, see also Landau, 1973). Repetition can be a means to ensure

20

that a critical service gets performed properly and effectively. It is not always and necessarily

the worst of things. Achieving coordination, as important as it may be, may have its own

costs, and it may give rise to problems of other nature, such as possibly stifling individual

action, innovation or organizational-level performance. The language and reality of trade-offs

and unintended consequences apply equally to the realm of coordination as it does to that of

NPM-type reforms – which were chastised for leading to such trade-offs and unintended

effects in the first place. The cycle of trade-offs may know no limits. Solving a type of

problem – lack of coordination – may give rise to a host of other problems. It is important,

therefore, to seek to understand the complexity of these potential trade-offs when evaluating

coordination efforts.

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