New development: Is the pandemic reinforcing the organizational legitimacy of the municipally-owned companies?

IMPACT

The Covid-19 pandemic required rapid intervention from governments. Local governments in Italy made use of municipally-owned companies (MOCs) to provide goods and services. This had advantages in terms of speed of intervention and reduction of transaction costs and has increased the organizational legitimacy of MOCs. Based on early evidence and from the author’s past experience as a mayor, this article describes how MOCs are changing and the future role they could play in emergencies.

ABSTRACT

Municipal bureaucracies are often too slow to respond effectively to the changing needs that arise in an emergency situation such as a pandemic. As well, public managers resorting to the market can also be a problem: the risk of opportunistic behaviours increases in conditions of uncertainty and high specificity. As a result, the use of municipally-owned companies (MOCs) has increased along with their organizational legitimacy. However, as demonstrated by many scholars, the use of MOCs is not always the most efficient choice. This article, starting from some limited empirical evidence, aims to stimulate a critical reflection on the role of MOCs after the pandemic crisis which seems to have strengthened their organizational legitimacy.

KEYWORDS:

• Corporatization
• inter-organizational control
• local governments
• organizational legitimacy
• municipally-owned companies
• public procurement
• public sector organisations
• transaction costs