Make and Buy—An Alternative to Make or Buy? An Investigation of Four Theoretical Explanations in Danish Municipalities

Abstract

The question of whether public organizations should provide services themselves or buy them from external suppliers has become increasingly relevant due to public-sector modernization. The literature has focused on it as a question of either make or buy. Contrarily, we focus on the reasons for public organizations to simultaneously produce and contract out similar services. The article investigates different theoretical explanations for concurrent make and buy. A survey of Danish municipalities shows that make and buy seems to be a steady choice. However, the results show little support for the theoretical explanations indicating the need for more public-oriented explanations.

Keywords:

• contracting out
• local government
• transaction cost
• rational choice
• resource-based view
• institutional theory