Municipalities’ willingness to adopt process innovations: evidence for higher cost-efficiency

ABSTRACT

In the public sector, innovation is understood as a major driver of public service performance improvement and excellence. On the one hand, previous research has proven a positive effect of innovation adoption on performance in the public sector. On the other hand, a broad literature proves positive effects of innovation antecedents on innovation adoption. This study bridges this gap and analyses the effect of an innovation antecedent – willingness to adopt a process innovation (accrual accounting) – on municipalities’ service provision cost-efficiency. Therefore, the author makes use of a panel data set of German municipalities, located in the federal state of North Rhine-Westphalia. Evidence shows that a higher municipal willingness to innovate relates to higher cost-efficiency. A higher innovation willingness might have a maximal effect of 17 percentage points on municipality cost-efficiency.

KEYWORDS:

• Process innovation willingness
• local government
• performance measurement
• stochastic frontier analysis

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. The determinants of organisation’s capability are: leadership practices, employees’ skills and innovativeness, process and tools for idea management, supporting culture, external sources for information, development of individual knowledge, employees’ welfare and linkage to strategic goals (Saunilla et al. 2014).

2. The shift of the accounting regime with the beginning of 2009 precludes the comparison of actual with data before 2009.

3. Because of availability problems only the amounts of public and private kindergarten places are available. As dealt by Kalb, Geys and Heinemann (2012), this variable is assumed to proxy for kindergarten places facilitated by the municipality.

4. Note that, importantly, social security contributions do not represent expenses for the municipality but for the federal government (and, as such, are not linked to the municipal budget other than as a proxy for infrastructure and business services).

5. Lampe, Hilgers and Ihl (2015) showed the positive effect of accrual accounting on local governments’ cost-efficiency.

6. Note that, social security contributions do not represent expenses for the municipality but for the federal government.

Additional information

Notes on contributors

Hannes W. Lampe

Hannes W. Lampe is a postdoctoral researcher at the Institute of Entrepreneurship at the Hamburg University of Technology, Germany. His research interests include interdisciplinary topics between public management and entrepreneurship as well as innovation management. His publications include ‘Trajectories of efficiency measurement: A bibliometric analysis of DEA and SFA’ (2015, European Journal of Operational Research, 240: 1–21) and ‘Does accrual accounting improve municipalities’ efficiency? Evidence from Germany’ (2015, Applied Economics, 47: 4649–4363).