Bandwagoning municipal enterprises: institutional isomorphism and the search for the Third Way

During the last decade, the number of municipal enterprises in Finland has almost tripled. This paper attempts to understand the phenomenon related to the recent mushrooming of municipal enterprises. This is done by three empirical case analyses of university hospital laboratories. In two of the three case organisations, there is very little indication that any strategy or other rational reasoning would explain the adoption of municipal enterprise form, and the analysis suggests that institutional isomorphism plays an essential role in the adoption of the municipal enterprise form. Moreover, there are signs that the search for the ‘Third Way’ of some local politicians, especially in the case of some early mover organisations, like the third case organisation of this study, might have triggered the development which has led to the bandwagon effect. The popularity of New Public Management (NPM) and the promises of the NPM mantra, suggesting, e.g. efficiency, cost-effectiveness and more flexible management, might lead the public administration decision-makers to believe in the superiority of certain business-like organisational forms. However, the decision-makers themselves might be surprised to learn how thin the evidence to back up the expectations concerning NPM reforms might be. The organisational transformation, such as the adoption of the municipal enterprise form, might lead to an outcome where public organisations become increasingly similar without necessarily becoming more efficient.