Drivers of outsourcing and backsourcing in the public sector-From idealism to pragmatism

Local governments are bringing previously outsourced services back in-house. Research into explanations for sourcing decisions in the public sector is growing, however, few researchers have investigated drivers of both outsourcing and backsourcing in local public-governance organizations. In this study we utilize transaction cost economic theory (TCE) and political ideology to investigate underlying motives of sourcing in local public governance organizations. Based on a 2018 survey of chief financial officers (CEO) in all of Sweden's 290 municipalities, this study shows that backsourcing is strongly associated with outsourcing and that outsourcing and backsourcing should not be understood as opposite phenomena, rather as interdependent phenomena in a dynamic sourcing strategy. Outsourcing and backsourcing are driven in part by different factors: Outsourcing by political ambitions and economic factors relating to TCE, while managerial and pragmatic concerns are foregrounded for backsourcing.

Automated summary

Research suggests that the phenomena of bringing previously outsourced services back in-house in local government organizations is driven by factors such as political ambitions, economic considerations, managerial concerns, and pragmatic issues. Local governments should view outsourcing and backsourcing as interdependent phenomena in a dynamic sourcing strategy, rather than opposite approaches. Outsourcing decisions are influenced by political and economic factors, while backsourcing decisions are driven by managerial and pragmatic considerations.