New Forms of Local Governance

This article seeks to identify which factors lead local governments to use corporate public sector organizations, particularly municipal corporations, for service delivery. The authors argue that local officials trade off bureaucratic costs of in-house production with agency costs of external delegation to municipal corporations when deciding how to deliver local public services. Econometric models are employed to test this explanation for the adoption of municipal corporations by 278 Portuguese local governments. The results indicate that organizational size, financial independency and fiscal surplus, as well as ideological concerns and the activity of local interest groups, drive choices of local governance structures.