Marketization and Economic Performance: Competitive Tendering in the Social Sector

The public management reforms of the past three decades have been characterized by
organizational innovations usually associated with New Public Management (NPM) and
reinventing government. In particular, neoliberal ideas of strengthening market mechanisms
in the public sector have been prominent. In the empirical literature focusing
on the consequences of marketization, most studies have examined technical services
such as refuse collection while very few have focused on the social sector.
In this article, an example of the general trend towards marketization conducted within
the social sector is analysed. A reform enforcing compulsory competitive tendering
in homecare for elderly people in Denmark is analysed and its relation to measures of
economic performance is explored. Two competing models of marketization
are contrasted in the analysis: a problem solving model inspired by public choice
ideology, in which marketization processes are seen as driven by work-related concerns
for efficiency and performance, and a macro phenomenological institutional model, in
which innovation processes are seen as driven by factors related to hegemonic
ideologies, legitimacy concerns and coercive enforcement.
Very little impact on economic performance is found, which lends support to an
institutional interpretation of the findings.