Decentralization and Reliance on the Controllability Principle in the Public Sector: An Exploratory Study

Despite the growing devolution of budgetary responsibility in public sector organizations, little attention has been paid to the key notion of the controllability principle in this context. This paper explores the relationship between decentralization of decision-making authority and reliance on the controllability principle (RCP) in the devolution of budgetary responsibility to the middle management level of a large Norwegian hospital. The results of a questionnaire survey lend modest support to the hypothesized positive relationship between decentralization and RCP. Qualitative data are then used to probe further into these results. This highlights the importance of various institutional factors impinging on the relationship between decentralization and various means of RCP, which have not been widely discussed in previous research. Based on these findings recommendations for future research, combining the functionalist approaches underpinning much prior theorizing on the controllability issue with insights from institutional theory, are advanced. Specifically, we suggest that future research should examine the institutional constraints on decentralization as well as the institutional pressures for various allocation practices in greater detail. Keywords: Budgetary responsibility, controllability, decentralization, institutional theory, Norway, public sector.