Entrepreneurship in the Public Sector: When Middle Managers Create Value

Citation

James Caton (2015), "Entrepreneurship in the Public Sector: When Middle Managers Create Value", Journal of Entrepreneurship and Public Policy, Vol. 4 No. 2, pp. 275-276. https://doi.org/10.1108/JEPP-08-2013-0035

Entrepreneurship refers to actions by individuals who take on the risk associated with creating organizations that will provide goods and services to the public. Entrepreneurs find new ways to organize resources in order to take advantage of unrealized profit opportunities. Fabian E. Diefenbach’s recent thesis, Entrepreneurship in the Public Sector: When Middle Managers Create Value, as the title suggests, investigates the significance of entrepreneurship within the public sector, a realm where the success of an organization is difficult to assess in the short term due to a lack of profit and loss. Despite this, Diefenbach argues that the existence and procurement of entrepreneurship among public sector managers contributes to an organization’s ability to serve the public and proceeds to identify the factors that significantly contribute to an organization’s entrepreneurial orientation.

Diefenbach divides his thesis into eight chapters. Chapter 1 observes a lack of research concerning public entrepreneurship. Diefenbach asks “Which antecedents explain department-level entrepreneurial orientation in the public sector?” and “How is department-level entrepreneurial orientation related to public value orientation)?” (pp. 3-4 and explains that he intends to investigate these questions with an empirical model. Chapter 2 reviews the existing literature on private sector corporate entrepreneurship and introduces the concept of entrepreneurial orientation “as the entrepreneurial strategy-making processes that key decision makers use to enact their firm’s organizational purpose, sustain its vision, and create competitive advantage(s)” (pp. 14). After reviewing the features of entrepreneurial orientation, the author employs this concept to describe the perspective and style of management in the private sector. Chapter 3 attempts to apply these concepts to public sector management where the autonomy of managers is traditionally limited. The introduction of public value management has helped to expand the decision-making role of managers and encouraged the rise of increased entrepreneurial orientation among management in public sector organizations. It is especially significant in helping organizations overcome constraints associated with traditional metrics of bureaucratic success that arose with the new public management paradigm.

Chapter 4 introduces the author’s model and discusses the variables that might affect entrepreneurial orientation either positively or negatively. Chapter 5 presents the study’s methodology. In this chapter the author defends his method of data collection (drawn from surveys given to managers from the German Federal Labor Agency) and confronts problems of endogeneity and spurious correlation. The results are finally presented in Chapter 6 where management support, staff motivation, multitude of expectations, localism, and tenure are shown to positively influence entrepreneurial orientation and, in turn, positively influence public value orientation. Chapter 7 further discusses the results and concludes that public sector organizations should actively attempt to attract entrepreneurial managers as well as promote entrepreneurial orientation within an organization, as these will improve public value orientation. Chapter 8 closes by simply summarizing and reemphasizing the findings.

Diefenbach has successfully identified at least some of the most important determinants of entrepreneurial orientation. Of these, localism and staff motivation are most significant, both statistically and economically. That is, managers need to be free to communicate and work with the local community. They should also need the autonomy necessary to cultivate a work place culture that makes their staff feel valued, empowered, and connected to the organization’s cause. This increased entrepreneurial orientation increases public value orientation within a given public sector organization. This, however, begs the question: what exactly is public value?

The actual definition of public value is difficult to delimit. The author provides a variety of definitions and perspectives on the topic. Common to all is that managers employ resources and exploit local networks to create value for the public. Goals for an organization are malleable. The lack of boundaries inspired by public value management might encourage emergent order that fits together the output of the organization with the needs of the community. This ambiguous concept never satisfactorily distinguishes precisely who in the community should be served by an organization. More than likely, a manager’s personal values will influence who is served, a problem never fully confronted in the study. While an increase in entrepreneurial orientation appears to lead to an increase public value orientation, the actual implications of this are altogether unclear without a timely feedback mechanism that constrains overly ambitious or self-seeking managers. The author does note that “politics, rather than management, are the legitimate final arbiter of public value” (pp. 50), but political levers are often slow to move if they move at all. Therefore, the success of this study might be augmented by a public choice critique of decision making in the public sector and discussion of mechanisms by which feedback to management might be further endogenized without greatly diminishing an organization’s entrepreneurial orientation.