A Multilevel Growth Assessment of the Diffusion of Management Innovation Nested in State Levels: The Case of US Local Economic Development Programs

Article excerpt

ABSTRACT

The practice of local public programs is an interesting topic for the study of the diffusion of management innovation. Based on previous research on the diffusion of innovative policy in state governments, this research employs a panel design to analyse the passage of management innovation related to local economic development programs. Panel data drawn from 1994, 1999, and 2004 USA International City/County Management Association (ICMA) surveys on economic developments of municipal and county governments were used. Using a multilevel growth curve model, the findings indicated that the diffusion of management innovation (e.g., adoption of economic development plans and performance measures) did not spread as expected between and within the localities sampled, even if management innovation has become a widespread practice in federal and state governments. However, our estimates found that the diffusion factors (e.g., internal determinants, learning, and competitiveness) contributed to the adoption of a performance measure and to an economic development plan to retain and attract local businesses and to drive economic growth. Using a panel design (rather than a cross-sectional study) to look at the changes of adoption of management innovation, this research examined the diffusion of policy innovations in local management. State factors are found to have an impact on local practices in the USA.

Keywords: management innovation; local economic development programs; multilevel growth model; policy diffusion

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INTRODUCTION

Public service has always responded to calls for enhancing its efficiency and effectiveness in meeting the citizens' demands. Often such response has been in the form of management innovation. The USA Government Performance and Results Act of 1993 (GPRA) required government agencies to develop strategic plans tied to proposed budgets and performance measures that were then realised by legislation and mandates (Franklin & Long 2003). The GPRA has influenced policy and management practices in both state (Melker & Willoughby 1998) and local governments (Berman et al. 1999; Berman & Wang 2000; Wang 2002; Rivenbark & Kelly 2003; Poister & Streib 2005). The spread of management innovation will most likely diffuse from federal to state governments, from state to local governments, and from one local government to another because of federalism. In particular, it is expected to explain the adoption of strategic plans and performance measures that provide incentive to others to adopt, or create, novel instruments that are useful at local levels.

Local management innovation in this research indicates that the implementation of new management practices that represent a significant departure from current norms. Over time, it has transformed the way many functions and activities work in local governments, what is intended to further organizational goals (e.g., efficiency, effectiveness, quality; Birkinshaw & Mol 2006; Birkinshaw et al. 2008).1 Given the intense budgetary pressures and the ideology of small government, state and local governments in the USA have looked to private management instruments such as strategic planning, performance measures to optimise practices in state governments (e.g., Berry 1994; Poister & Van Slyke 2002; Nicolini & Shambarger 2007; Compin 2008) and local governments (e.g., Poister & Streib 1989; Julnes & Holzer 2001). Strategic plans and performance measures are relatively new innovations to local governments, some scholars found they were not commonly adopted by local governments (e.g., Poister & Streib 1989; Julnes & Holzer 2001; Walker & Boyne 2006).

The above-mentioned efforts indicated the importance of adopting local management innovation, but inappropriate and unconvincing evidences failed to our understanding the extent of their diffusion. …