Reputation and Legitimacy: A Comparative View of Three Municipal Enterprises in Finland

Introduction

The Finnish government along with other European Union Member States strive to improve the value for money of healthcare through improvements in coordination and the rational use of resources (EC, 2009; Vuori, 2011). In addition, the New Public Management (NPM) era triggered a call for innovation in the process of change in service provision to more efficient organisational forms (Pollitt & Bouckaert, 2011; Lane, 2009). In response to this call, adoption of the municipal enterprise form has been gathering momentum in Finland during the last two decades (see also Windischhofer, 2007; Kallio & Kuoppakangas, 2012; Kuoppakangas, 2013a; 2013b).

Municipal enterprises have become increasingly common in the water, waste and energy sectors, whereas it was only in the 1990s that interest in transforming into this type of organisational form arose in the public-healthcare sector. Organisational changes tend to create tensions on different levels, and it goes without saying that the public-healthcare sector faces tensions in the process of transformation into more business-like forms. These tensions seem to reflect healthcare ethics and professionalism, the historical roots of which lie in humaneness rather than profitmaking. They may also provoke dilemmas that inherently risk the organisation’s reputation and threaten the legitimacy it seeks.

The study at hand draws on Kallio and Kuoppakangas’ (2012) earlier findings suggesting that the bandwagon effect on municipal enterprises in Finland’s healthcare sector was attributable to institutional pressures and political stalemate (DiMaggio & Powell, 1983; Greenwood & Hinnings, 1996; Scott, 2000; Mahmood & Rufin, 2005). Moreover, Kuoppakangas (2013a; 2013b) explains how isomorphic forces, related to institutional theory, create dilemmas, and how the way in which organisations respond to these dilemmas influences the ultimate outcomes of organisational change (Hampden-Turner, 1990; 2009). This article examines these dilemmas and the kinds of reputation risk they may create. Attention is also given to the reputation risks that may threaten the sought-for legitimacy in the three case organisations.

It is suggested here that there is a need to adopt a different approach to tackling the isomorphic forces and the subsequent dilemmas. Perhaps there should be a shift in focus in the theoretical discussion from the reasoning behind the transformation of healthcare organisations into municipal enterprises to the reputation risks and legitimacy threats attributable to the dilemmas arising from the isomorphism and contradictory aims.

This article contributes to the existing literature in two ways. First, it is suggested that the various dilemmas attributable to isomorphic forces in the management of organisational change are creating reputation risks. Second, it raises the question of whether the dilemma-management actions could have an impact on the organisation’s reputation and legitimacy: what is sought after is a focus on dilemma management as opposed to organisational theory.

In the following sections the municipal enterprise is defined, reputation and institutional theory are discussed, with specific reference to the role they play in the general theory of organisations, and dilemma theory as applied in this article is outlined. After that the case organisations are introduced and the analytical methods described, and finally the tenets of the three theories are integrated into the data analysis to determine the extent to which isomorphic forces affect reputation, and vice versa.