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Strategic Management Journal, Vol. 13, 79-97 (1992)
THE CREATION AND EVOLUTION QUASI OF MARKETSIN THE PUBLICSECTOR:A PROBLEM FOR STRATEGIC MANAGEMENT EWAN FERLIE
Centre for Corporate Strategy and Change, WarwickBusiness School, University of Warwick,Coventry, England
The public sector has been unjustly neglected by the strategic management field as an object of study. In Britain we now see significant changes in public sector management, notably the introduction of an 'internal market' in the National Health Service. This paper reviews three theoretical perspectives on these developments and develops propositions for empirical enquiry based on the economic sociology perspective.
INTRODUCTION These are exciting times to be working in the field of strategic management research. Empirically, new phenomena are appearing. Nowhere does this sense of a new age appearing have greater resonance than in public sector services. Who would have predicted in the mid 1970s-when all the talk was of immobilism, government overload and the power of staff at the periphery-the top down and politically driven pressure for restructuring apparent throughout Britain and many other countries in the 1980s? Theoretically, too, old approaches seem to have lost validity (e.g., the incrementalist view of decision making in the public sector) and quite new fields are emerging as branches of economics move towards sociology and branches of sociology move towards economics. The discipline of law-with its emphasis on agency theory and contracting-also has to be taken into account. The debate between the three may be vigorous, but it is now proceeding at a much more sophisticated level than 10 years ago. Any
empirical research has now to engage with these new theories. This article attempts to map some of this new landscape from the perspective of those concerned with the strategic management of a transformed public sector. Most of the examples are here taken from a U.K. context, but they may well have resonance in other countries where public sectors have also come under increasing pressure to change. This piece seeks to review the field, and to move some of the developing literature into the domain of strategic management. The neglect of public sector organizations within strategic management
A major theme concerns the neglect by strategic management of the public sector (this weakness is indicated in Lyles' review of the field, 1990). A recent working definition of the strategic management field (Rumelt, Schendel, and Teece, 1991) is that it consists of the study of the direction of organizations, usually business firms. Often the focus in practice has been limited to the study of the competitive strategy of the firm. This is curious because other branches of...