Contractual governance for public service value networks

The aim of this paper is to explore the links between contractual governance and performance measurement in a value network for public service business, in the context of public transport, by positing service‐dominant logic (S‐D logic) as an alternative paradigm to the conventional goods‐dominant logic (G‐D logic). The paper addresses the following research questions: how does S‐D logic influence contractual governance and performance measurement? How do these influences of S‐D logic on contractual governance and performance measurement affect the governance of public service businesses in a value network?

The study adopts a qualitative approach, using case studies to undertake an analysis of the role of contractual governance and performance management in the Swedish public transport system.

The paper demonstrates that the current model of contractual governance and performance measurement is focused on operand resources, and driven by G‐D logic, rather than focused on operant resources, with S‐D logic. The effect of this dichotomy is an effective negation of the professed desire for a customer‐oriented public service system. The paper also develops and proposes a viable model of how a redefined arrangement, based on S‐D logic, could be achieved. The challenge is to govern a loosely coupled value network based on values rather than rules. Another challenge is how to create more sustainable public service based on value‐in‐use for all stakeholders in the value network. When developing a service business based on S‐D logic, it is important to invest resources in accordance with a balanced set of social, environmental and economic perspectives. The current study also contributes to the ongoing discussion of S‐D logic as an open source.

In service research, little attention has been devoted to the links between contractual governance and performance measurement. The paper proposes and develops a novel model of contractual governance and performance measurement based on S‐D logic.