Comparing Learning-by-Doing Between In-House Provision and External Contracting in Public Service Provision

Studies of organizational learning show that experience enables firms to utilize specific governance structures effectively. Nevertheless, little attention has been given to comparing the effects of learning-by-doing across different structures. In this paper we investigate whether the duration of operation influences performance differently in two structures utilized in public services: in-house provision and external contracting. An analysis of water supply data in France from 1998 to 2008 suggests that the learning advantages are greater in external contracting due to its high-powered incentives, but these benefits decrease as the technological complexity and environmental uncertainty of public services increase. We contribute to organizational learning theory, extend research on governance structures, and provide critical insights into the sustainable management of natural resources.