The municipality pinch: Slack reduction in state and firms

Abstract

A change in control in an organization may be a means to find and decrease slack. We claim that during the economic recession of the 1970s, the change of control in the states of Sweden and Finland has been different from the changes within the firms of these countries. Firms appear to have reacted to the declining demand by increasing centralization of authority. In the public sector, on the other hand, there seems to have been an increasing decentralization to the level which controls the implementation of welfare, that is, the municipalities.

We discuss the different strategies of the states and the companies. We also touch on the possible impact these different strategies can have on municipalities. Special attention is paid to the impact on the municipalities dominated by firms which are units of big companies with their main interest located elsewhere.