Neo-liberalism makes water providers more active, but not necessarily better (or worse)
Water companies that are privatised behave differently; they become more active and entrepreneurial. However, the different pattern of behavior does not significantly affect the company’s performance. Marco Schouten concludes this in his PhD thesis entitled ‘Strategy and Performance of Water Supply and Sanitation Providers’.
Schouten - Senior Lecturer in Water Services Management at UNESCO-IHE Institute for Water Education - investigated the behavior of water companies through assessing their strategies. He successfully defended his thesis Friday April the 17th at the Erasmus University in Rotterdam, the Netherlands.
Since the 1990s many water companies have been subject to the influence of neo-liberalism. Within Western Europe many governments have delegated their water supply and sanitation provision to autonomous public or private companies. The effects of this trend were still unclear, up to now. Scholarly investigations have so-far produced contradictory evidence on the effect privatisation has on the performance of the water companies.
Schouten’s research design deviates from the existing body of research, since he includes the behavior of water companies as the missing link between neo-liberal institutional changes and shifts in performance. First he investigates whether privatisation has an influence on the behavior of water companies; subsequently he relates the (possible) shift in behavior to a difference in performance. Behavior is interpreted as the strategy of the water provider in the thesis.
Schouten investigated water providers in the Netherlands, the Netherlands Antilles, Great Britain and Italy. The research showed that shifts in ownership indeed have a significant influence on the strategies of water providers; private parties are less reactive and less defensive in their strategies. Moreover, Schouten looked at whether this different strategy would ultimately be better for the provider’s performance.
He found that there was insufficient supporting evidence for a strong relation between the company’s strategy and its level of performance. Hence, to properly understand the influence of an institutional change - like neo-liberalism - it may be more insightful to focus on shifts in behavior of water providers instead of possible changes in performance indicators.