Governance Structures: Using IAD to Understand Variation in Service Delivery for Club Goods with Information Asymmetry


Brenda K. Bushouse is an Associate Professor of Political Science and Public Policy at the University of Massachusetts, Amherst.


Club goods with information asymmetry are frequently provided through mixed economies of for-profit, nonprofit, and public providers. Theory explaining mixed economies relies on sector to classify providers based on assumptions that sector-level differences in how organizations either distribute or reinvest profit will affect behavior. However, this classification is overly broad and is not able to adequately capture the diversity of providers of these types of goods. The author utilizes the Institutional Analysis and Development framework to identify six “governance structures” in the for-profit and nonprofit sectors. Governance structures are constitutional-choice level rule variations in who has the power to make rules. I argue that there are two types of power that affect rules: (1) concentration of constitutional-choice level decision-making power (i.e., how many principals) and (2) proximity of monitoring and enforcement of those rules. The extent to which the constitutional rules actually guide service delivery outcomes depends on a nested rule environment. Only if there is consistency across three level of rules (constitutional, collective, and operational) can we connect sector to outcomes. The empirical reality of service delivery, particularly for club goods with information asymmetry, is far too complex for simplistic assumptions linking profit distribution or its reinvestment to outcomes. This article directs further research toward building contingent theory, with if/then conditions, based on empirical research.