This paper focuses on how the SOE as a hybrid mode of governance between market- and hierarchy-based modes of governance evolves in the marketisation of Danish passenger rail from the 1990s to 2015. The qualitative case study of the development of Danish passenger rail has been analysed and discussed from the perspective of gradual change in historical institutionalism by Streeck and Thelen (2005) to explain hybridity and re-centralisation in NPM and post-NPM (Christensen and Lægreid, 2011, Bezes and Lodge, 2015).
The paper shows that market-based governance was layered on the hierarchal governance mode of the traditional SOE via contracting out and open access. The SOE was turned into a hybrid governance mode through corporatisation having both negotiated activities on subsidy from the state and commercial activities at arm’s length with the option of participating as a commercial operator in public tenders of its own traffic. This layered set-up provided the state with a double governance grip that together with the hierarchal governance of policies and political agreements drove the marketisation until 2011. However, the hybridity of the SOE created ripple effects between the market and the hierarchy that hampered the marketisation when financial and operational problems occurred in its commercial activities that created a governance dilemma for the state as both owner and regulator. The hierarchical governance was turned towards centralisation and the market mode of governance was put on hold. The hybridity of the SOE as mode of governance was endogenously displaced by tiring out the SOE via cost cutting and closing down of commercial activities and a new negotiated contract, leading to a re-conversion of the SOE towards its old institutional repertoire in the hierarchical organisation of the Ministry of Transport.
The paper points to that the hybridity of the SOE as a governance mode changes over time, not because of legal changes in ownership or statute, but in the interpretation of the role of the SOE by the Ministry of Transport and the management of the SOE. This takes place in changes of strategy by the SOE, changes of organisational set-up and policies by the Ministry of Transport and in the negotiated contracts between the two parties. The hybridity of the SOE makes it
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possible for the Ministry to gain control over the sector through re-centralisation when major problems occur in the market-based governance due to the associated company of the SOE. The paper therefore argues that by having a SOE as a governance mode in public service provision, marketisation is not inevitable towards more market-based governance, but can be re-centralised not only on executive level (Dommett and Flinders, 2015) or as a part of major reforms (Pollitt and Bouckaert, 2011, Christensen, 2012), but in a sector through actors’ interpretation of an existing institutional set-up. The case thus provides insights into the complexity and opportunities involved for the state in controlling agency like SOEs during marketisation of state provided public services balancing ownership and market reforms. The focus on actors’
interpretation of the institutional set-up in historical institutionalism and the modes of governance provide a framework to understand the ongoing nature and national dynamics in European passenger rail as described by Finger (2014).
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