Does Collaboration Improve Organizational

Journal of Public Administration Research And Theory, 2018, 1–15
doi:10.1093/jopart/muy078
Article
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Article
Does Collaboration Improve Organizational

Efficiency? A Stochastic Frontier Approach
Examining Cities’ Use of EECBG Funds
Angela Y. S. Park*, Rachel M. Krause*, Richard C. Feiock†
*University of Kansas; †Florida State University
Address correspondence to the author at tplyon angelapark@ku.edu.
Abstract
Despite an abundance of research on collaboration, relatively little attention has been paid to the
impact of collaboration on organizational outputs. This study helps fill this gap by unveiling the
efficiency implications of collaborative arrangements. Using stochastic frontier (SF) analysis, we
evaluate the efficiency of U.S. cities’ use of Energy Efficiency Conservation Block Grant (EECBG)
funds in implementing sustainability programs and the extent to which collaboration influences
resulting efficiency levels. The findings indicate the presence of considerable inefficiency in cities’
use of EECBG dollars. However, cities’ collaboration with a greater variety of governmental and
community organizations is found to reduce this inefficiency, supporting the positive effects of
collaborative partnerships in public policy implementation and management. Collaboration’s effi-
ciency-improving effects are, however, not linear; its marginal effects diminish as cities approach
the highest levels of collaboration. This implies that while collaboration brings a positive impact
on achieving cost-efficient organizational outcomes, there is an optimal level of collaboration for
cities to engage in.
Introduction there remains a consistent call for research that moves

Research on collaboration has flourished over the past beyond description to evaluate collaboration’s impact
two decades as public, private, and nonprofit organi- on organizational performance (Amirkhanyan 2008;
zations increasingly forge relationships with each Bryson, Crosby, and Stone 2006; Huxham 2003;
other to tackle the complex problems facing society. McGuire 2006; O’Flynn 2009; Provan and Milward
The multifaceted, interconnected, and trans-boundary 2001). This is particularly important given contradic-
nature of many contemporary policy problems chal- tory claims about the expected benefits and costs of
lenge the ability of individual jurisdictions and organi- collaboration as a management tool for complex issues.
zations to effectively address them on their own and While collaboration is often depicted as a positive phe-
contribute to the development of collaborative part- nomenon that pools resources and capacity across dif-
nerships in governance. Given the frequency of its use, ferent policy actors, ultimately enhancing governing
it is important to understand and describe collabora- ability, a considerable volume of research also iden-
tion as a phenomenon. A rich literature has advanced tifies potential unintended negative consequences of
understanding of why and how collaboration is under- collaboration, including increased coordination costs
taken as well as what constitutes its success.1 However, and risk (Andrews and Entwistle 2010; Milward and
1 We acknowledge that there is a great variation in the definition and discussions about the definitions already exists, therefore we use
operationalization of collaboration in the literature and well-informed collaboration as a general term encompassing those different definitions.
© The Author(s) 2018. Published by Oxford University Press on behalf of the Public Management Research Association. 1
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2 Journal of Public Administration Research and Theory, 2018, Vol. xx, No. xx
Provan 2000; Newig and Fritsch 2009; Scott 2015). problems, such as those relating to environmental pro-
Nonetheless, to our knowledge, few public policy and tection and social welfare, are so complex and multi-
management studies have established empirical evi- dimensional that no single agency has the capacity
dence for these suggested causal relationships. to effectively tackle them (Huang and Provan 2006;

This research begins to fill this gap in our under- Weber and Khademian 2008). Faced with resource
standing of collaboration by empirically examining constraints and increasingly complex and heteroge-
the impact that collaboration has on organizational neous community needs, local governments are par-
performance. Specifically, it assesses the influence of ticularly vulnerable to these cross-cutting policy issues
collaboration on cities’ efficiency in implementing pol- and actively seek ways to collectively address them. In
icy initiatives and delivering public programs in the response to the upsurge in the use of collaboration as a
context of the federally funded Energy Efficiency and management practice among public agencies, research
Conservation Block Grant (EECBG) program. EECBG on this topic has also mushroomed. Some of the
funds were distributed to state and local governments major threads within this literature include: the intel-
in 2009 as part of the American Reinvestment and lectual origin and history of collaboration (McGuire
Recovery Act to advance efforts to improve energy 2006); the definition and types of various collabora-
efficiency and reduce greenhouse gas emissions. Of tive contexts (Agranoff and McGuire 1999; Mandell
the almost $3.5 billion in EECBG funds distributed, and Steelman 2003; Thomson and Perry 2006); the
a significant portion—approximately 38.8%—was expected benefits and costs (Berry et al. 2004; Daley
spent on energy efficiency retrofits (DNV GL 2015). 2009; Huxham and Vangen 2005; McPherson, Smith-
Because there is considerable variation in the extent to Lovin, and Cook 2001; Raab and Milward 2003;
which cities collaborated with other entities on the use Witesman and Heiss 2017); and the exploration of
of their EECBG funds, it provides an ideal context for questions regarding how to create and maintain suc-
this study. Using a novel dataset that merges national cessful collaboration (Agranoff and McGuire 2001,
survey data with administrative and secondary data 2003; Ansell and Gash 2008; Emerson, Nabatchi, and
that detail EECBG-funded activities, we examine cit- Balogh 2012; Hill and Lynn 2003; O’Leary and Vij
ies’ performance implementing energy conservation 2012; Provan and Milward 1995; Thomson, Perry, and
projects and evaluate the extent to which collaboration Miller 2007; Weber and Khademian 2008).
influenced their performance. With the proliferation of collaborative practices, the
The article proceeds as follows: First, we briefly key theoretical and empirical question facing the lit-
describe how collaboration is studied in the current literature lies in assessing “collaboration performance”
erature and why more attention to understanding its (Emerson and Nabatchi 2015), that is, determining
impact on organizational performance is warranted. the extent to which collaboration meets the challenge
Although organizational performance is multidimen- of effectively solving cross-boundary problems. Many
sional, we focus on efficiency. Our rationale for this studies treat collaboration as an outcome and positively
emphasis is tied to the subject of collaboration perform- equate the presence of collaboration with improved
ance and the study’s context of cities’ implementation organizational performance. This has resulted in a fair
of EECBG-funded retrofit programs. We summarize amount of concern about collaboration being presented
arguments in the existing literature about the poten- as “the latest one best way” or even as a panacea, with
tial positive and negative effects that collaboration little caution about its potential draw-backs (Bryson,
can have on policy outputs and outcomes. Following Crosby, and Stone 2006; Huxham 2003; McGuire
the literature review, we advance a hypothesis which 2006; O’Flynn 2009). On one hand, collaboration is
predicts how these theoretical expectations will be an important phenomenon studied in its own right,
empirically borne out. We then introduce our data and given its increasing—some might even argue impera-
methodology, stochastic frontier (SF) analysis, and use tive—use in this age of networked governance. On the
it to assess how cities’ use of collaborative partnerships other hand, an empirically based understanding of its
affect the efficient production of EECBG-funded retro- utility in dealing with collective action problems is also
fit programs. We conclude with policy implications recognized as a critical need. This is particularly the
and suggestions for future research. case given the nontrivial number of studies that iden-
tify various downsides of collaboration, including the
loss of managerial autonomy, increased transaction
Literature Review
costs, and its effects on power distribution among par-
Evaluating Collaboration Performance ticipants and the resulting equity concerns (Berry et al.
Joint-production is present in almost every part and 2004; Fleishman 2009; Huxham and Vangen 2005;
level of today’s administrative system. The driving Jang and Feiock 2007; O’Toole and Meier 2004; Raab
force behind this is the realization that many policy and Milward 2003).
Journal of Public Administration Research and Theory, 2018, Vol. xx, No. xx 3
In response, scholars are increasingly calling for Among the handful of studies that assess the impact
estimating the casual relationships suggested by these of collaboration on public service performance, schol-
different arguments. Yet, the empirical assessment of ars have directed greater effort toward understanding
collaboration performance involves a range of theor- how it shapes organizational or program effectiveness

etical and analytical challenges. Collaboration itself (Andrews and Entwistle 2010; Milward and Provan
is a complex, multi-faceted concept that exists under 2000; Newig and Fritsch 2009; Scott 2015). The
various names—such as networks, partnerships, and equity implications of collaborative management have
collective action—and its definition and scope require also been addressed through examinations of decision
careful consideration and clarification before its equity (Choi and Robertson 2014) and the rate of ser-
impact on anything else can reasonably be examined vice delivery directed to disadvantaged populations
(Moynihan et al. 2011). Research in collaborative con- (Andrews and Entwistle 2010). On the other hand,
texts also often faces endogeneity issues because col- efficiency, while relatively straightforward to concep-
laborative networks are not a mere sum of independent tualize and measure, has not received as close attention
elements, but a web of often loosely connected policy in a governance context.
actors with blurred lines of accountability and divi- A second reason for our focus on efficiency relates
sions of labor (O’Toole and Meier 2004). Such concep- to the policy context of this research. Recently, evalu-
tual complexity breeds analytical challenges not only ation studies with contradictory results were released
for operationalizing the key concept but also for mod- on the cost-effectiveness of energy efficiency invest-
eling its relationship with other variables of interest. ments made using funds from the 2009 American
Further, ambiguity in defining public sector perform- Recovery and Reinvestment Act (ARRA).2 A national
ance is complicated in collaborative networks. This evaluation report on the Weatherization Assistant
is because the expansive and inclusive nature of col- Program, published by Department of Energy (DOE),
laborative networks often incorporates diverse sets of offers a positive assessment of weatherization retrofits
stakeholders, which can challenge prioritizing whose as a cost-effective energy-saving strategy (Tonn et al.
interests should be considered when measuring net- 2015). A second study, a randomly controlled experi-
work performance (Thomson, Perry, and Miller 2007). ment conducted by a group of environmental econo-
In this context, teasing out a direct causal relationship mists, offers sharply contrasting findings and estimates
between an organization’s collaborative actions and a that the energy savings amount to only about half of
particular outcome can be fairly difficult. the invested costs (Fowlie, Greenstone, and Wolfram
2015). Although various factors, including differences
Linking Collaboration Impact to Organizational in study design, explain some of the disagreement in
Efficiency findings, the contradiction raises concern about both
Given the conceptual and technical complications of the policies under consideration and the approaches
its measurement, outcomes are rarely examined in the for evaluating them.
extant collaboration research. Most studies employ In the face of contradictory evaluations, unrav-
output measures, such as the number of resolutions eling the black box of implementation becomes par-
adopted due to collaboration (Koontz and Thomas ticularly important. In any production unit, standard
2006) or examine what Emerson and Nabatchi (2015) production factors (e.g., costs, labor, and capital) are
describe as process performance, such as trust, mutual not the only determinants of production efficiency.
understanding, social learning and other forms of It is important to consider the indirect environmen-
social capital. They suggest that, to advance efforts tal factors that influence the organizational ability to
in understanding and theorizing the consequences of transform inputs into outputs. These factors are typ-
collaboration, scholars need to disentangle process ically thought to affect efficiency, but their impact is
performance from productivity performance, which less well-known than that of direct standard produc-
directly taps into the discussion of outcomes. tion factors (Kontodimopoulos et al. 2011). However,
This study contributes to the understanding of the to determine comprehensive organizational efficiency
productivity performance of collaboration, particularly and develop policy recommendations for perform-
in the dimension of efficiency. Collaboration performance improvement of public programs, the effects of
ance, especially relating to productivity performance, these environmental and managerial factors must be
manifests in several dimensions, including efficiency, understood and accounted for. The public manage-
effectiveness, equity, and sustainability (Emerson and ment literature offers a wealth of empirical evidence
Nabatchi 2015). There are two primary reasons why
we pay close attention to efficiency as a dimension of
2 Although the Weatherization Assistance Program has a long history—
collaboration performance. First, compared with other
it started in 1976—both these cost-effectiveness studies were
dimensions, efficiency is relatively underexplored. conducted after ARRA funds were expensed.
about how “management matters” for organizational sources of transaction costs, including asset specificity,
performance. Major discussions in the field of public frequency and uncertainty (Krutilla and Krause 2011;
management—including those around human resource Williamson 1981).
management, performance management, representa- While a transaction costs framework is frequently

tive bureaucracy, contracting-out, and diversity man- employed in discussions of service production and
agement—all emphasize how managerial choices can delivery choices (e.g., contracting), it also has import-
have meaningful impact on organizational perform- ant implications for understanding the efficiency of col-
ance and policy outcomes. This study adds a public laborative partnerships. There are at least two primary
management view to recent debates over the efficiency reasons why collaboration may increase transaction
of energy efficiency programs by examining the impact costs, resulting in the loss of efficiency: First it is an
of a particular management practice, collaboration, on expansive and inclusive governing mode. From a trans-
retrofit outputs. action costs perspective, collaboration is a resource
intensive activity. Collaborative partnerships—whether
Costs of Collaboration and Decreased Organizational externally mandated or voluntarily forged—impose a
Efficiency decision process that can encompass a wide range of
Research increasingly recognizes that collaboration policy actors and decision points spread across mul-
entails costs and risks and identifies several disadvan- tiple organizations. This plurality in policy making
tages that organizations may face when participating environments is what creates “the potential synergy”
in a collaborative network. For example, there are con- that can contribute to more innovative, efficient, and
cerns about the potential undemocratic nature of col- effective solutions (Huxham 2003). However, it also
laboration, despite its promise to enable more inclusive can mean increased decision and bargaining costs to
governance by engaging in diverse stakeholder groups, settle disagreements among collaborative partners,
including those underrepresented. Power imbalance each of whom can serve as a veto point (Tsebelis 1995).
between participants can hamper equitable distribu- Furthermore, bringing together multiple actors with
tion of costs and benefits, while network homophily— different identities, functions, and authority, as well as
the clustering of network participants with cultural, rules and norms embedded in their operations, neces-
structural, or political similarities—may favor pre- sarily involves a series of negotiations, adjustment, and
serving the interests of some groups, while suppress- trust-building, all contributing to increased coordin-
ing the needs of others (Berry et al. 2004; McPherson, ation and monitoring costs (Feiock, Steinacker, and
Smith-Lovin, and Cook 2001; Witesman and Heiss Park 2009; Feiock 2013; O’Toole and Meier 2004).
2017). There are also risks that partnerships will not The avoidance of these transaction costs is a chief justi-
successfully hold together, resulting in goal displace- fication for why the traditional bureaucratic paradigm,
ment (Carr and Hawkins 2013; Feiock 2013; Raab which emphasizes a clear principal–agent relationship,
and Milward 2003). Scholars also note that increased has served as the predominant management form in
environmental uncertainty and decreased autonomy public administration: it improves efficiency by elimi-
of individual participating organizations may interfere nating duplication and consolidating reporting points
with organizational culture and morale (Galaskiewicz (Thompson 1975).
and Colman 2006; Thomson and Perry 2006). Another way that collaboration can negatively
The role of transaction costs in initiating and main- impact organizational efficiency is through its potential
taining collaboration is key given our focus on the pro- to increase instability and uncertainty (Galaskiewicz
ductive performance of collaboration, and specifically and Colman 2006; Milward and Provan 2000). One
efficiency. Initially coined by Coase (1937) and further of the chief virtues of collaborative networks is their
developed within the tradition of New Institutional flexible structures; they are often depicted as open,
Economics, the concept of transaction costs reflects fluid systems where participants with necessary skill
relative costs incurred during the process of pursuing sets enter and exit to achieve a shared goal, allowing
economic activities of producing and trading goods a series of inflows and outflows of people, resources,
and service (Brown and Potoski 2003; Krutilla and and knowledge. This feature of being “light on their
Krause 2011; Williamson 1981). They often arise as a feet”’ is believed to enable efficiency in resource allo-
result of the managerial and environmental variations cation as well as the flexibility to change and adapt to
discussed above and influence organizations’ ability external needs (Milward and Provan 2000). However,
to transform standard production inputs to outputs. the flipside of this flexibility is a loss of control or sta-
While not direct determinants of production costs and bility in organizational operations. Such a volatile and
efficiency, transaction costs often have nontrivial effects uncertain environment can not only thwart organiza-
on the level of production efficiency. As a result, sig- tional efforts to implement policies and programs in
nificant attention has been given to identifying various an efficient and consistent manner, but also lead to
weaker forms of social action and ineffectual policies conducive to forming reliable and better coordinated
(Milward and Provan 2000; Scott 2015). In sum, while partnerships.
collaborative networks are conducive to resource Another chief mechanism through which collab-
pooling and flexibility, which may enable more effi- oration can reduce transaction costs is through the

cient production of public goods and services, they can exchange of informational resources among parti-
also require additional time and resources as well as cipants. Public-sector performance is closely linked
increase uncertainty, all resulting in increased transac- to the efficient acquisition and processing of know-
tion costs, thereby making collaboration an expensive ledge (Cong and Pandya 2003; Harvey et al. 2010;
managerial choice (Hefetz and Warner 2004; Thomson Rubenstein-Montano, Buchwalter, and Liebowitz
and Perry 2006). 2001; Sita Nirmala Kumaraswamy and Chitale 2012).
Multiple efficiency-related benefits come from shar-
Benefits of Collaboration and Increased ing and integrating information between individuals
Organizational Efficiency and across organizations, including: reducing pro-
Extant research offers rich theoretical and empirical grammatic trial and error, reducing work redundancy,
accounts of how collaboration may benefit organiza- facilitating cross-functional coordination, building an
tions. Collaboration is thought to advance democratic expanded and diversified knowledge stock, and gen-
values by bringing together a wide range of stakeholder erally making more informed decisions (Cong and
groups who may otherwise remain dispersed, indiffer- Pandya 2003; Dawes, Cresswell, and Pardo 2009;
ent, or underrepresented (Agranoff and McGuire 2001; Eglene, Dawes, and Schneider 2007). Collaborating
Ansell and Gash 2008; McGuire 2006). Its inclusive through information sharing can have particularly sig-
and expansive decision-making mode can also create nificant benefits for energy efficiency programs and
institutional environments conducive to generating activities. The benefits of information/knowledge shar-
and exchanging diverse perspectives and innovative ing manifest in two ways: by reducing costs before the
policy solutions (Daley 2009; Getha-Taylor 2012; arrangement and implementation of energy efficiency
Koontz and Newig 2014; Lynn, Heinrich, and Hill retrofits (ex-ante costs) and by reducing costs occur-
2000; Provan and Milward 2001). Resource leverag- ring later in the process of monitoring and enforce-
ing is another chief advantage offered by collaborative ment (ex-post costs) (Matthews 1986). Transaction
partnerships. Reflecting this, collaboration is increas- have been estimated as comprising between 10%
ingly promoted as a means to maximize policy effects and 40% of energy efficiency retrofit projects’ total
among public and nonprofit agencies with limited costs (Kiss 2016). Due to its technical nature, imper-
resources (Galaskiewicz and Colman 2006; Gazley fect information is a key factor inhibiting the efficient
2008; Guo and Acar 2005; Pfeffer and Salancik, 1978; purchase and installation of energy efficient technolo-
Tschirhart, Amezcua, and Anker 2009). gies, thereby increasing costs and decreasing financial
Collaboration may also improve organizational net gains from improved energy efficiency (Kiss 2016;
efficiency. Standing in sharp contrast to the afore- Sanstad and Howarth 1994).
mentioned perspective that collaboration contributes Typically, the implementation of retrofit programs
to increased transaction costs and a loss of efficiency, takes the form of either in-house production or private
advocates of collaboration argue the opposite: col- contracting. Both models of production face transac-
laboration can be a superior alternative to traditional tion costs. Internal production is likely to face ex-ante
centralized hierarchy in improving the efficiency of costs, involving the search for and assessment of infor-
public service production and delivery (Lubell 2015). mation relating to factors of production, such as instal-
Several explanations are offered as to why and how lation strategies and required materials. Contracting
these benefits are expected to arise, a primary one may entail both ex-ante (e.g., searching for reliable and
being that collaboration improves social capital, competitive local contractors) and ex-post costs (e.g.,
including mutual understanding, trust, and the norms monitoring) (Terman 2016; Terman and Feiock 2016).
of reciprocity. These qualities, in turn, reduce uncer- In both cases, collaboration with local partners who
tainty and generate the social conditions necessary are able to offer information and advice that is tailored
to ensure credible commitment and can reduce some to local economic and climate conditions is expected
of the transaction costs identified above, particularly to be most valuable. Collaboration with local partners
those associated with coordinating and monitoring may also enable cities to pursue strategies that maxi-
actions (Beccerra and Gupta 1999; Hindmoor 1998; mize economies of scale. Research suggests that the size
Leroux, Brandenburger, and Pandey 2010). Increased of municipalities is often not optimal for production as
levels of mutual trust and agreement mitigate prob- they are often too small to provide service at minimum
lems of opportunism and information asymmetry cost (Bish 2000; Feiock 2007). Collaborating through
among partners and thus create an environment exchanging information about best-practices and
realizing potential economies of scale in purchasing which establishes punishment-reward mechanism

as well as working with specialized contractors could based on the performance of contractors, has prolif-
benefit local government agencies. erated as part of performance management strategies
Based on this, we hypothesize that collaboration (Kettner, Moroney, and Martin 2012; Van Dooren

among local partners enhances organizational per- 2011). Since most cities in our analyses made contracts
formance especially by improving efficiency in the pro- using the EECBG funds, we are interested in exam-
duction of technology-involved programs and services. ining the effects of PBC on cities’ efficiency levels. As
with contracting-out, however, evidence that perform-
Performance-Altering Managerial Variations and ance management leads to organizational efficiency
Controls has been mixed. Research often finds that organiza-
Collaboration is not the only managerial practice that tions do not systematically use performance indicators,
influences organizational performance and a failure to often making them irrelevant, if not detrimental, to
control for them can bias findings on the determinants efficiency in practice (Moynihan 2008; Perrin 1998).
of government efficiency. We therefore identify and We thus expect little to no significant causal relation-
control for variables that have an established theoret- ship between cities’ practice of monitoring contractor’s
ical impact on organizational efficiency and those that performance and the improved level of organizational
are expected to have a program-specific effect on the efficiency.
production of energy efficiency retrofits. These include: Administrative capacity also plays an important role
(1) the city’s decision to produce internally as opposed in translating external needs and inputs into desired
to contracting-out; (2) whether the city is engaged in policy outputs and outcomes. Governments with
performance management around sustainability; (3) greater capabilities and resources are better equipped
the local government’s human and financial adminis- to pursue and implement policy innovations (Walker
trative capacity; and (4) population size. 1969). We explore the effects of administrative capacity
Production choice is among the most studied man- on city governments’ retrofit efficiency, by conceptual-
agement variables to explain public organizational effi- izing it as composed of human and financial resources
ciency. The rationale for contracting-out over internal (Hawkins et al. 2017) and expect that increased level
production is rooted in the New Public Management of both types of administrative resources will lead to
movement of the late 1990s, which advocated for increased level of efficiency.
improved public-sector efficiency through competition Finally, population is included to account for pos-
and market-based practices, such as privatization and sible variation in production capacity between the
performance-based contracting (Gazell 1997; Osborne governments of larger highly urbanized cities and of
and Gaebler 1992; Savas 2000). However, decades of smaller less urbanized cities. In sustainability research,
research have not led to a firm conclusion about the which broadly studies energy-related and climate-
efficiency-improving effects of contracting-out and change related policy actions, population has been fre-
instead have reinforced the view that organizational quently employed as a proxy for a city’s capacity to
performance is function of multiple factors that have coordinate energy conservation and climate protection
nonlinear and interactive relationships with each other programs. This research consistently finds that large
(Heinrich and Choi 2007; Lu 2015; Martin 2005; Steen cities tend to be at the forefront of such efforts, likely
and Smith 2012). As explained above, retrofit programs due to their enhanced capacity in mobilizing necessary
are either internally implemented or contracted out to human, fiscal, and technical resources (Betsill 2001;
a third-party entity, and each face different sources Krause 2011). We thus expect that large cities enjoy
of transaction costs. Contracting may incur both ex- increased levels of efficiency. Using these government
ante (searching and assessing for contractor informa- and community characteristics, we test the extent to
tion) and ex-post (monitoring and enforcing contract which our hypothesis about the efficiency improving
expectations) transaction costs. Given the inconclusive effects of collaboration is empirically borne out in cit-
link between contracting-out and improved organiza- ies’ retrofitting activities.
tional performance as well as the expected sources of
costs involved in managing contracts, we expect that
internal production positively impacts cities’ efficiency Data and Methods
in retrofitting activities. Data
Performance management, or the idea of managing Building upon the previous literature, we investigate
for results, has permeated the public sector and pushed variation in the efficiency achieved by city governments
many organizations to adopt some form of perform- when implementing energy efficiency programs and the
ance management practice. In the case of contracting- extent to which that variation is explained by differ-
out, the use of performance-based contracting (PBC), ences in administrative and managerial characteristics,
among which collaboration is of key interest. We spe- obligated, and vice versa). The data were then merged
cifically examine Recovery Act-financed building retro- with the EECBG Grantee Implementation Survey, a
fit activities funded by the US Department of Energy’s national survey administered by the Askew School of
(DOE’s) Energy Efficiency and Conservation Block Public Administration at Florida State University dur-

Grant (EECBG) Program. It provided $3.2 billion in ing late 2010 and early 2011. The survey, which is part
block grants and $400 million in competitive grants of the larger Integrated City Sustainability Database
to local governments, states, and Indian tribes with the (ICSD) (Feiock et al. 2014), gathered information about
goal of supporting projects that simultaneously pro- how cities spent EECBG funds as well as their general
moted energy and climate sustainability while creating administrative environment for carrying out EECBG-
jobs. Cities with populations over 35,000 and/or those related programs. The survey has a 77% response
that were one of the ten largest in each state were eli- rate, which minimizes selection bias and helps assure
gible to apply for direct formula grants and cities with the quality of data for this study. The Construction
populations below 35,000 were eligible for subgrants Costs Area Modification Index was obtained from the
from their state governments (42 USC 17151(3)).3 2013 National Building Cost Manual, an annual pub-
The EECBG program provides an opportune con- lication for construction professionals and engineers
text to study the impact of collaboration on efficiency. that offers technological references for construction/
Given that collaborative governance is a particularly replacement related costs. Because building construc-
useful administrative apparatus for addressing com- tion costs (e.g., labor, materials, etc.) vary across cities,
plex trans-boundary problems, we expect to see its the index is used to adjust for city-level differences to
frequent use in multilateral sustainability efforts, such arrive at reliable cost estimates. The index is calculated
as those promoted by the EECBG. Indeed, one of the from the comparison of building construction/replace-
outcomes sought by the DOE in expending EECBG ment costs in nearly 600 communities throughout the
money was to improve inter-jurisdictional coordin- United States (Moselle 2015). A modification score of
ation of energy-related policies and programs with an 0 indicates the baseline while any number different
aim to achieve cost-effective and lasting results (Lim from 0—either negative or positive—indicates a need
and Bowen 2018; Tang and Hill 2018; U.S. DOE to adjust estimated construction costs by that number.
2010). The index ranges from −21 to 36 and for the cities in
To examine this, we use a unique dataset con- our sample, it ranges from −13 to 24. These data were
structed from four different data sources: adminis- then merged with 2010 census population estimates
trative records on city-level retrofit activities received arriving at a final sample of 302 city observations.4
from DOE; a national survey administered to all cities
that received EECBG funds; Construction Costs Area Method
Modification Index from National Building Costs Our study employs stochastic frontier (SF) analysis to
Manual, and finally population information from the assess how cities’ collaboration with external partners
U.S. Census Bureau. The DOE administrative records on climate and energy issues influences efficiency in
include grant disbursement information and data on delivering retrofit services. Following the standard def-
project outcome metrics, fund outlays, and activities inition from neoclassical welfare economics, efficiency
that each grant recipient was required to submit as part is operationalized as achieving the maximum outputs
of monthly and quarterly reports. From these records, from given inputs. Initially proposed by Aigner, Lovell,
we extracted data on the EECBG dollars obligated to and Schmidt (1977), SF analysis is motivated by an
building retrofits in US cities and the number of square interest in determining high and low performing eco-
feet retrofitted with those funds between 2009 and nomic agents (i.e., observations) in a given sample. It
2013. The majority of cities had multiple data points works by first estimating the productivity level of every
reported over the course of 5 years. To minimize report- observation based on a specified production function
ing errors, each entry was inspected with care: each (e.g., Cobb-Douglas, Translog, etc.), which relates the
“activity unique ID” was examined and entries were
aggregated only when observations corresponded to
each other (i.e., the square foot values were aggregated 4 SF analysis—the chief methodology employed in this research—is
only when there were matching numbers on dollars primarily interested in the distance between the frontier and the average
or below average observations in a sample. Therefore, outliers in SF
analysis need to be treated with caution as they may carry important
3 More specifically, the grant process was based on two tracks: “local information useful for determining the frontier. Nonetheless, it is also
government-alternative 1” and “local government-alternative 2.” possible that outliers are caused by data error or noise and may be
The former required a minimum of 35,000 people while the latter had misrepresented as highly efficient players or inefficient players. Most
a requirement for a minimum of 50,000 to apply. States, counties, the outliers caused by reporting error were detected during data cleaning
District of Columbia, US territories, and Indian tribes also received the and additional ones were examined and removed by inspection of
grant based on different selection criteria and funding formula. leverage-versus-residual-squared plot.
quantity of output to the quantities of inputs used in provides an interesting contrast to OLS models: while
the production. This process determines a set of “best ordinary regression models focus on average behav-
performers” that achieve the maximum output for the ior, SF analysis is primarily interested in understanding
given inputs. Each observation in the rest of sample is the optimal or “frontier” behavior of economic agents.

then compared to these exemplary observations and the From this point of view, an implicit assumption is that
difference between their values becomes the efficiency “more is better,” which aligns with efficiency expect-
score for each observation. These efficiency scores can ations, whereas the OLS model can be regarded as a
be used as descriptive statistics or be plugged into a “middle is better” situation (Troutt et al. 2001).
new regression model as a dependent variable to ana- The error term has two components: a one-sided,
lyze what factors explain the efficiency variations. This non-negative error that represents inefficiency (ui) and
study does latter. Older studies employing SF analysis a stochastic component that accounts for random
used a two-stage approach in which efficiency scores shocks and statistical noise (vi). The inefficiency error
are estimated first and then regressed against explana- ui gives the log difference between the maximum and
tory variables separately in a second stage. We adopt a the actual output with a value closer to 0 implying a
more recent single-stage approach that estimates effi- dynamic that is closer to fully efficient. The stochas-
ciency variations and the determinants of those effi- tic component vi accounts for the potential effects of
ciency variations at the same time (Kumbhakar and unobserved and potentially relevant variables as well
Lovell, 2003; Kumbhakar, Wang, and Horncastle as measurement errors. While vi is assumed to be two-
2015). sided and normally distributed, like an ordinary error
A general SF model is specified as the following: term in any OLS model, ui is assumed to be non-nega-
tive with a half-normal distribution.6 This is the stage
yi = f ( xi ,β ) + vi − ui that estimates the determinants of estimated efficiency.
The model estimated in this article uses the total
where yi is the quantity of a particular output; f (*) is square footage of buildings retrofitted by each city
a specified production function used to convert inputs as its output (yi) and the EECBG dollars dedicated to
into the outputs; xi is a vector of inputs, which typic- retrofits and Construction Cost Modification Index as
ally consists of standard factors of production, such as inputs (xi). The determinants of efficiency (ui) in this
labor and materials, and affect the location of specific model includes the extent of collaboration and other
observations on the frontier (Kumbhakar, Wang, and management practices that may affect city govern-
Horncastle 2015); β is a vector of estimated param- ments’ retrofitting activities. This can be expressed as
eters; vi is random error; ui is a non-negative ineffi- the following:
ciency term. Factors that are not direct inputs, but
that are still expected to affect output production are ln (Sq.ft.Retrofitted ) = β0 + β1 ln (EECBG$)
included in the inefficiency term. + β2 ln (Cost Modification Index ) + vi − ui
The model is composed of two distinct parts: (1)
the frontier f (xi , β) and (2) the error term ( vi − ui ) . where
The frontier part, as discussed above, estimates the
relationship between input and output variables using ui = δ 0 + δ1Collaboration + δ 2 Staff capacity
a specified production function—in our case Cobb- + δ 3Fiscal capacity + δ 4 Production choice
Douglas5—and determines an ideal, stochastic effi- + δ 5 Performance management + δ 6 Population
ciency frontier, which essentially serves as a ceiling and
represents the best possible performance that no eco-
nomic agent can exceed. All deviations from this fron- Variables
tier are considered inefficiencies and estimated as part The production frontier only employs input and out-
of the error term. In other words, a set of observations put quantity data (Kumbhakar and Lovell 2003).
that maximize outputs serves as a baseline or a yard- EECBG dollars represent a main input variable, while
stick against which the rest of sample is compared. This Construction Cost Modification Index is included as a
proxy for price differences in construction costs that
directly influence the output production, including
5 The Cobb-Douglas production function, which is used in our analysis, labor, overhead and material. In an ideal situation, we
is the most common production function methodology and allows for
a fairly easy estimation and interpretation of coefficients. However,
would also include direct measures of other standard
it also imposes restrictive assumptions, such as constant elasticity
of substitution—or “smooth” substitution—among inputs (Klacek, 6 While the SF model has been extended to other distributional
Vošvrda, and Schlosser 2007). Alternative ways to relax these assumptions, including truncated normal or gamma distributions, it has
assumptions have been suggested, including Translog production been suggested that accurate estimation of these later extensions is
function, which comes with a different set of limitations. challenging (Ritter and Léopold 1997; Troutt et al. 2001).
inputs, such as labor and time, to gain a more com- SF analysis: (1) A simple skewness test on OLS8 resid-
plete picture of returns of scale. Nonetheless, given uals; and (2) A generalized likelihood ratio (LR) test of
the lack of available data on these metrics—a com- inefficiency.
mon challenge in such research—and the fact that an Negative skewness is a sign of the presence of ui:

output elasticity7 is tangential to our primary focus, because ui is assumed to be a non-negative one-sided
we argue the current model is sufficiently justified. In error (i.e., ui ≥ 0) the composite error (i.e., vi − ui )
other words, the input and output variables are only will always skew to the left (Schmidt and Lin 1984).
used to generate the efficiency levels of each city, and Our sample is heavily skewed to the left with Coelli’s
the factors that explain the observed variations in effi- (1995) skewness statistic (also known as M3T) at
ciency are of more importance to this study. −3.701. The M3T statistic for a normal distribution is
We include the following variables in the ineffi- 1.96, thus our M3T statistic shows ample evidence for
ciency portion of the SF model: collaboration index, the presence of inefficiency term (ui) in our data. While
staff and financial capacity, production choice, per- the skewness test serves as a simple pretest, we further
formance management, and population. Collaboration verify the model validity with a LR test, as it provides
serves as the main exogenous factor hypothesized to more precise and reliable evidence for ui (Kumbhakar,
influence organizational inefficiency. Collaboration Wang, and Horncastle 2015). The LR statistic for our
reflects the scope and strength of ties each city has with data has a critical value equal to 13.856—a value that
other governmental and nongovernmental entities in completely rejects the null hypothesis of no inefficiency
their region to work on energy and climate issues. It is in our data at less than the 1% significance level.9 Both
operationalized as a count of the number of external test results indicate there is an inefficiency error term
sectors that a city partnered with on EECBG-funded clearly present in our sample and thus the SF model
energy programs weighted by the extent to which the better fits our data than the restricted OLS estimation
city collaborates with each partner. There is a total does.10
of six types of local and regional collaborative part- The maximum likelihood estimation results of the
ners—both governmental and nongovernmental—and SF model are offered in table 3.11 EECBG dollars obli-
the strength of each collaborative partnership is esti- gated to retrofits have an output elasticity of 0.468
mated on a scale of 5 ranging from (1) “not at all” to and is highly significant (p < .001). This implies that a
(5) “to a great extent.” Although this weighted index 1% increase in dollars, ceteris paribus, would lead to a
may not fully capture the multidimensional and con- 0.47% increase in the number of square feet retrofitted.
textualized nature of collaborative networks in prac- Construction Cost Modification Index, while having
tice, it has been shown to be a sufficient proxy in other the expected sign—the higher the construction costs,
studies (such as Agranoff and McGuire 2003; Meier the less sq. ft. retrofitted—was not found significant.
and O’Toole 2003). The consistency of collaboration Our main variable of interest, Collaboration, is found
effects is further confirmed by an alternative model to play a significant role in explaining cities’ inefficiency
that employs a factor obtained from factor analysis (p = .03). Note that because Collaboration is included
in lieu of an additive index, which will be further dis- as an inefficiency variable, a positive coefficient sign
cussed in the Results and Discussion section. Table 1 indicates increased inefficiency whereas a negative sign
explains the description as well as the operationaliza- represents decreased inefficiency. Thus, the negative
tion of each variable and their data sources and table 2 coefficient of Collaboration means that collaboration
provides summary statistics.
8 OLS estimates are provided in Supplementary Appendix 1.

Results and Discussion 9 Critical values for the LR test are obtained from a tabulation developed
Central to SF models is the presence of the one-sided by Kodde and Palm (1986). For further discussion on this topic, please
error (ui) that represents inefficiency in a given data refer to the original paper as well as the explanation offered in
Kumbhakar, Wang, and Horncastle (2015) book.
sample. If no evidence for the presence of efficiency 10 Results of the model run as a standard OLS regression are provided in
error is found, the SF model will provide results that Supplementary Appendix.
would not be different from those of a standard OLS 11 Several alternative models were also run to rule out any potential
regression model (Kumbhakar, Wang, and Horncastle endogeneity concerns and to ensure the robustness of our results. In
2015). Therefore, we conduct two validity tests of the one model, we altered the way we measured collaboration and tested
the model with a total count of collaborators without collaboration
stochastic frontier specification before undertaking the strength (i.e., the frequency of collaboration). The significance of
collaboration on improving efficiency still held and indeed improved
with the count variable (p < .05, t = −2.20). In another model, we
7 Output elasticity in economics captures output sensitivity to input excluded all control variables and collaboration was still significant at
variations and is calculated as the percentage change of an output p < .05, t = −1.97). Overall, they do not meaningfully change the impact
divided by the percentage change of an input. shown by collaboration. Results are available by contacting the author.
Table 1. Variables Used in SF Model
Variable Name Variable Description
Dependent variable
Sq ft. Retrofitted using EECBG Total square feet of buildings that were retrofitted using EECBG dollars.

funds Source: Department of Energy
Input variables
$$ Obligated EECBG dollars dedicated to retrofitting (only includes the amount that were directly
involved in implementing retrofit activities, excluding the amount used to generate
financial incentives & loans)
Source: Department of Energy
Area Modification Index An annually published index used to adjust city-level differences when estimating
construction/replacement related costs. It ranges from −21 to 36 (%) and for our sample
specifically, it ranges from −13 to 24. Constant was added to transform the variable in
logarithmic from for Cobb-Douglass production function.
Source: 2013 Building Construction Cost Manual, Craftsman Book Co.
Inefficiency variables
Collaboration The scope of a city working collaboratively on energy issues with other organizations and
the intensity of each tie ranging from (1) Not at all to (5) To a great extent. Potential
partnering organizations include: other cities in the county, other cities within the region
or MSA, universities, utility companies, state, and regional organizations.
Source: 2011 EECBG Grantee Implementation Survey, a national survey administered by
the Askew School of Public Administration at Florida State University
Staff capacity If a city has dedicated staff to sustainability efforts (0 = No; 1 = adopted after the receipt of
EECBG funds; 2 = already adopted even before the receipt of EECBG funds)
Financial capacity If a city has budget dedicated to sustainability efforts (0 = No; 1 = Yes)
Production choice If a city contracted with the private sector for implementing EECBG-funded sustainability
activities (0 = No, 1 = Yes)
Performance management Among the cities that made contracts using EECBG, if they record performance information
of their contractors on indicators other than green jobs (0 = No, 1 = Yes)
Population (in 1000) 2010 population estimates for each city included in the study sample
Source: U.S. Census Bureau
Table 2. Variable Summary Statistics
N Mean SD Min Max
ln(sq. ft. retrofitted) 302 11.42 1.58 5.52 15.65

ln($$ obligated to retrofits) 302 12.14 1.40 8.34 15.26
ln(cost modification index) 302 3.42 0.19 2.84 3.99
Collaboration 240 10.09 5.44 0 24
Staff capacity 258 0.79 0.86 0 2
Financial capacity 260 0.46 0.77 0 2
Production choice 302 0.11 0.32 0 1
Performance management 302 0.86 0.34 0 1
Population (in 1000) 302 130.5293 190.8675 5.937 1,449
has a positive impact on diminishing inefficiency in cit- collaboration is associated with about a 4.6% reduc-
ies’ performance in policy implementation. tion in inefficiency in cities’ energy retrofit activities.
We compute the average marginal effects of Since the results are maximum likelihood estimates
Collaboration and find that a one unit increase in and Collaboration is an additive index ranging from
Table 3. Maximum Likelihood Parameter Estimates
Coefficients Standard Errors T Ratio
Frontier model
EECBG dollars 0.468 0.065 7.16***

Cost Modification Index −0.617 0.450 −1.37
Constant 8.454 1.695 4.99***
Inefficiency model
Collaboration −0.162 0.076 −2.12*
Population −0.027 0.012 −2.31*
Production choice −1.277 1.252 −1.02
Performance management −1.244 0.629 −1.98*
Financial capacity −0.816 0.518 −1.58
Staff capacity 0.604 0.335 1.80
Constant 2.295 0.723 3.17**
Variance parameters
σu 1.110 0.217 5.12***
Γ (σ 2u / σ 2u + σ 2v ) 0.801
Log-likelihood −382.473
LR-test 13.857**
N 232
*p < .05. **p < .01. ***p < .001.
0 to 24, interpreting a one-unit change is not com-

pletely straightforward. Instead, we provide an overall
picture of how collaboration moderates efficiency loss
incurred in retrofit projects. For visual enhancements
of our graph, we generated a factor of collaboration
index using the same survey items and factor analysis.
Cronbach’s alpha reliability of survey items was 0.84
and a factor with eigenvalue of 3.25 was obtained,
indicating a reasonable level of internal consistency
and construct validity. The significance of collabor-
ation was still consistent using the factor. Estimates of
SF analysis using the collaboration factor are provided
in Supplementary Appendix 2.
Figure 1 depicts the marginal effects of collabor-
Figure 1. Marginal Effects of Collaboration on Inefficiency.
ation on cities’ technical inefficiency. All observations
show negative marginal effects, indicating that tech-
nical inefficiency decreases as the collaboration index the costs of investing in collaboration will outweigh
scores increases. Nonetheless, the fitted line with 95% the benefits it generates.
confidence intervals is clearly trending upward—sug- Other variables included in the inefficiency term
gesting diminishing returns where the size of negative also produced some interesting results. Production
effects (i.e., efficiency improving effects of collabor- choice and administrative capacity—both human and
ation) becomes smaller as the collaboration index financial—do not exhibit significant causal impact on
scores increase and eventually reaches close to 0. In organizational efficiency, whereas population and per-
other words, collaboration always yields positive, effi- formance management influence cities’ efficiency in
ciency-improving effects, but cities enjoy greater mar- retrofit activities. Population shows a negative sign
ginal benefits of working together when moving from suggesting that larger cities are capable of producing
no collaboration to the average level of collaboration more with less resources than smaller cities. This sup-
than they do when moving from average collaboration ports extant research findings that population serves
to the maximum level of collaboration. Given that as a proxy for municipal capacity to advance energy
engaging in collaboration requires energy, time and efficiency and sustainability goals, beyond its con-
resources, this result implies that collaboration and ventional use of controlling for unobserved variables
organizational efficiency are positively associated, but across cities. Counter to our hypothesis of a weak rela-
that the relationship is not linear and at some point, tionship between the performance management and
efficiency gains, the practice is also found to have a information on collaboration dynamics or tease out the
significant effect. The negative sign indicates that cities effects of a particular collaborative activity or mechan-
that collect performance information on their contrac- ism. In other words, with the existing data, the specifics
tors reduce inefficiency more than those that did not. of how cities benefit from collaboration in achieving

While the extant research is mixed on the effects of more efficient policy outputs remain unknown. As
performance management on organizational efficiency, discussed above, one possible explanation is tied to
it appears to have positive effects on retrofit program information sharing on the technology, resources, and
implementation. the markets related to retrofit activities, thereby redu-
The gamma parameter, which measures the vari- cing transaction costs that influence efficiency levels in
ability of the two error terms (i.e., vi and ui) is 0.801. energy-related programs.
Together with LR test statistic, discussed above, this Another limitation is that these findings may not be
leads to the conclusion that the inclusion of ineffi- easily generalizable outside of the specific context of
ciency term in the model provides an estimation that this study. We examine the effects of collaboration on
is statistically more significant and efficient than OLS building retrofits, which has both an advantage and
(Wijeweera, Villano, and Dollery 2010). a disadvantage. On the advantageous side, it serves
as a fairly solid proxy for the outcomes of EECBG.
While there were several energy-conservation activities
Conclusion that were initiated and delivered using EECBG dol-
The extant literature on collaboration provides consid- lars, energy efficiency retrofits are the most frequently
erable insight into understanding what collaboration performed program type, representing almost 40%
is, how it is being practiced, and its expected benefits of total dollars spent under EECBG while most other
and costs. On one hand, collaboration is expected to activities were responsible for less than 5% (DNV GL
reduce organizational inefficiency by breaking down 2015). Still, the nature of retrofit activities may limit
silos and aggregating different entities’ unique capabil- the generalizability of our findings. Retrofit programs
ities. On the other hand, inefficiencies can result from can be technical in nature. The evaluation reports
diffuse and inclusive collaborative governance which released by ONR identifies the availability of technical
often entails more risk and transaction costs. We exam- assistance as an important variable of the performance
ined how these contrasting theoretical expectations are of EECBG-funded projects (DNV GL 2015). The find-
borne out empirically using data on US cities’ energy ings that inter-local collaboration helps achieve greater
retrofit activities and find that collaboration provides efficiency might not hold in other programs that do
an efficiency benefit. This finding offers an important not require technical or locally-specific information.
addition to the literatures on inter-local collaboration The use of EECBG funds also adds context-specific
and networked management where inquires for evalu- implications to our findings. That said, many local
ating collaboration performance are increasing both governments utilize one-shot grants to fund the imple-
in volume and significance. The statistical significance mentation of tangible projects, so the implications of
shown in table 3 supports a hypothesis that collabor- these findings may extend more broadly. However,
ation improves efficiency and, in this way, enhances more research is needed to assess the degree to which
organizational performance. Nonetheless, because these findings hold in other sectors, particularly those
it also takes time and resources for organizations to that are very different, such as welfare or social ser-
work together, the diminishing marginal effects of col- vices, or in other levels of government.
laboration suggest that there is an optimal level of col- The existing literature documents well the specific
laboration for cities to engage in. Another important conditions under which collaboration successfully
contribution is the employment of SF analysis. While develops, yet most work has not investigated how
SF analysis is fairly data intensive, requiring various these conditions can also influence outcomes. Future
sources of information on standard and nonstandard research can take advantage of the literature that lists a
production factors, the assumptions underlying the range of enablers of successful collaboration to exam-
methodology directly tap into the notion of efficiency, ine how these factors can explain the variations in mar-
making it ideal for modeling several relationships sug- ginal benefits of collaboration. In a similar vein, future
gested by public management theories, especially relat- research linking determinants to consequences could
ing to performance management. contribute to unraveling the nonlinear relationship
The findings reported here begin to fill a large gap between collaboration and organizational efficiency
in the current literature, yet they are not without limi- found in this research. This finding embodies the two
tations. One obvious limitation has to do with the contending views on transaction costs inherent in col-
nature of the study data. Since this study utilizes quan- laboration; while we find that collaboration is able to
titative data, we are not able to offer contextualized improve efficiency in policy implementation, especially
when involving information search, the decreasing Andrews, Rhys, and Tom Entwistle. 2010. Does cross-sectoral partnership
deliver? An empirical exploration of public service effectiveness, effi-
marginal effects of collaboration on efficiency levels
ciency, and equity. Journal of Public Administration Research and Theory
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