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Determinants of Digital Innovation in the Public Sector

Article  in  Government Information Quarterly · June 2022

DOI: 10.1016/j.giq.2022.101723

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 Determinants of Digital Innovation in the Public Sector

Sounman Hong Sun Hyoung Kim Myungjung Kwon

Yonsei University, Yonsei University, California State University,

Korea Korea Fullerton, USA

Abstract

This study explores the determinants of digital innovation in the public sector. Focusing

specifically on new digital technologies, such as big data, artificial intelligence, Internet of things,

and augmented reality, we explained the wide variation in how Korean local governments used

these technologies to transform their services. We found support for four theoretical mechanisms.

First, our findings support the existence of demand-pull innovation in the public sector: public

organizations respond to citizen demands or needs for innovation. Second, we also find support

for an electoral incentive hypothesis, which posits that local governments’ motivation for digital

innovation is influenced by local politicians’ electoral incentives. Third, our results show the

existence of isomorphic pressure as a driver for public sector innovation: public organizations

emulate their neighbors in adopting innovative practices. Fourth, the results support the upper

echelons theory, as younger policymakers are more active innovators.

Keywords: digital innovation; public sector innovation; electoral competitiveness; artificial intelligence;

upper echelons theory

Acknowledgement: This work was supported by the Ministry of Education of the Republic of Korea and

the National Research Foundation of Korea (NRF-2018S1A5A2A03030694)

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1. INTRODUCTION

Governments often need to adapt to changes in the social, political, and technological

environments, and innovations are crucial to governments’ adaptability to changing

environments (Janssen and Van Der Voort 2016). This is especially true for governance in

increasingly turbulent times, when various organizational agencies interact in a highly variable,

inconsistent, unexpected, and unpredictable manner (e.g., Ansell et al., 2017). Given the critical

importance of government innovations, more evidence is needed to develop precise theories and

design practical implementation strategies.

In this context, two central questions in public sector innovation research and practice arise;

what are the key determinants of innovation in the public sector? Why do some public

organizations actively adopt and experiment with new technologies to improve their services

while others are found to lag? Several previous studies have explored the determinants and

conditions for innovation in the context of public organizations (Arundel et al., 2019; Cepparulo

& Zanfei, 2021; Clausen et al., 2020; Cinar et al., 2019; Demircioglu, 2017; Demircioglu and

Audretsch, 2017, 2020; De Vries et al., 2018; Epstein, 2022; Faber et al. 2020; Hameduddin et

al. 2020; Hartley et al., 2013; Liang et al. 2017; Pittaway and Montazemi, 2020; Suzuki &

Demircioglu 2019; Vickers et al. 2017). However, relatively few have focused on the reasons

why public organizations adopt these new technologies specifically to transform their service

delivery.

To address this gap in knowledge, this study explores the primary determinants of

innovation in the public sector, focusing particularly on digital innovation among the various

types of public sector innovation. In this study, digital innovation in the public sector is defined

as the use of digital technology and applications to improve the processes and procedures of

public services (see also Mergel et al., 2019). This study focused on innovation cases that use the

following new digital technologies: information and communication technologies (ICT),

2
artificial intelligence (AI), blockchain, big data, 3D printing, augmented reality (AR), QR codes,

and the Internet of things (IoT). Several previous studies have explored the determinants and

conditions for innovation in the context of public organizations (Arundel et al., 2019; Clausen et

al., 2020; Cinar et al., 2019; Demircioglu and Audretsch, 2017; De Vries et al., 2018; Hartley et

al., 2013; Pittaway and Montazemi, 2020). To the best of our knowledge, however, few have

focused on the reasons why public organizations adopt these new digital technologies specifically

to transform their service delivery.

This study examines the case of a South Korean reform program called “innovation case

map.” In 2018, the Korean central government announced its plan to adopt new digital

technologies to improve public services and encouraged all local governments to participate in

the initiative. Some local governments actively participated in the process by implementing new

experimentations, while others did not respond to the request. This study exploits this variation

across local governments in order to find the key determinants of digital innovation in the public

sector. Specifically, this study tests whether the following organizational and institutional

variables are associated with the propensity to innovate: (1) citizens’ needs as measured by their

demographic profile, (2) electoral incentives from policymakers, (3) institutional pressures, and

(4) policymakers’ demographic profile.

Taken altogether, this study proposes the following research questions: What are the

determinants of Korean local governments’ adoption of digital innovations? To what degree is

Korean local government’s adoption of digital innovations associated with the four main drivers

of innovation (citizens’ needs, electoral incentives, isomorphic pressure, and demographic profile

of leadership)?

Overall, we found support for the following four aspects. First, some demographic

characteristics of citizens may be significantly associated with governments’ participation in

experimentation. Specifically, we found that localities with a high share of young constituents
3
tend to actively experiment with digital innovation. Second, reelection concerns influence the

decision to experiment. We found support for the proposition that policymakers engage in

innovation when a high level of electoral competition exists. Third, governments conform to

institutional pressures in their environment by engaging in mimetic innovations. Localities

conform to institutional pressures to be viewed as legitimate by their key stakeholders. Finally,

the individual characteristics of leadership play an important role in engagement with digital

innovation.

2. THEORY AND HYPOTHESES

This study proposed and tested four distinct theoretical mechanisms to verify why local

governments experiment digital innovation. Based on previous literature in innovation,

management, and public administration, four factors were identified that may drive public sector

innovation: (1) citizens’ needs, (2) electoral incentives, (3) isomorphic pressure, and (4)

demographic profile of leadership. Specifically, this study argues that public organizations may

pursue digital innovation to satisfy citizens’ needs, improve reelection chances, and meet the

expectations of their key stakeholders. Finally, the characteristics of top decision makers also

influence organizations’ experimentation with digital innovation. The theoretical rationale

underlying each of these factors is presented below.

2.1 Citizen Needs Hypothesis

We first propose that local governments adopt innovation to meet the needs (or demands) of their

constituents. Schmookler (1966) is among the first to stress that demand plays a critical role in

determining the direction and magnitude of innovative activities, the idea often called “demand-

pull” innovation. Schmookler focused on firms’ inventive activities in markets and argued that

4
innovation is a function of market demand, that is, firms respond to incentive; they engage in

innovative activities if there exist sufficient demands for the potential outcome of these activities.

Since then, scholars have demonstrated the importance of these demand-side factors in fostering

innovative activities by market participants (Boon and Edler, 2018; Martin et al., 2019; Radicic,

2019; see also Kleinknecht and Verspagen, 1990).

In this study, we argue that the demand-pull innovation occurs not only in markets, but also

in the public sector. Public organizations also respond to incentives; they are willing to

experiment with new public services if there exist sufficiently high potential demands for them.

Policy innovations often entail potentially high costs of failure because there exists an element

of uncertainty inherent in any innovative practices (Rose–Ackerman, 1980; Hong and Lee, 2018).

As Majumdar and Mukand (2004, p.1208) describe, “governments face[s] a choice between

maintaining the safe, status quo policy or experimenting with a new, untried policy that may

generate higher, though uncertain [benefits].” In this setup, policymakers are willing to take risks

and experiment with novel policies only if the expected potential benefits outweigh the costs.

Here, the perceived level of benefits is an increasing function of the demands for innovation. In

the public sector, the demand or needs for innovation may be defined as citizens’ willingness to

use the outcome of innovative activities. It follows, therefore, that public organizations will be

motivated to invest their resources in innovation if there exist sufficiently large citizen demands

for their outcome.

Previous studies have suggested that demographic factors, including age, gender, and

education, have critical influences on someone’s willingness to use e-government services

(Bélanger and Carter, 2009; Bonfadelli, 2002; Dugdale et al., 2005, Norris, 2001; Thomas and

Streib, 2005; Gauld, Goldfinch, and Horsburgh, 2010; Goldfinch et al., 2009). Among the

various demographic factors, we argue that age can be particularly important for the types of

innovations studied in this article. According to our interviews with a public manager who led
5
digital innovation projects in one of the localities, governments generally use mobile phone

applications as an interface to communicate with their constituents. Given the extensive and

persistent gap between younger and older generations regarding the use of mobile devices,

policymakers can perceive the average age of constituents as an important cue and use it as a

shortcut to evaluate the expected demands and needs for digital innovations. This

operationalization is supported in previous research (e.g., Norris et al., 2001). Therefore, we

hypothesize that the lower the average age of constituents, the stronger the motivation of local

governments for digital innovation. We call this citizen needs hypothesis of public sector

innovation.

H1: Local governments’ motivation for digital innovation is negatively associated with

the average age of constituents.

2.2 Electoral Incentive Hypothesis

Schmookler’s (1966) theory of demand-pull innovation assumes that firms seek to maximize or

at least improve profitability by satisfying market demands. To apply this theory in the public

sector, public organizations must also be concerned with the demands of their constituents.

Previous research in public administration and political science suggests that regular elections

serve as an effective instrument to make policymakers responsive to citizen demands by holding

them accountable (Ashworth, 2012; Hong, 2017). To satisfy the needs of their constituents,

policymakers must often adapt to changing environments by implementing innovative practices

(Hong and Lee, 2018). Therefore, electoral incentives can push policymakers to experiment with

innovative practices despite the risk of failure. As Rose–Ackerman (1980, p.593) states,

“politicians must take risks if they hope to be reelected.”

6
 If elections are effective in pushing policymakers to experiment innovative ideas, the

behavioral impact on policymakers should be clearer when elections are competitive. Previous

studies have shown that a higher level of political competition is associated with the degree to

which politicians consider the interests of their constituents (Bernecker et al., 2018; De Janvry et

al., 2012; Hong and Lee, 2018b). With little political competition, policymakers may be hesitant

to experiment new ideas as they weigh risky electoral gains from the innovation against their safe

status quo. However, a greater level of competition makes the status quo increasingly insecure,

pushing policymakers to risk experimenting new innovations. Here, electoral insecurity is the

concept that links electoral competition to the behavior of office-motivated politicians. Thus, a

similar logic may apply to other variables that affect incumbents’ electoral insecurity. For

instance, the vote shares of incumbent policymakers in the previous election may also affect

innovation, although the sign of the relationship is reversed. Therefore, we propose the following

electoral incentive hypothesis.

H2-1: Local governments’ motivation for digital innovation is positively associated

with the level of electoral competition in the jurisdiction.

H2-2: Local governments’ motivation for digital innovation is negatively associated

with the previous vote shares of incumbent policymakers.

Previous research in behavioral science suggests that the impacts of positive and negative

information are asymmetric (Cyert and March, 1963; Kahneman and Tversky, 2013). Cyert and

March (1963) show that firms engage in innovative activities until they achieve an outcome that

exceeds a set of minimum acceptability criteria. Once these criteria are met, however, the

motivation for innovation decreases dramatically. Previous research has shown that this
7
behavioral perspective may also apply to decision making in public organizations (Hong 2019,

2020; Hong & Kim 2019; Hong, Kim & Son 2020). Following this strand of research, we

hypothesize that electoral insecurity may affect innovation in a nonlinear fashion. Politicians

actively adopt new innovative practices if they feel highly insecure. Once they reach a certain

level of electoral security, however, their motivation for innovation decreases considerably.

Therefore, we hypothesize:

H2-3: Electoral (in)security as measured by electoral competition or the previous vote

shares of incumbents may affect digital innovation in a nonlinear fashion.

2.3 Isomorphic Pressure Hypothesis

As explained above, policymakers – and thus local governments – pursue digital innovation to

satisfy constituents’ needs and improve reelection chances. These explanations implicitly assume

that organizations innovate to improve performance, effectiveness, and competitiveness.

However, there exists an alternative view that organizations engage in innovative practices to

seek legitimacy (DiMaggio and Powell, 1983; Meyer and Rowan, 1977). In other words,

organizations change their practices to meet the expectations of their key stakeholders. According

to this view, innovations have a ritual aspect; Organizations pursue innovation to demonstrate

that they are at least attempting to maintain their adaptability to changing environments and thus

claim legitimacy to their stakeholders.1

This institutional theory explains that organizations face isomorphic pressures. Here,

isomorphism is a “constraining process that forces one unit in a population to resemble other

1
In the context of local governments, key stakeholders may include upper-level governments (i.e., central or
metropolitan), constituents, civil societies, and local district assembly.
8
units that face the same set of environmental conditions” (DiMaggio and Powell, 1983, p.149).

DiMaggio and Powell (1983) propose three types of pressures that produce isomorphic change:

coercive, mimetic, and normative forces; however, these concepts are not necessarily empirically

distinguishable. Coercive forces refer to external pressures from the government or other

organizations to adopt the practice or system they prefer. Mimetic forces refer to pressures to

mimic peers’ activities or systems. Normative forces refer to pressures stemming from

professionalization (i.e., the effect of the professional standard on organizational changes).

In this study, we argue that isomorphic pressures provide one possible explanation for why

local governments decide to experiment innovative ideas. Previous studies have shown that

institutional theory is relevant to public organizations; they also pursue legitimacy by conforming

to isomorphic pressures (Ashworth et al., 2009; Frumkin and Galaskiewicz, 2004; Jun and Weare,

2011; Piña and Avellaneda, 2018). In the context of our study, coercive isomorphism may have

played some roles, as local governments are influenced by the reform program initiated by the

central government. However, the main isomorphic pressures may be mimetic, as digital

innovation and transformation involve a significant level of uncertainty. That is, as organizations

cannot assess the exact value of their digital transformations, they choose to simply copy or

emulate practices adopted by others while still claiming legitimacy. We hypothesize that, in

copying other practices, local governments will consider neighboring organizations, as they are

geographically proximate, often share key stakeholders (e.g., constituents, civil societies, and

metropolitan government), and have similar cultures, in addition to geographical job mobility of

public managers across adjacent localities (Zhu and Meng, 2020). Therefore, we have the

following isomorphic pressure hypothesis.

H3: Local governments’ experimentation of digital innovation is positively associated

with their neighboring organizations’ experimentation.

9
2.4 Upper Echelons Hypothesis

Leadership plays a crucial role in fostering organizational change and innovation due to its

prominent role within organizations (e.g., Buchheim et al., 2020; Damanpour and Schneider,

2009; De Vries et al., 2016; Vaccaro et al., 2012; Walker et al., 2010; Zhang et al. 2017). The

upper echelons theory offers a theoretical perspective to understand the importance of leadership

in organizational decision making. According to this theory, top managers make decisions based

on their own interpretations of the strategic situations they face and, therefore, their experiences,

values, and personalities affect their decisions (Hambrick and Mason, 1984; Hambrick, 2007).

Previous studies have presented clear evidence that demographic profiles of leadership are

significantly associated with firms’ decisions and performance (e.g., Finkelstein et al., 2009).

Research in public administration has shown that the upper echelons theory also holds in

public organizations (Anessi-Pessina and Sicilia, 2020; Desmidt, Meyfroodt, and George, 2019).

Accordingly, this study applies the upper echelons perspective to explain how and why the

demographic profile of policymakers may affect their decisions to experiment innovative

practices. Among the various individual characteristics, we focus on policymakers’ age, as recent

studies have found that the age of top decision makers is particularly important in understanding

firms’ risk-taking and creative innovations (Acemoglu et al., 2014; Navaretti et al., 2019; Liang

et al., 2018; Belenzon et al., 2019). Therefore, we hypothesize that the age of policymakers is

significantly associated with local governments’ decision to experiment innovative practices.

Specifically, we propose the following upper echelons hypothesis.

H4: Local governments’ motivation for digital innovation is negatively associated with

policymakers’ age.

10
3. PUBLIC INNOVATION PROGRAM IN KOREA

In this study, we analyzed local governments’ participation in the “innovation case map,” a

reform program implemented by the Korean central government. In March 2018, the Korean

government announced its master plan for public sector innovation. In this plan, the

government emphasized the critical importance of digital technology in improving the quality

of public service. The plan mentioned explicitly the use of AI, IoT, and big data as examples

of digital innovation. As a specific strategy to achieve the plan’s goal, the government launched

a reform program called “innovation case map.” In this program, the central government urged

all localities to implement innovative ideas to reform their public services. Local governments

that participated in the program by experimenting with innovative practices were required to

submit their experiences. The central ministry administering this program reviewed the

submitted cases and uploaded them to a public website (www.innogov.go.kr) so that all citizens

can view and comment on it.2 The number of cases uploaded in this database by each locality

can be viewed as a reasonable proxy for the locality’s motivation to innovate its public services.

Table 1 about here

In this study, we focused on “digital innovation,” which is defined as public service

innovation using new digital technologies and applications. Local governments that submitted

their experiences were required to submit a list of keywords related to the innovation case.

2
The selected cases are ongoing projects that have benefited citizens by changing how local governments provide
their service. We do not believe that all the selected cases have had transformative impacts on how the localities
achieved their missions. Most selected cases were “small innovations,” which nonetheless have potentially
significant impacts. As the submitted cases are open to the public, submitting a fake case was impossible for local
governments.
11
Based on the keywords, we chose the cases that explicitly relied on the following new digital

technology and applications: information and communication technologies (ICT), artificial

intelligence (AI), blockchain, big data, 3D printing, augmented reality (AR), QR codes, and the

Internet of things (IoT). Our decision to focus on specific types of innovation was to produce a

more credible analysis. In fact, the cases selected for the reform program included very different

types of innovations, which makes it difficult to have a meaningful comparison across localities.

The very definition of what constitutes an “innovation” was unclear. This is problematic as the

determinants of innovation vary significantly across types of practices (Mooney and Lee 1995).

Our exclusive focus on digital innovation alleviated such a problem. Table 1 shows several

exemplary cases of digital innovation implemented by local governments and presented in the

“innovation case map” program. Generally, most cases included in the “innovation case map”

were incremental administrative process innovations that changed how local governments

interact with their citizens.

4. METHOD

4.1 Data

The dependent variable of this study was the number of digital innovations experimented by local

governments. We manually collected this variable in September 2020 from the website that lists

the best cases of public sector innovation. The following four treatment variables were also

gathered from different public datasets. First, the proportion of population in their 20s, 30s, and

40s was collected from the Korean Statistical Information Service (KOSIS) website. Second,

an indicator for whether a neighboring locality has implemented a digital innovation practice

was produced using a Geographic Information System (GIS). Third and fourth, the age of the

elected head and electoral competition were collected from the National Election Commission

(NEC) website.
12
 Table 2 about here

The control variables were also drawn from several public data sets. The local population

size was obtained from the KOSIS website. Data on the number of public employees and size

of tax revenue per population were collected from a public dataset called the Local

Administration Integrated Information System (LAIIS). The proportion of citizens’ data

requests that are approved by local governments out of the total number of requests was

obtained through information disclosure requests sent to each local government. Finally,

information about the policymaker’s party affiliation was provided by NEC. Table 2 displays

summary statistics for all variables included in the analysis.

4.2 Empirical Method

To evaluate our hypotheses, we employed the following simple model. In the equation below,

𝐼𝑛𝑛𝑜𝑣𝑖 is the number of digital innovations experimented by a local government i. This

variable is the dependent variable of this study, which is used to measure localities’ motivation

for innovation. As this variable is left-censored with many zeros, we used tobit regression

instead of a standard linear ordinary least squares (OLS).

𝐼𝑛𝑛𝑜𝑣𝑖 = 𝛼 + 𝛽𝐶𝑖𝑡𝑖𝑧𝑒𝑛𝑖 + 𝛾𝐼𝑛𝑠𝑡𝑖 + 𝛿𝐿𝑒𝑎𝑑𝑒𝑟𝑖 + 𝜃𝐸𝑙𝑒𝑐𝑡𝑖 + 𝛾𝑋𝑖 + 𝜈𝑖 (1)

This study proposes four determinants of public sector innovation as operationalized by

the following variables: 𝐶𝑖𝑡𝑖𝑧𝑒𝑛𝑖 , 𝐼𝑛𝑠𝑡𝑖 , 𝐿𝑒𝑎𝑑𝑒𝑟𝑖 , and 𝐸𝑙𝑒𝑐𝑡𝑖 . First, 𝐶𝑖𝑡𝑖𝑧𝑒𝑛𝑖 is the

proportion of population in their 20s, 30s, and 40s that captures the expected demands and

13
needs for digital innovation. This operationalization assumes that those in their 20s, 30s, and

40s may be viewed as a “digital generation,” who can easily access digital information and

communication technologies (or at least that policymakers believe they do). Second, 𝐼𝑛𝑠𝑡𝑖 is

an indicator of whether a neighboring locality has implemented a digital innovation practice.

We included this variable to test whether local governments engage in mimetic isomorphism

in response to institutional pressures. Third, 𝐿𝑒𝑎𝑑𝑒𝑟𝑖 refers to the individual characteristics of

the leadership. Specifically, we included the age of the policymaker. Lastly, 𝐸𝑙𝑒𝑐𝑡𝑖 is the level

of electoral competition as measured by the margin of victory in the most recent election (i.e.,

the vote share margin of the first versus the second place).

The model includes a set of control variables within the vector 𝑋𝑖 . First, we included the

local total population to control for the widely different district sizes. Second, we controlled

for the administrative capacity of local governments, as measured by the number of public

employees working for local district governments. Third, we controlled for the size of tax

revenue per population, as an organization’s motivation for innovation may depend on its

financial capacity. Fourth, we also controlled for local governments’ participation in the open

government data initiative as measured by the proportion of citizens’ data requests that are

approved by local governments out of the total number of requests. By including this variable,

we controlled for localities’ willingness to participate in any reform programs, as localities that

actively participate in open data initiatives may be generally receptive to reform. The last

control variable is the party affiliation of the elected policymaker. We included this variable to

see whether the intensity of digital innovation is affected by the political ideology of the

leadership. Specifically, we included an indicator of the leadership’s political affiliation with

the Democratic Party (or Justice Party). Finally, 𝜈𝑖 is an error term.

5. RESULTS

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5.1 Descriptive Analyses

Before presenting the results of tobit regressions, we first show the descriptive statistics. We

investigated whether the key hypotheses are supported through simple analyses. Figure 1

shows the binary association between citizens’ needs for innovation and local governments’

motivation for digital innovations. The citizens’ needs for innovation is measured by the share

of the population in their 20s, 30s, and 40s, and is shown on the horizontal axis. The localities

were divided into three groups (i.e., low, medium, and high) based on the measured level of

citizens’ needs. The vertical axis depicts the dependent variable as measured by the number of

digital innovations experimented by local governments. As shown in Figure 1.1, there exists a

clear association between the two variables; the younger the constituent’s average age, the higher

the intensity of digital innovation experiment by local governments.

Figure 1 about here

Figure 1.2 shows the association between the age of policymakers (i.e., heads of local

governments) and the motivation for digital innovations. As all policymakers are in their 40s,

50s, or 60s, we generated three indicator variables based on their age. We then investigated

whether the number of digital innovations experimented by local governments differs across

these three groups. As shown in Figure 1.2, younger politicians tend to engage more actively in

experimenting innovation. The result that the age of both constituents and politicians matter for

public sector innovation supports the notion that the age bias in political institutions has critical

consequences for public policy (Stockemer and Sundström, 2018; McClean, 2019).

Figure 2 about here

15
 Figure 2 depicts the association between electoral competitiveness and governments’

motivation for digital innovation. We hypothesized that a greater level of electoral competition

would pressure policymakers to engage in policy experiments, including digital innovation. We

thus expected to verify a positive association between the two variables. Figure 2.1, however,

reveals the opposite; Electoral competitiveness is negatively associated with governments’

experiments in digital innovation. As a robustness check, we use the policymakers’ vote shares

in the previous election instead of electoral competition and plot it against digital innovation, as

shown in Figure 2.2. Here, again, the result is inconclusive; Electoral support from policymakers

is positively associated with their experiments in digital innovation, although the association is

somewhat nonlinear. This result would also reject Hypotheses H2-1 and H2-2.

Figure 3 about here

Next, we performed a graphical inspection of the hypothesis that local governments

respond to institutional pressure by emulating their neighbor localities (H3). To this end, we

divided localities into two groups based on the value of the dependent variable: localities with

high and low value of digital innovation. Figure 3 presents the map of the country divided into

six parts. As shown in Figure 3, localities with high intensity of innovation are clustered to some

extents, except for Jeolla province and Jeju Island in Figure 3.5. A locality is more likely to

experiment digital innovation if a neighboring locality engages in similar types of innovation. In

fact, neighboring localities share similar regional characteristics, which makes it difficult to claim

a causal relationship from the analysis. This limitation motivates a more rigorous statistical

analysis with covariates. In the following section, we thus test whether the results of simple

graphical inspections survive in tobit regressions.

16
5.2 Tobit Regressions

Next, we tested whether the results of simple graphical inspections would survive in tobit

regressions. Here, we present the results of the tobit model with control variables. Our sample

consisted of 226 local governments that existed in 2019. Table 3 reports the coefficients of the

model. Overall, the results demonstrated in column 1 provide support for our hypotheses.

Findings suggest that local governments more actively engage in digital innovation if (1)

constituents are younger (citizen needs hypothesis), (2) there exists a high level of electoral

competition in the district (electoral incentive hypothesis), (3) the government has a young

leader (upper echelons hypothesis), and (4) neighboring localities also engage in the same type

of innovation (institutional isomorphism hypothesis). Somewhat puzzling evidence is that

electoral competitiveness positively affects digital innovation, which is inconsistent with what

we found in the binary association shown in Figure 2.1. As shown in column 2 of Table 3, we

examined whether electoral competitiveness affects digital innovation in a nonlinear fashion

by splitting electoral competitiveness into low, medium, and high values. We verified that, if

all else being equal, the motivation for digital innovation is especially strong in highly

competitive jurisdictions, supporting the relevance of the behavioral perspective (Cyert and

March, 1963).

Table 3 about here

The coefficient of electoral competitiveness supports our hypothesis that a high level of

electoral insecurity will be associated with an increase in motivation for policy innovation (H3).

To address the conflicting findings reported in Figure 2.1 and Table 3, we performed a

robustness check with an alternative measure. In place of electoral competitiveness, we

17
included incumbent policymakers’ vote shares in the previous election. Here, a low value of

past vote shares signifies electoral insecurity. Here again, we used tobit regression, and the

coefficients are reported in Table 4. Overall, the results in Table 4 are broadly consistent with

those reported in Table 3. The incumbent policymakers’ vote share is negatively associated

with the intensity of digital innovation. Again, this result is inconsistent with that of the binary

association presented in Figure 2.2.

In sum, the results in Tables 3 and 4 provide support for the four hypotheses we formulated.

However, additional explanation is necessary regarding the effect of electoral competition on

digital innovation. We found that the sign of the coefficient of electoral competition in Equation

(1) switches from negative to positive once we include the size of the local population. One

possible explanation may be the following. In examining the data, we observed that there is a

greater level of electoral competition in regions with a low population. We also verified that

localities are less likely to experiment innovation in regions with low population on average.

In such a case, the negative binary correlation between electoral competitiveness and digital

innovation may be misleading if we do not properly control for the effect of local population

size. In fact, however, we do not claim that we identified the causal impact of electoral

competition on localities’ engagements in digital innovation. Nevertheless, we argue that, if all

pieces of evidence are considered together, one may conclude that electoral competitiveness

encourages digital innovation in the public sector.

6. DISCUSSION AND CONCLUSION

In this study, we explored the key determinants of public sector innovation. To this end, we

examined a reform program called “innovation case map” launched by the Korean government

to analyze the wide variation in the intensity of digital transformations across local governments.

Our findings are summarized as follows. First, local governments are willing to experiment
18
digital innovation if there exist high potential demands for them. We found that the share of

young population, a reasonable proxy for the level of demands or needs for digital innovation, is

positively associated with the number of digital innovations experimented by local governments.

Previous research has been mixed over whether citizen demands can stimulate public sector

innovation (e.g., Mooney and Lee, 1995; Tolbert et al., 2008). We contribute to this scholarly

debate by indicating evidence supporting the existence of demand-pull innovation in the public

sector.

Second, we found that policymakers’ electoral incentives drive local governments to

experiment new ideas and practices. Policymakers face a choice between maintaining the

relatively safer status quo and experimenting with innovative ideas that may produce greater

but uncertain gains. We argue that a greater level of electoral insecurity makes the status quo

increasingly unattractive, pushing policymakers to innovate. To support this hypothesis, we

showed that the intensity of digital innovation is higher when there exists a high level of

electoral competition. We also performed a robustness check with incumbent policymakers’

past vote share and found consistent results. Our findings provide broad support for the notion

that electoral accountability is conducive to adaptive governance (Hong and Lee, 2018b).

Third, we found that local governments copy or emulate practices operating in neighboring

localities. Based on the institutional theory, we explained that local governments engage in

mimetic process as they face institutional pressures to experiment digital innovation. This

emulation occurs as the benefits of digital transformation is uncertain; Local governments thus

conform to the pressures by simply copying other available practices, so that they can be

viewed as legitimate in the eyes of the key stakeholders. This finding is consistent with

previous works showing that digital transformation occurs as a strategic response to

institutional pressures (Weerakkody et al., 2016). Lastly, we reported evidence in support of

the upper echelons theory. Specifically, we demonstrated a significantly negative association

19
between the age of policymakers and local governments’ adoption of digital innovation.

Therefore, the individual characteristics of leadership play an important role in engagement

with digital innovation.

Despite our valuable contributions, our study has some limitations. First, this study

assumed that age is an important determinant for digital technology use: younger citizens are

more interested in government practices that utilize new technologies, and younger politicians

better understand such practices. The assumption that the younger generation is more receptive

to new technologies is strongly supported in “digital divide” literature (Á lvarez-Dardet et al.,

2020; Lee and Porumbescu, 2019; Loges and Jung, 2001). We acknowledge, however, that

other factors may contribute to the creation of a more conducive environment for digital

innovation. This simple operationalization clearly limits our capacity to test a more complete

picture of the underlying theoretical mechanisms. Despite the apparent limitation, we are

confident that, given the uniqueness of the dataset we collected, our evidence may still

contribute to the scholarly discussions in digital innovation.

We also note that one should be cautious in interpreting our main findings, as the reported

coefficients may not necessarily show the causal relationships among variables. While we

reported statistically significant associations supporting our hypotheses, further research may

be necessary to verify whether or the observed associations are causal. Lastly, the main findings

reported in this study may depend on the social, political, and cultural environments

surrounding the cases we explored. We stress that our findings come from Korean local

governments, and more work needs to be done to generalize our findings.

This article aims to explore the primary determinants of digital innovation in the public

sector. Previous studies on technology adoption and diffusion have reported the complex

dynamics of innovation (Berry and Berry, 1997; De Vries et al., 2016). This study focuses its

attention on digital innovation (as opposed to general innovation) by taking advantage of the

20
unique dataset recently collected from the Korean public sector. Our evidence posits that local

governments’ incentive to adopt new digital technologies may be strongly influenced by

environmental factors that are beyond the control of organizations (e.g., constituent

demographics). Nevertheless, we do not deny the strategic view of innovation, as our findings

report the critical importance of political leadership (e.g., upper echelon). Although the role of

political leaders is important, their motivation may be significantly shaped by surrounding

environments. Evidence indicates that political leaders seek ideas, motivation, and support to

address organizational needs outside of the organization (e.g., neighboring states’ policies).

Findings from this research have several practical implications that explain why citizen

needs, electoral incentives, isomorphic pressure, and demographic profile of leadership matter

in adopting digital innovation in the public sector. Due to the fact that citizen needs and

electoral incentives are critical to digital innovation in the public sector, the support of such

stakeholders and elected officials is essential to adopting and/or implementing digital

innovation in local governments. In order to obtain such support from stakeholders and

legislators, local governments must create avenues to provide information about the benefits

of digital innovation. Second, local governments need to establish desirable legal and policy

guidelines which are crucial for enhancing the effectiveness of digital innovation rather than

just jumping on the bandwagon of adopting legitimated innovation due to isomorphic pressure.

Such legal and policy guidelines help local governments to oversee and evaluate their digital

innovation accurately, objectively, and legally by setting clear expectations and standards.

Doing so will engender trust and confidence in the innovation among stakeholders and citizens.

Finally, this present research contributes to the broader literature on digital innovation and

public sector innovation by examining determinants that go beyond those recently identified in

relation to government digital innovation. This study is the first to draw on a sample of Korean

local governments to examine these determinants of digital innovation in the public sector.

21
22
 FIGURE 1. Citizens’ Needs for Digital Innovation and Leadership Characteristics

Figure 1.1.
Share of Young Constituents
vs. Governments’ Motivation for Digital Innovation
.5
Motivation for Digital Innovation

.4
.3
.2
.1
0

Low Middle High

Figure 1.2.
Age of Policymakers
vs. Governments’ Motivation for Digital Innovation
.8
Motivation for Digital Innovation

.6
.4
.2
0

40s 50s 60s

23
 FIGURE 2. Electoral Competitiveness and Past Voter Shares

Figure 2.1.
Electoral Competitiveness
vs. Governments’ Motivation for Digital Innovation
.4
Motivation for Digital Innovation

.3
.2
.1
0

Low Middle High

Figure 2.2.
Policymakers’ Vote Shares in the Previous Election
vs. Governments’ Motivation for Digital Innovation
.4
Motivation for Digital Innovation

.3
.2
.1
0

Low Middle High

24
FIGURE 3. Digital Innovation by Localities

Figure 3.1. The city of Seoul Figure 3.2. Gyeonggi Province

Figure 3.3. Chungcheong Province Figure 3.4. Gangwon Province

Figure 3.5. Jeolla Province and Jeju Island Figure 3.6. Gyoeongsang Province

Note: Localities are divided into two groups based on their values of the dependent variable (i.e., motivation for
digital innovation). The areas with dark color have high values, whereas those with light color have low values.

25
TABLE 1. Exemplary Cases of Digital Innovation Implemented by Local Governments
IoT-based Parking Space
Sharing
Related technology IoT
Locality Yeongdeungpo-gu, Seoul
Service description  Yeongdeungpo-gu
introduced a real-time IoT-
based parking space
sharing system.
 IoT sensors are installed
underneath parking spaces
to monitor space
availability.
 Citizens install an app on
their mobile phones to
check vacant parking
spaces nearby in real-time.
 The local government
expects that this system
will contribute to
alleviating the serious
parking lot problems in the
district.
AI-based Chat-bot
Big data & AI
Daegu City, Gyeongsang-do
 Daegu city experimented a
conversational AI that
operates 24-hour, 365-day.
 The chat-bot provides
services including passport
renewal, car registration,
and information provision
about city policies.
 Citizens can access the
chat-bot with mobile
devices.
 The chat-bot also analyzes
the big data collected from
their citizens to constantly
improve its ability to
satisfy citizens’ varying
needs.
26
AI-based Surveillance
AR-based Urban Canvas
Cameras on Beaches
AI AR
Donghae City, Gangwon-do Seocho-gu, Seoul
 Donghae city installed AI-  Seocho-gu launched an
based surveillance cameras “urban canvas” program
that identify swimmers that transformed crime
who appear to be in hotspots into street art
danger. galleries with the AR
technology.
 The AI system broadcasts
warning alarms when it  Citizens install an app on
spots swimmers in danger their mobile phones to
and send automated enjoy the displayed AR-
messages to the marine based artworks.
police.
 The local government  The local government
expects that this program
expects that the system
will contribute to the will allow citizens to enjoy
reducing drowning the artworks as well as
incidents as well as contribute to crime
flagging other dangerous reduction by attracting
situations such as people to the areas.
unattended children.
TABLE 2. Summary Statistics

Variable Obs. Mean Std. Dev. Min Max

Governments’ motivation for digital innovation 226 0.28 0.79 0 8
Share of young constituents 226 0.39 0.07 0.24 0.53
Electoral competitiveness (in log) 226 4.39 0.20 3.43 4.61
Incumbents’ vote shares (%) 226 53.8 9.59 25.7 85.0
Policymaker aged 40 226 0.08 0.28 0 1
Policymaker aged 50 226 0.46 0.50 0 1
Neighboring localities’ adoption of digital innovation 226 0.17 0.29 0 1
Local population (unit: million KRW) 226 0.22 0.22 0.01 1.20
Number of public employees (unit: thousands) 226 0.94 0.51 0.34 4.49
Tax revenue per population 226 403.8 214.5 99.86 1225.6
Participation in open data initiative (%) 226 97.69 1.40 87.96 99.72
Political affiliation with the Democratic Party 226 0.76 0.43 0 1

27
TABLE 3. Determinants of Digital Innovation in the Public Sector (Main Model)

Dependent variable:
Governments’ motivation
for digital innovation
(1) (2)
Citizen needs
Share of young constituents 6.573* 6.726*
(3.486) (3.469)
Electoral incentives
Electoral competitiveness 2.229**
(1.096)
Electoral competition (1 High, 0 otherwise) 1.240**
(0.617)
Electoral competition (1 Medium, 0 otherwise) 0.067
(0.523)
Upper echelons
Policymaker aged 40 1.923** 1.934**
(0.563) (0.569)
Policymaker aged 50 0.339 0.299
(0.463) (0.445)
Isomorphic pressure
Neighboring localities’ adoption of innovation 1.058* 1.363**
(0.625) (0.645)
Control variables
Local population 0.615 0.402
(2.181) (2.178)
Number of public employees 0.575 0.658
(0.760) (0.768)
Tax revenue per population -0.002 -0.002
(0.002) (0.002)
Participation in open data initiative -0.368 -0.389
(0.291) (0.310)
Political affiliation with the Democratic Party 0.115 0.200
(0.515) (0.481)
Constant 20.92 31.98
(30.75) (30.56)
Sigma 2.230** 2.240**
(0.163) (0.173)
N 226 226
Pseudo R2 0.112 0.118
Note: Standard errors in parentheses, * p < 0.10, ** p < 0.05; the dependent variable is operationalized with the
number of digital innovations experimented by a local government.

28
TABLE 4. Determinants of Digital Innovation in the Public Sector (Robustness Check)

Dependent variable:
Governments’ motivation
for digital innovation
(1) (2)
Citizen needs
Share of young constituents 6.213 6.477*
(3.814) (3.851)
Electoral incentives
Incumbents’ vote shares -0.044*
(0.025)
Incumbents’ vote shares (1 Medium, 0 otherwise) -0.563
(0.533)
Incumbents’ vote shares (1 High, 0 otherwise) -1.244**
(0.494)
Upper echelons
Policymaker aged 40 1.880** 1.930**
(0.547) (0.501)
Policymaker aged 50 0.375 0.328
(0.467) (0.440)
Isomorphic pressure
Neighboring localities’ adoption of innovation 1.062* 1.161*
(0.609) (0.627)
Control variables
Local population 0.767 0.702
(2.112) (2.327)
Number of public employees 0.454 0.505
(0.746) (0.789)
Tax revenue per population -0.002 -0.002
(0.002) (0.002)
Participation in open data initiative -0.375 -0.378
(0.295) (0.290)
Political affiliation with the Democratic Party 0.088 0.167
(0.449) (0.484)
Constant 33.87 32.25
(28.21) (27.80)
Sigma 2.233** 2.225**
(0.160) (0.158)
N 226 226
Pseudo R2 0.112 0.117
Note: Standard errors in parentheses, * p < 0.10, ** p < 0.05; the dependent variable is operationalized with the
number of digital innovations experimented by a local government.

29
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