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This article analyses incremental institutional change and subsequent organizational and performance outcomes of the digital transformation from a comparative perspective. Through 31 expert interviews, the authors compare two digitalized public services in Germany. Two digitalization approaches are identified. The voluntary, decentralized bottom-up approach involves layering of new rules, limited organizational restructuring, and performance deficits. Conversely, the compulsory, top-down approach with centralized control facilitates displacement of existing rules and far-reaching organizational change; in this study, it is also associated with improved performance.
Despite the high hopes associated with public sector digitalization, especially in times of crisis, it does not yet hold up to its potential. Both the negotiation and implementation of digitalization policy presents a challenge for all levels of government, requiring extensive coordination efforts. In general, there are conflicting views if more centralized or decentralized policy processes are more effective for coordination—a tension further exacerbated in the context of digitalization policy within multilevel systems, where the imperative of standardization collides with decentralization forces inherent in federalism.
Based on the analysis of expert interviews (n = 29), this chapter examines how digitalization policy in the context of the German federal intergovernmental relations context is located and negotiated, and how this relates to local policy implementation. Focusing on the decentralized German tax administration as a case study, the analysis reveals a shift from a conflicted to a multi-layered policy process, underpinned by a mechanism of “concentration without centralization.” Strategic and operational competencies are bundled in an institutionalized and legally regulated network for digitalization to achieve necessary standardization of digital infrastructure. Furthermore, the research emphasizes the influence of intergovernmental relations on local implementation and the associated challenges and opportunities.