Transforming Government Workshop 2012, Brunel University, West London, UK, 8-9 May 2012

1. Institutionalization of Public Systems
in Developing Countries: A Case
Study of eProcurement in Indonesian
Local Government
Fathul Wahid
Department of Information Systems, University of Agder, Kristiansand, Norway and
Department of Informatics, Universitas Islam Indonesia, Yogyakarta, Indonesia
fathul.wahid@uia.no

2. Introduction
n developing countries:
• Implementation of public systems/eGovernment has had to confront
many serious challenges, and generally has had a poor record of
success
• One of the main challenges relates to institutional issues.
• Implementation of eProcurement is very challenging
• Lack of institutionalization is identified as one of the main causes of
failure
esearch question
• How does institutionalization happen during the implementation of a
public system? 2

3. eProcurement
Procurement systems
• provides information only, or
• facilitates transaction
enefits:
• more efficiency process, cost reduction, enhanced transparency,
better access for SMEs, and corruption avoidance
ssues:
• system integration, re-engineering the process, top management 3

4. eProcurement in the public sector
imilarities with the private sector
• Its main objective is to find goods or services needed at a potential
cheapest price and between acceptable limits of specifications or
quality
ifferences:
• It should adhere to a number of rigid regulations
• It depends on the political decision
• The variety of goods or services purchased are greater
• The transparency becomes its basic requirement
• It is often implemented under a unified public procurement plan that
involves various government agencies (such as department levels) 4

5. Institutional theory (1)
nstitutional isomorphism
• Occurs when an institution has to respond to various external
pressures (DiMaggio & Powell, 1983)
• Isomorphism pressure: coercice, normative, mimetic (DiMaggio &
Powell, 1983)
• Basis of legitimacy: legally enforced, morally governed, culturally
supported (Scott, 2008)
nstitutitional logic
• Guides its organizing principles and provides social actors with
vocabularies of motive (Thornton & Ocasio, 2008).
• Defined as ‘the socially constructed, historical patterns of material 5

6. Institutional theory (2)
nstitutional entrepreneurship
• Actors who are taking advantage of the position to mobilize support
and resources to create and empower institutions (DiMaggio, 1988)
• Collective institutional entrepreneurship to overcome collective
inaction (Wijen & Ansari, 2007)
• Support mobilization: convening, leveraging, accumulation (Dorado,
2005).
• Institutionalization:
• A process of instilling values: to infuse with value beyond the
technical requirements of the task at hand (Selznick, 1957)
• A process of creating reality: occurs whenever there is a
reciprocal typification of habitual actions by types of actors
(Berger & Luckmann, 1967).
6

7. Case and method
ase:
• Implementation of eProcurement in Yogyakarta (a local government in
Indonesia) in four year period (2007-2011)
ethod:
• Interpretive case study
• 11 interviews (various levels: from administrator to the mayor),
observations (several visits), and document analysis
7

8. Development of implementation
Total
2008 2009 2010 2011
2008-2011
Number of work 11 51 137 247 446
packages
tendered via
eProcurement
Selection Attractive work All work All work All work -
criteria/work packages packages packages packages
packages valued between valued at more valued at more valued at more
tendered IDR 500 million than IDR 500 than IDR 100 than IDR 100
and 1 billion million million million
Value (IDR 5,449 78,866 141,267 249,278 471,741
million)
Efficiency (IDR 225 12,649 22,404 37,567 72,844
million)
Efficiency (%) 4.34 16.18 16.10 15.07 15.44
8

9. Critical events and status
9

10. Institutionalization process
Main concept Sub-concept 2007-2008 2009-2010 2011
Institutional Isomorphic Normative Coercive Mimetic
isomorphism pressure
Basis of Morally Legally enforced Culturally
legitimacy governed supported
Institutional logic - Transparency Efficiency Better process
and
accountability
Institutional Resource Convening Leveraging
entrepreneurship mobilization
Institutionalizatio Instilling values Creating reality
n
10

11. Some quotes: isomorphism
‘We made a study by visiting the local government that have used
eProcurement. In 2007, we visited the City of Surabaya which has
developed and used an eProcurement application. … Then, we visited the
City of Bogor which was going to use the application made by Surabaya.
… In Bogor, we got information that Bappenas was developing a similar
application.” (Administrator)
‘Yes [the perception changed]. After using the system for some years,
they realized that it made a faster process since everything was available
online. The eProcurement officers felt more comfortable, no more
pressures, no more terrors.’ (Head of department)
11

12. Some quotes: logic
‘The direct communication between the internal procurement committee
and the suppliers/contractors, and between the suppliers/contractors,
would give an opportunity for “affairs”’. (Administrator)
‘We then could monitor the efficiency [of the procurement process]
directly. When the procurement processes were under the authority of the
departments, it took a long time to obtain the data [of the procurement
process].’ (Head of department)
‘The positive impact on the procurement officers’ side was that we were
feeling more comfortable with the process. No more external pressure’.
(Head of department)
12

13. Some quotes: entrepreneurship
‘As I understood it, the eProcurement agency advanced by themselves,
with their own innovation without my input. At first, I only cultivated values
and shaped them. The hardest part [in the institutional change] is if there
are no values. ... An institution is like a box and its foundation is values’.
(The mayor)
‘You can ask those [pointing to his backers] who communicated with the
local parliament. In Indonesia, the most difficult part is not on the technical
side. The political side is more complicated than the technical one’. (The
mayor)
‘When climbing a mountain, you find a steep track. For me, resistance is
not a burden to stop me or to set me back. We only need to know when
we should move slowly, when we should move fast. It's more about how
to choose the right rhythm to play’. (The mayor)
13

14. Conclusion
he eProcurement institutionalization process could be
understood from three different but interrelated perspectives:
isomorphism, logic, and entrepreneurship
dentification of actual benefits:
• cost reduction (16.5% savings), a faster process (from 30 to 18 days),
a better incentive for procurement officers (from IDR 150k to 700k per
tender), a more comfortable process, a more transparent and
accountable process
ractical suggestions: 14

15. Contributions
t provides a new understanding and a fresh explanation of how
institutionalization of a public system (i.e., eProcurement), has taken
place in the context of developing countries.
he study demonstrates that three concepts from institutional theory as
aforementioned provided vocabularies and insights to explain the
phenomenon under study.
he study identifies actual benefits enjoyed by the government agency
after adopting the system.
he study also provides some practical suggestions that can be adopted 15

16. Thank you!
Tusen takk!
Terima kasih!
16