Digitalisation Labs: A New Arena for Policy Design in German Multilevel Governance

INTRODUCTION

Decision-making and policy design processes have changed significantly in recent decades to meet the demands of modern society and its complications. In an increasingly digital world with ever-expanding complexity of knowledge and institutional infrastructure, governments and public administrations need to improve their policy-making processes by creating digital and innovative solutions for citizens and companies (Ansell and Gash Citation2007, 543–544; Janssen and Wimmer Citation2015, 1–2). To make the digital transformation in politics and administration possible, close collaboration is needed both vertically and horizontally between administrative levels (Layne and Lee Citation2001, 129–134). To date, the German public sector has been dominated by a decentralised and strongly differentiated administrative landscape. This is on account of its structure as a federal-state as well as municipal self-government. Differences are particularly evident in the digitalisation of the public sector. As a result of this heterogeneous IT landscape, collaboration within the administration is made significantly more difficult. Furthermore, the pursuit of autonomy by the Länder and municipalities hinders the introduction and implementation of e-government reforms in the complex German multilevel system (Kubicek and Wind Citation2004, 48–49; Martini Citation2017, 17; Wegrich Citation2020, 3–4).

Particularly in recent years, public policy and public administration research has focused on the impact of new forms of network-based collaboration to foster collaborative policy design and innovation in the public sector. Under the keyword ‘collaborative innovation', governmental arrangements have been examined in which public organisations design and implement new and creative solutions to complicated governance challenges, together with non-state actors, in a problem-oriented policy design process (Sørensen and Torfing Citation2011, 843–844; Wegrich Citation2019, 12–14). A special form of collaboration that has been appearing more and more frequently since 2010 is the so-called ‘policy (innovation) labs' (Williamson Citation2015, 4). Policy labs work within or for the public sector or a government entity to support the design and implementation of innovative public policies. In doing so, they involve various stakeholders in policy design processes from a creative, design- and user-orientated perspective (Fuller and Lochard Citation2016, 1–2). They aim at providing governments at all administrative levels with novel methods for policy design and implementation, taking into account new digital tools and the experiences of different stakeholders (Romero-Frías and Arroyo-Machado Citation2018, 1182). So far, there is a lack of academic literature dealing with the internal dynamics of the labs and how they influence policy design processes (Williamson Citation2015, 4; Olejniczak et al. Citation2020, 94).

The implementation of the Online Access Act (OZG) adopted in 2017, has created a novel arena for collaborative policy design in Germany. With the new law, the German government seeks to support harmonisation and better collaboration by creating uniform standards across administrative levels. The law obliges the federal administration, the Länder and municipalities to offer their administrative services digitally by the end of 2022 (Mergel Citation2019; Wegrich Citation2020). In doing so, the administration is supported by so-called digitalisation labs. The digitalisation labs represent a new multilevel governance arrangement that seeks to increase acceptance for jointly developed solutions across traditionally rather disconnected levels, typically characterised by an executive federalism that distributes policy formulation and implementation vertically, and in which local self-government is a constitutionally protected norm. The labs are organised by consulting firms and bring together public servants from across all federal levels, alongside digitalisation experts and users, to design and digitalise a highly prioritised public service. A unique feature of these labs is that they challenge classical processes and means of bureaucratic decision-making, focussing on a user-centric approach rather than on formal competencies of the administration, by involving various actors who are traditionally uninvolved in the policy design process in executive federalism.

As with policy labs in general, the internal dynamics and processes of digitalisation labs have barely been scientifically investigated. Against this backdrop, the purpose of this paper is to make an initial scientific contribution to the investigation of this novel arena for policy design in the German multilevel governance system. Following a neo-institutionalist perspective and drawing on the analytical concepts of multilevel governance and problem-solving, this paper seeks to examine how institutional settings, organisational design and actors’ constellations influence policy design process in the labs. To answer this question, a case study of two digitalisation labs in the subject area ‘Immigration and Emigration' was conducted based on ten expert interviews, combined with extensive document analysis.

The remainder of the article is structured as follows: in the next chapters, the analytical framework and methodological approach of this paper will be presented in more detail. Afterwards, based on the concepts of multilevel governance and problem-solving the paper analyses the settings, strategies, dynamics and processes of the labs. The paper concludes that both the institutional settings and the organisational design of the labs, as well as the constellations of the actors, influences the policy design process in various ways by facilitating problem-solving behaviour in the laboratories.

PROBLEM-SOLVING IN MULTILEVEL GOVERNANCE SETTINGS

The concept of multilevel governance (MLG) emerged in the 1990s in the course of research on decision dynamics in the European Union. In a nutshell, the concept of MLG deals with systems in which governance takes place predominantly with cooperation across different levels. The term covers not only the vertical relationships between various governments and levels, but also the horizontal relationships between actors within a level, as well as the ‘sideways processes' (Maggetti and Trein Citation2019, 356) with independent and non-state actors. Decision-making processes involving MLG are neither completely centralised nor exclusively made on an individual level, but rather with an interplay of inter- and intragovernmental processes and structures (Hooghe and Marks Citation2003, 234; Benz Citation2000, 21–22). Due to the increasing complexity of policy making in a globalised world, the original concept of MLG has been further developed, undergoing various transformations. In today's political science research, the concept is no longer applied exclusively in EU research but also in the context of other multilevel settings, such as federal states (Hooghe and Marks Citation2003; Stein and Turkewitsch Citation2008; Irepoglu Carreras Citation2019; Maggetti and Trein Citation2019).

Even though the term problem-solving was introduced into MLG research early on (Scharpf Citation1997b; Benz Citation2000), the concept remained blurred for a long time (Thomann, Trein, and Maggetti Citation2019, 38–39). In recent years, political scientists have been increasingly concerned with the question of how the two concepts are related and what influence MLG settings have on problem-solving in policy design processes (Maggetti and Trein Citation2019; Trein, Thomann, and Maggetti Citation2019). In contrast to bargaining, which focuses on the individual interests of actors in the decision-making process, problem-solving is originally seen as a decision-making mode among experts that is characterised by its orientation towards a common interest (Scharpf Citation1988, 260–261; Benz Citation2000, 26). Following a procedural understanding and the definition of Maggetti and Trein (Citation2019, 357), problem-solving can be defined as a process in which policy makers:

Hooghe and Marks created a basic concept for the distinction of two types of MLG which can be linked to the concept of problem-solving (Maggetti and Trein Citation2019). Type I governance is characterised by a small number of general-purpose jurisdictions with non-intersecting boundaries. The number of jurisdictional levels is limited to a few levels and the framework is designed to be system-wide and long term. Hooghe and Marks refer to federalism as the ‘intellectual foundation for Type I governance' (Hooghe and Marks Citation2003, 236–237). By contrast, Typ II governance is defined by a large number of intersecting, task-specific jurisdictions which are organised in a flexible, problem-oriented structure across many levels. In empirical reality, the two types of governance co-exist and complement each other. Often, functionally differentiated Type II jurisdictions are embedded in a general-purpose Type I governance structure (Hooghe and Marks Citation2003, 237–240).

While the advantages of MLG settings lie primarily in their scale flexibility, transaction and coordination costs are often higher than in other systems (Hooghe and Marks Citation2003, 239). They rise with an increasing number of responsibilities and actors involved in decision-making processes (Scharpf Citation1997a, 70). Institutional arrangements play a decisive role in dealing with these problems. Two different strategies can be distinguished to deal with transaction and coordination problems: reducing the number of necessary participants and limiting the number of interactions between actors. A reduction in the number of actors involved is particularly evident in Type I governance settings, which are characterised by few non-intersecting jurisdictions, thus limiting the need for vertical and horizontal collaboration between jurisdictions. On the other hand, this small number of jurisdictions leads to increased party competition and distributive bargaining. In Type II governance settings, the number of jurisdictions is not limited. However, transaction and coordination costs in decision-making processes can be reduced by problem-specific, functionally more differentiated jurisdictions. These functional differentiation results in a focus on internal interactions rather than external interactions (Hooghe and Marks Citation2003, 239–240).

Differing effects of the two MLG types can also be observed concerning the objectives of the actors and the way conflicts are dealt with in decision-making processes. In Type I governance, the actors’ focus is primarily on representing the interests of particular groups, and the barriers to exit from the decision-making process are relatively high because these are long-term arrangements in which decisions are regularly made on a variety of issues. This bundling of issues in a few jurisdictions results in ideological conflicts and party competition playing a more important role in Type I governance. Due to the problem and task-specific focus of the jurisdictions in Type II governance settings, ideological issues take a back seat and the actors involved in the decision-making process appear as individuals or members of fluid communities rather than as representatives of a particular group. The voluntary nature of the institutional arrangement allows the actors to leave decision-making processes or to dissolve jurisdictions when they are no longer necessary. At the same time, the functional differentiation and smaller scope of Type II governance structures offer the possibility to avoid conflicts in decision-making processes. Because of the focus on individual issues, decision-making processes can be made independent of other overriding problems and controversies (Hooghe and Marks Citation2003, 240).

Besides the general type of governance, the nature of the ‘denationalisation' (Maggetti and Trein Citation2019, 360) -upwards, downwards or sideways- can influence the problem-solving capacity. Concerning digitalisation labs, the downwards and sideways denationalisation in Type II governance plays a particularly important role. The downwards denationalisation in Type II governance structures describes the delegation to issue-specific sub-national bodies. Their problem-solving capacity results above all from the possibility of developing customised policy solutions without being restricted by the classical boundaries of competencies. However, new problems can also potentially arise, such as jurisdictional wrangling, when this governance arrangement overlaps with other formal authorities. The problem-solving capacity of sideways denationalisation in Type II governance structures results in particular from the sector-specific knowledge that non-state actors contribute to the policy design process (Maggetti and Trein Citation2019, 360). While it is assumed that such network governance arrangements can contribute to increased output legitimacy through more adequate and problem-focused decision-making, concerns arise in particular with regard to their democratic accountability. This is because these governance arrangements are often characterised by a low level of citizen participation, a lack of visibility and unclear political responsibilities (Papadopoulos Citation2007, 471). Even though Type II governance arenas are often not directly involved in the legislative process, they can indirectly exert great influence upon it. Since the capacities and expertise of the legislative authorities are limited, decisions and proposals from policy networks are often simply ratified to avoid transaction costs (Papadopoulos Citation2007, 474).

The paper is based on the assumption that policy processes are influenced by institutional arrangements, but not completely determined by them. Besides the institutional context, the strategies of the different actors as well as the actor's constellations play an important role (Scharpf Citation1997a; Mayntz and Scharpf Citation1995; Kiser and Ostrom Citation2000). Following this neo-institutionalist perspective and the outlined analytical framework of problem-solving, this paper argues that the institutional and organisational settings of the multilevel governance system and the organisational design of the digitalisation labs, as well as the actor's constellations, influence the policy design process by promoting a problem-solving behaviour in the laboratories.

METHODOLOGY AND DATA COLLECTION

The paper is designed as an explorative, qualitative case study. Since no scientific debate on the subject has yet emerged, a qualitative case study allows an in-depth examination of the subject (Blatter, Langer, and Wagemann Citation2018, 174). As a case, the digitalisation labs in the subject area ‘Immigration and Emigration' were selected. The Federal State of Brandenburg and the Federal Foreign Office are jointly responsible for this subject area. They are officially supported by the Federal Ministry of the Interior, Building and Community (BMI) and the state of Bavaria. Informally, the Länder Baden-Wuerttemberg, Schleswig-Holstein and North Rhine-Westphalia have declared their willingness to support the digitalisation of services. A total of 25 services belong to this subject area (21 on immigration and four on emigration) (Federal Ministry of the Interior, Building and Community Citation2019, 17). The two services; residence permit for the purpose of gainful employment and formal obligation were given particularly high priority and therefore are examined more closely in two digitalisation labs. The labs are organised by two different consultancies and vary in the number of participants; from 11 (formal obligation) to approximately 20 (residence permit). The subject area can be considered a crucial case, as this policy field shows high degrees of cross-sectoral and multilevel policymaking, touching a wide range of ministerial departments across all governmental levels in Germany. Furthermore, it must currently be considered a particularly salient policy issue. As a result, it is to be expected that there might be a higher potential for political and ideological conflicts between actors in this subject area which could complicate collaborative decision-making. Therefore, strategies to promote problem-solving behaviour might be of special importance in the policy design process.

The data basis of this paper consists of 10 expert interviews conducted between January and March 2019, as well as an analysis of official documents on the OZG and the digitalisation labs. Participants and organisers of the labs at all administrative levels, as well as consultants, were interviewed based on semi-structured interview guidelines. This multi-actor approach allows an examination of the internal dynamics and processes of the labs from different angles. Additionally, interviews with the consultants and organisers of the labs offer the opportunity to obtain detailed information on the strategies of the labs, which are not provided in official documents.

DIGITALISATION LABS IN GERMAN MULTILEVEL GOVERNANCE SETTINGS

In the following chapters, the institutional framework, internal dynamics and processes of digitalisation labs will be analysed based on the empirical data surrounding digitalisation labs in the subject area ‘Immigration and Emigration'. How multilevel governance settings, the organisational design of the labs and the composition of the actors influence the policy design processes in the labs will be discussed. In doing so, special attention will be paid to the identification and analysis of strategies to promote problem-solving.

CONCLUSION

The analysis of the digitalisation labs in the subject area ‘Immigration and Emigration' has shown that the institutional framework, organisational design and strategies, as well as the composition of the actors influence the labs’ policy design process and promotion of problem-solving.

The implementation of the Online Access Act and digitalisation labs is characterised by a strong functional differentiation, decentralisation of policy design processes and a clear focus on problem-solving. In contrast to classical patterns of executive federalism, actors from all three administrative levels, as well as external actors, are involved in the policy design process. The focus is not on formal competencies, but on user orientation and the collaborative search for solutions to a concrete policy problem. This focus on problem-solving is additionally bolstered by the organisational design and the composition of the actors in the labs. To promote problem-solving, the consultancies rely not only on a joint problem definition but also on a strategy of conflict avoidance. Possible conflicting issues, such as legal or financial concerns, are mostly excluded in the labs in order to prevent distributive bargaining. This may facilitate decision-making processes within the laboratories, however, in the long term, conflicts might only be postponed, which could lead to problems in the later implementation of the developed solutions.

The digitalisation labs are a novel MLG arrangement, departing in many ways from classical patterns of the German executive federalism. They provide a new arena for bureaucratic and external actors to work together to find solutions to concrete policy problems. Formal competences and organisational affiliations are deliberately neglected in this process in order to promote problem-solving. Flat hierarchies, a focus on user orientation, and agile methods are intended to help break through classic paradigms in order to find innovative solutions to pressing policy problems. Another novel feature of this arrangement is that it gives actors access to policy design and decision-making processes that are not traditionally involved, such as the local level or non-state actors. On the one hand, this can promote the exchange of expertise and knowledge between the actors and initiate learning processes, while on the other, it raises problems regarding democratic accountability. Limiting the number of participants and focusing on user orientation are further strategies to promote problem-solving in the labs. The low number of participants due to labs typically consisting of relatively homogeneous groups of experts from the field of digitalisation, and therefore the collaboration in the labs is more about the exchange of professional expertise than about ideological or political discussions. The different actors in the labs are equally involved in finding a solution to a policy problem, regardless of their organisational affiliation. Formal competencies and objectives of the respective parent organisation take a back seat in the course of problem-solving. This uncoupling from the parent organisations’ objectives may be further promoted by the fact that the labs are formally equipped with comparatively few competencies, since decisions have no legally binding effect.

This paper provides an initial scientific contribution about this novel form of collaboration in the German multilevel system and an in-depth insight into the institutional settings, organisational design and the actors’ constellations of the digitalisation labs. It identifies various strategies to promote problem-solving in the policy design process and contributes to existing multilevel research literature by analysing this special form of collaboration, combining the analytical concepts of multilevel governance and problem-solving with empirical evidence from the German digital transformation. Since the empirical analysis is based on a case study of two selected cases, some findings might only be generalised to a limited extent. However, this article is a first attempt to shed light on a new governance arrangement, which has seen barely any scientific investigation. It holds the door open for future research.

Based on the results of this study, there are many new insights for a future research agenda, from both a theoretical and empirical perspective. While the paper uses a procedural definition of the analytical concept of problem-solving, thus focusing on the analysis of policy design processes, the study could be extended by an outcome-centred approach to problem-solving. In other words, it could be examined as to what extent the laboratories and the strategies used have actually contributed to innovative problem-solving as an outcome. Additionally, the question of the legitimacy and democratic accountability of such governance formats could be examined more closely. Furthermore, the empirical basis of the paper could be extended by analysing and comparing digitalisation labs from other subject areas. In doing so, one might be able to see how other factors, such as the organisational field or the salience of the subject area, influence the policy design process as well as the outcomes of the labs. Also, the role of external actors in the labs could be further examined. While in the subject area ‘Immigration and Emigration' mainly bureaucratic actors were represented in the labs, other subject areas (e.g. building and housing) show a much greater involvement of non-state actors, such as IT-providers or federal umbrella organisations. A comparative analysis of the different composition of actors in the laboratories of various subject areas could provide more precise information as to the extent to which the concrete composition of the laboratories influences their processes and results. As the digitalisation labs have hardly been researched so far, the findings of this paper open the way to a broad range of subsequent research questions.