Public Value in Public Service Ecosystems

ABSTRACT

This article conceptualizes public value and develops a conceptual framework for understanding the nature of public value in public service ecosystems. So far, the conceptualization and research of public value, and its nature in the context of public service ecosystems is incoherent and scant. The theoretical development of this article occurs within the theoretical foundations of service ecosystems, public value, service-dominant logic, and public service dominant logic. It bridges the theoretical domains of value and service ecosystem research between the public and private sector research. It proposes a framework for characterizing the nature of public value at different levels of a public service ecosystem. The main theoretical contribution of this paper is the further conceptualization of public value and its characterization in the context of public service ecosystems. The article makes articulated propositions and provides novel theories for understanding and analyzing public value and public service ecosystems relevant for researchers, public managers, and policymakers of this field.

KEYWORDS:

• Public value
• public service
• public ecosystems
• S-D logic
• networked government

Introduction

The private sector management thought was originally developed for manufacturing and distributing goods (Drucker, 1954; Kotler, 1967, Porter 1985). Over the past 15 years, however, private sector companies and researchers have increasingly adopted S-D- logic (service-dominant logic), which is based on customer value, co-creation, and ecosystems (S.L. Vargo & Lusch, 2004; Vargo & Akaka, 2012). Similarly, public sector research has adopted similar ideas based on public value, value co-creation, systemic approach, and ecosystems (Osborne et al., 2013; Radnor et al., 2014). This stream of research is called PSDL (public service dominant logic) or PSL (public service logic). Public administration thinking has been dominated by the new public management (NPM) paradigm (Thatcher, 1995) in most Western countries during the past decades. The idea of NPM is to apply management methods of private sector in public administration and management of public organizations (Hood, 1991).

In practice, NPM or “neo Taylorism” (Pollitt, 1990, p. 56), has often meant applying management methods that were developed for private manufacturing industries during the industrial era in the public administration and public services. Transferring ideas from the private into the public sector is not straightforward (S. P. Osborne, 2018) due to several key differences (Nutt & Backoff, 1993; Rainey & Chun, 2005; Jaakkola et al. 2019). While many ideas developed in the private sector do lend their use to the public sector, considerable research is often required to succeed in this effort, particularly concerning theoretical fundamentals and their application. This includes development of value oriented and ecosystem theories for service in the public sector. This article addresses the knowledge gaps of this area, namely, the nature of public value in public service ecosystems.

The concept of public value is blurred. The lack of understanding of the concept of public value and value co-creation has been highlighted by several researchers. For example, recently Cabral et al. (2019, pp. 467–468) noted that “the construct of public value is currently vague and in need of operationalization” and “The field would benefit from much greater attention [given] to the conceptualization of public value. The lack of knowledge is particularly notable since value and value co-creation are at the heart of PSL. As the definition of public value is unclear and requires more knowledge (S. P. Osborne, 2018), the current article responds to this knowledge gap by exploring the concept of public value and making propositions concerning its nature and role in public service ecosystems.

In the private sector service research, S-D logic (S.L. Vargo & Lusch, 2004) has become the main philosophical approach. S-D logic emphasizes the value to the customer as well as the customer’s central role in that value creation (Vargo & Lusch, 2016, 2017). While S-D logic research is not restricted in the private sector context, the private sector perspective is often present drawing on ideas of the function of markets and firms rather than those of the public sector.

Service ecosystems are relatively self-contained, namely, self-adjusting systems of resource-integrating actors connected by shared institutional logics and mutual value creation through a service exchange (Vargo & Akaka, 2012). Institutions and institutional arrangements are the constitutive elements of such service ecosystems (Akaka et al., 2013). Still, relatively little research exists on service ecosystems in the traditional S-D logic literature (Frow et al., 2016, p. 36; Koskela-Huotari et al., 2016). The research on public ecosystems based on the principles of PSDL/PSL is even newer. Similarly, the research dealing with public ecosystems is scarce (Petrescu, 2019; Trischler & Charles, 2019). Thus, the meaning of the concept of public value in public service ecosystem is mostly unknown. We tackle this knowledge gap.

The purpose of this article is to conceptualize public value and develop a conceptual framework for understanding the nature of public value in public service ecosystems. This focus occurs within the theoretical foundations of public value, public service ecosystems, and S-D logic in the public and private sectors. This article first reviews the literature of public service logic. Next, based on the literature, it discusses what constitutes value. Then, it conceptualizes the public value with propositions concerning its nature. Next, it makes propositions about public ecosystems. After that, it suggests a conceptual framework for understanding the nature of value in a multilevel public service ecosystems. Next, it discusses the theoretical contribution of this article. Finally, it offers its conclusions.

Public service logic

A growing stream of literature aims to enhance public administration and management theory with ideas of value management and value co-creation. This research is called public service logic (PSL) and its early version public service-dominant logic (PSDL). Many of the ideas of this research stream are borrowed from the S-D logic. Both PSL and S-D logic essentially relate to service ecosystem and network research, thus we discuss them briefly.

Service-dominant logic

The traditional industrial era thinking on value is largely based on what is called goods-dominant logic (S.L. Vargo & Lusch, 2004). Goods-dominant logic (G-D logic) is the opposite of S-D logic. G-D-logic is based on the following assumptions. Goods are the motivation and object of exchange. The producer decides what represents value. Value is embedded in goods. Value is understood as value-in-exchange. The role of the customer is to be the recipient of goods. Customers are targeted with company’s resources to create the desired transactions. Wealth creation is based on tangible resources.

In contrast, S-D logic is based on the following premises. Value does not exist prior the offering is used and experienced by the customer. The concept of value-in-exchange is replaced by value-in-use and value-in-context. Value is uniquely determined by the customer or user (S.L. Vargo & Lusch, 2004). The company can only offer value propositions, but the actual value is co-created with the customer, making him/her a co-creator of value. Value creation or value co-creation means customer’s creation of value-in-use, and co-creation is a form of interaction (Grönroos and Voima 2013). The role of goods is to be distribution mechanism of service. Their value is derived through the service they provide. S-D logic distinguishes between “service” and “services.” Service means doing something beneficial and services refer to unit of output of certain activity (R. F. Lusch & Nambisan, 2015). Consequently, there may be services that do not deliver service, and goods that deliver service (S.L. Vargo & Lusch, 2004; Vargo & Lusch, 2008b, 2016, 2017). Customers are always value creators and the role of company is to be the facilitator of value co-creation (Grönroos & Gummerus, 2014; Grönroos & Ravald, 2011). This all happens through resource integration orchestrated by the company rather than “production,” where the most important resources are human resources (S.L. Vargo & Lusch, 2004,). The value is facilitated by and built-in goods and other resources that constitute service, which then delivers value to the customer or user (Grönroos & Ravald, 2011; Gummesson, 1995). All this means that companies need to change their mind-set to understand value differently (Lähteenmäki & Nätti, 2013).

Public service logic/public service-dominant logic

The PSL/PSDL literature originates from Osborne et al.’s (2013) article that asserted that new public management paradigm NPM is unfit for the public sector service delivery process, and service marketing and management theory can provide a more applicable framework for public service organizations to manage and deliver public services. They (Ibid.) encapsulated S-D logic for public administration and management and proposed PSDL as a new approach. PSDL is based on several premises: First, both citizen and user are essential stakeholders of the public policy and public service delivery processes, and their engagement in these processes adds value to both; secondly, a public service-dominant marketing approach is essential both for turning the strategic intent of a public service into a service promise or offering and shaping the expectations of users and service employees; third, co-production of service is essential for public service delivery and design; fourth, operations management is needed to ensure efficient and effective public services and fulfil promises (Osborne et al., 2013). The concept of value co-production is one of the PSDL premises (Alford, 2016; Osborne et al., 2013, 2016) as it has claimed to be useful in public sector reform, public service planning and the active involvement of various actors (Osborne et al., 2016).

The term, co-production, was introduced by Ostrom (1972). Co-production involves users, either voluntary or involuntary efforts in the design, management, delivery, and/or evaluation of public services (Osborne et al., 2016). It has three modes, namely, consumer, participative, and enhanced co-production (Osborne & Strokosch, 2013). Alves (2013) discussed the potential application of S-D logic in public service development and proposed that co-creation may effectively enhance innovation in the public sector by integrating citizen capacities and knowledge.

The focus of PSDL shifted from co-production toward value co-creation. Hardyman et al. (2015) argued that the emphasis should be on value co-creation rather than co-production. Alford (2016) recognized that co-creation is an umbrella concept that includes co-production among other factors within the complex inter-connections among people and processes in public services. Osborne et al. (2016) analyzed the relationship between value co-production and co-creation further and developed a definition for co-production. Co-production refers to the voluntary or involuntary involvement of public service users in any of the design, management, delivery, and/or evaluations of public services.

When the emphasis of PSDL shifted on co-creation of value, the new term of PSL was introduced (S. P. Osborne, 2018). The similar shift of theoretical focus from production orientation to value orientation took place in the 1990s in the private sector service research (e.g., Heinonen et al., 2010; Ravald & Grönroos, 1996). This shift was in line with Alford’s (2016) proposition to include a stronger client focus in PSDL, and the criticism by Trischler and Charles (2019) who argued that co-production is an optional process, whereas value co-creation is not, and further, co-production can vary from none at all to extensive co-production activities. In addition, the locus shifted from linear production to wider service system co-creation. The differences between the public and the private sector in the context of PSL were highlighted. They include first that, “repeat business” in the public sector is likely to be a sign of service failure; secondly, unwilling or coerced customers are a significant part of public services; thirdly, users of public services may have a different definition of a successful outcome of a service; and fourthly, users have a dual role to play, both as users of public services and as citizens (S. P. Osborne, 2018).

Grönroos (2019) argued that public service organizations can be as user-focused and service-oriented as private companies through good service management, PSL, and right application of service logic of the private sector. Skålén et al. (2018) extended the PSL research using a framework of public service innovation through suitable resource integration processes. Westrup (2018) examined the potential of the S-D in public services and found that S-D logic has something to offer as a diagnostic tool in terms of the system perspective. Eriksson (2019) introduced a model for integrating social context with the PSL in which evaluation, design, and delivery are understood as interconnected phases in co-production of public services. Engen et al. (2020) contributed to PSL by extending knowledge of conflicts and “co-destruction” in public service value co-creation.

Despite the increasing interest of researchers, the knowledge on applying the ideas of S-D logic in public sector is still in its early stages. According to Trischler and Charles (2019),while the theory and practice of S-D logic are widely addressed in the private sector research, so far the S-D logic research and its application in the public is lacking. Despite the similarities between private and public service organizations (Grönroos, 2019), there are still many differences in the operating context (S. P. Osborne, 2018). The research of S-D logic in the private sector has been extensive over the past 15 years. So far, only a few of the aspects of S-D logic have been researched in the public sector. The potential transferability and applicability of most of the different ideas and aspects of S-D logic in the public sector represent a large and prominent knowledge gap. One of these aspects is addressed in this article, namely the concept of value

What constitutes value

Value is preference-related. An individual human being is seen as the originator of preference, and therefore, of value (Brown, 1984). Value assessment, whether formal or informal, is a necessary component of any rational decision-making process concerning the use, consumption, or management (Lockwood, 1997).

“Value” and “values” are different concepts (Day & Crask, 2000; Oliver, 1996; Woodruff, 1997). ”Value” is the outcome of an evaluative judgment (Holbrook, 1994, Holbrook, 1999). It implies a trade-off between benefits and sacrifices (Payne & Holt, 2001), and it has traditionally been equated with utility or desirability (Sánchez-Fernández & Iniesta-Bonillo, 2007). In contrast, “values” refer to the standards, rules, criteria, norms, goals, or ideals that serve as the basis for such an evaluative judgment (Holbrook, 1994, Holbrook, 1999). They are important personal beliefs that people have toward themselves and the goals for which they strive (Rokeach, 1968, 1973). These implicit criteria are employed by an individual in making a preference judgment, and they guide the behavior of people because they reflect the desired “ultimate end-states of existence” (Vinson et al., 1977; Flint et al., 1997, p. 169).

According to Zeithaml (1988, p. 14), customer-perceived value refers to “the consumer’s overall assessment of the utility of a product based on a perception of what is received and what is given.” Similarly, Monroe (1991) defined perceived value as the ratio between perceived benefits and perceived sacrifice. The perceived sacrifice includes all the costs the buyer faces when making a purchase: purchase price, acquisition costs, transportation, installation, order handling, repairs and maintenance, risk of failure or poor performance. The perceived benefits are a combination of physical attributes, service attributes and technical support available in relation to the particular use of the product, and the purchase price and other indicators of perceived quality (Ravald & Grönroos, 1996, pp. 21–22). Parasuraman and Grewal (2000) extend the “give-versus-get” model. They conceptualized perceived value as a dynamic phenomenon consisting of four types of value that emerge in different points of time and for different reasons during the purchase and consumption of a service. They are acquisition value, transaction value, in-use value, and redemption value. Acquisition value refers to the benefits (relative to the monetary costs) buyers believe they are getting by acquiring a product/service. Perceived value is a dynamic construct in which the relative emphasis of each component may change over time. The service-dominant logic theory (S.L. Vargo & Lusch, 2004; Vargo & Lusch, 2016) has emphasized the difference between value-in-exchange and value-in-use and considers the latter most important. Value-in-exchange is the market price, while value-in-use refers to perceived benefits of use. The service-dominant logic understands that value is always co-created with customers.

Value has been understood both as one- and multi-dimensional construct. The former conceives value as a single overall concept that evaluates the consumer’s perception of value (Agarwal & Teas, 2002; Brady & Robertson, 1999; Chang & Wildt, 1994; Dodds, 1991; Hartline & Jones, 1996; Kerin et al., 1992; Sweeney et al., 1999). The latter understands perceived value as a multi-dimensional construct that consists of several interrelated attributes or dimensions that form a holistic representation of a complex phenomenon (Babin et al., 1994; Holbrook, 1994; Holbrook, 1999; Mattsson, 1991; Sheth et al., 1991; Sweeney & Soutar, 2001). Holbrook (1996, Holbrook, 1999) proposed a typology for perceived value including extrinsic vs. intrinsic value, self-oriented vs. other-oriented value, and active vs. reactive value. Extrinsic value means that a product or service is viewed instrumentally as a means to some end. Intrinsic value refers to consumption experience for its own sake as an end in itself. In the case of self-oriented value, something is valued for the effect it has on oneself or for one’s own sake. Other-oriented value means that an aspect of consumption is positively evaluated because of how others respond or for the sake of someone else. Active value involves the manipulation of a product or service by its user. Reactive value refers to the appreciation of some consumption experience where an object affects oneself rather than vice versa. Holbrook argues that different types of value occur together to varying degrees.

The concept of public value

We next review the literature on public value and present proposition characterizing the fundamentals of this concept. There is no generally accepted definition of public value, as concluded by Rutgers & Overeem, 2014, p. 808), “There is neither a straightforward, fixed, or exact meaning of public value, nor a conclusive way to recognize it.” Instead, there are numerous different characterizations of this concept. In the era of the Internet, the existence of public value is even denied (Rogers & Kingsley, 2004). While the early attempts to conceptualize “value” stem from the private sector research (Buzzel & Gale, 1987; Monroe, 1991; Parasuraman & Grewal, 2000; Petrick, 2002; Ravald & Grönroos, 1996; Zeithaml, 1988), increasingly, the literature of public administration and management emphasizes public value as a part of public policy reform.

Most of the definitions (e.g. Zeithaml, 1988) understand private value as a subjective perception of the beneficiary and refer to the ratio between benefits (gains) and sacrifices (costs; Figure 1). The idea of receiving or creating something that is considered desirable is embedded in the value definitions in public, nonprofit, and for-profit contexts (Stark, 2011). Thus, we propose it is meaningful to understand public value as comparison between benefits and sacrifice.

P1: Public value is the ratio between benefits and sacrifice of a public service to its beneficiaries

Figure 1. Value: the basic principle.

The literature on public value originated with the work of Moore (1995, in Williams and Shearer 2011, p. 1371), who defined public value as “a framework that helps us connect what we believe is valuable … and requires public resources, with improved ways of understanding what our ‘publics’ value and how we connect to them.” Moore also introduced a strategic triangle within which public managers operate. It consists of the aims of public programmes, the environment of operation, and resources. For Kelly et al. (2002), public value means the value created by government through services, laws and regulation, and other actions. Bozeman (2007, p. 37) defines public value as “those values providing normative consensus about firstly, the rights, benefits, and prerogatives to which citizens should (and should not) be entitled; secondly, the obligations of citizens to society, the state, and one another; and thirdly, the principles on which governments and policies should be based.” O’Flynn (2007) indicated that public value should be determined by the citizen and is a multi-dimensional construct. Alford and O’Flynn (2009) identified four approaches to public value, which are a paradigm change of NPM, a rhetorical strategy to preserve the partial interests of bureaucrats and their organizations, a narrative about the environment of public managers, and a broad way to measure government performance.

Hartley et al. (2017) identify three elements of public value: (1) it is a construct that shows how the contribution to the public sphere creates the welfare, (2) it explains where and how value is added by organizations and partners, however, an organizational scope is not enough, (3) it is a practical tool for managers in the public sector to get things done. Bozeman (2019) notes that citizens’ opinions on public value are important. He (Ibid.) also finds that one rates a value as being vital for society even if it is not vital to oneself, and further, one often obtains different results when asking people about values than when asking them to enact those same values either through behaviors, indecisions, or discrete choices. According to Cabral et al. (2019), public value is an evolving structure that constantly adapts and forms through wide-ranging public interaction between different actors. Moreover, it is rarely possible to reach consensus between the various parties on public value. In addition, public–private partnerships can add more value than other types of governance arrangements (Ibid.). Hartley et al. (2019) note that public value is a struggle between ideas and interests, and leadership involves the orchestration of different players and helping stakeholders to find their voice in the public sphere and utilize conflict and coalition for common purpose.

Citizen view is considered an integral part of public value and individuals are often understood as users/consumers of public services (e.g., Bozeman, 2007, 2019; Dahl & Soss, 2014; O’Flynn, 2007). The broader collective aspect is considered; however, the knowledge in this respect is scant. Due to the complexity of the public sector context, no unified definition or understanding exists on public value. Much of the complexity is because the consumer and customer (buying-decision maker) are not the same person or organization as true in most cases in the private sector (Harviainen, Ekström, & Ojasalo, 2019). For example, in public health care the patient is the consumer, the municipality is the customer that buys health care service and makes the buying decisions, and the hospital is the service organization. The effect of good or bad public service is directly perceived by the citizen, and indirectly perceived affected by the whole society (ibid.). Consequently, public value propositions are more complex (Alford, 2016) than private sector value propositions (Harviainen et al., 2019), which makes value co-creation more challenging in the public sector. In conclusion, we make the following proposition.

P2: Public value is ultimately perceived by citizens who are the end consumers of public service

According to Benington (2011), public value has two parts, first, what the public values, and second, what adds value to the public sphere. Williams and Shearer (2011) identified three important areas of public value. First is the relationship between citizens and their representatives that support the value. Second covers the rules of engagement between, and relative legitimacy of public representatives including democratically elected politicians, civil servants, and local managers. Third is the question of adaptation of the public value framework outside of US.

Fisher and Grant (2013) emphasized that that public value is defined primarily in terms of collectively assessed use value. Use value reflects how useful an item is to a given person situation. It is notable that meaning of “use value” is very similar to that for value-in-use, which is the corner stone of S-D logic in the private sector context (S.L. Vargo & Lusch, 2004). Dahl and Soss (2014) highlighted empowering and the involvement of citizens in governance, the democratic political process, and problem solving. For example, state-market cooperation that does not take into account the different views of citizens channeled through the democratic process is not likely to result in optimal public value. Rhodes and Wanna (2007) argue that, the elected politicians have only a legitimate role when determining public value, but non-elected officials do not share that role. The concept of public value is considered to promote democracy when different actors are involved in the creation of that value. Spano (2014, p. 357) described public value as “a changing one, which evolves over time, taking advantage of increased knowledge.” Benington (2011) indicated that public value is contested in a democratic process and involves tradeoffs not only between “good’s” and “bad’s,” but also between competing priorities and is often established through a continuing dialog process. According to Rutgers (2015), public values are enduring beliefs of individuals, organizations, collectives, or political communities about something that is regarded as crucial of desirable.

According to Alford (2016), public value is public not because of who produces it, but who consumes it – the collective citizenry, mediated through the political process. Private value is discerned through individual expressions of either satisfaction or dissatisfaction. In contrast, public value is not the sum of individual preferences, but rather a coherent set of understandings fashioned via the democratic political process. Public value has an individual as well as a collective side, which impacts value creation at different levels. Focusing on private value alone (for an individual citizen) is not enough for public services. Moreover, public value is complex. Public (collective) value as well as private (individual) value are produced from the same process, but discerned by different mechanisms and consumed separately. Public value is produced through a political process and consumed collectively by citizens. Public value propositions refer to those things that benefit the individual but can only be consumed collectively.(ibid.:680–681). According to Bryson et al. (2017), understanding the actors, levels, sectors, sectors and logic is needed for the creation of public value. Thus, while public value is ultimately perceived by individual citizens, their representatives define it in the public decision making. Consequently, we present the following propositions concerning public value.

P3: Public value includes individual and collective components

P4: Public value is defined through a democratic political process in the public decision making by the elected representatives and authorized administration

We propose the following definition of public value. Public value is collective value that represents aggregation of the value perceptions of individual citizens who are the beneficiaries. Public value has similarities and differences with private value, which refers to value to an individual. The most significant difference is the collective aspect of public value. What represents value for a certain citizen may not represent value for a larger group of citizens. Often, public value tends to be “optimal,” “best possible,” “compromise,” or “acceptable” – rather than superior to anyone. Another difference is that public value is defined in public decision making by democratically elected representatives, while private value is defined by the individual himself. The definition in decision making does not always result in good public value. Politicians can make bad decisions. Public value is similar with private value since it is ultimately perceived by individual citizens. Also, ultimately at citizen level, it results from the ratio between citizens’ benefits and sacrifice.

Public service ecosystems

Next, we make proposition dealing with public value in public service ecosystems based on the literature. Radnor et al. (2014) observed that co-production of public services goes beyond the inter-organizational focus and extends to larger network constellations (Ojasalo, 2004; Normann, 1991), open systems (Scott Morton, 1991) and service systems (Gummesson et al., 2010). In S-D logic theory domain, these are covered with the concept of service ecosystem (Akaka et al., 2013; Lusch et al., 2016; R.F. Lusch & Vargo, 2014; Vargo & Akaka, 2012; Vargo et al., 2015). According to Akaka et al. (2013), service ecosystems represent the idea that service interactions occur throughout networks of firms, customers, and other stakeholders and are governed by “institutions” or “rules of the game,” and they are formed and reformed through a recursive relationship between individual actions and the reproduction of relationships and shared meanings (e.g., social norms and cultures). The interaction includes, for example, “service production” or “service delivery,” consumption, and innovation.

The literature refers to levels or layers distinguishing the role of different actors within a service ecosystem. It suggests that ecosystems include several hierarchical levels, where the upper levels integrate the lower levels and their actors. Frow et al. (2016) discuss health-care service ecosystems in terms of ecosystem levels. They developed a typology of service ecosystem co-creation practices. The levels used are taken from the S-D logic’s service ecosystem research and include micro, meso, macro, and mega levels (Akaka et al., 2013, Chandler and Vargo, 2011). In a service ecosystem, these four levels are “nested” and actors can access and share different pools of resources at each level (Mars et al., 2012). The typology by Frow et al. (2016) suggests that co-creation practices in a service ecosystem will have different impacts, origins, and measures at different levels of that service ecosystem.

Beirão et al. (2017) empirically examined a health-care ecosystem and presented various value co-creation factors and outcomes at the micro, meso, and macro levels. Their ecosystem levels were adopted from the service ecosystem model of S-D- logic. At each level, the co-creation factors and outcomes include resource access, resource sharing, resource recombination, resource monitoring, and governance/institution generation. Jaakkola et al. (2019) examined technical health-care innovation, and found that different logics of public and private sector organizations caused conflicts and slowed innovation. They (Ibid.) identified four levels of a service ecosystem, including primary user layer, professional layer, technical layer, and a regulative and political layer. Petrescu (2019) stated that delivery of public services creates value at multiple levels in a service ecosystem, including micro, meso, and macro, and also individual and collective. Actors join into the co-creation process to provide access to each others’ resources to enable development and realization of new value propositions. Trischler and Charles (2019) argued that S-D logic-based service ecosystem principles can be used for analyzing and improving public policy and offered a framework for this purpose. They defined public policy in terms of S-D logic as “the coordination of resources that enables value co-creation activities between multiple actors within the broader service ecosystem” (Ibid.:20). In conclusion, we make the following propositions concerning beneficiaries and judgments of public value in public service ecosystems.

P5: The judgements of what represents public value depend on the level of public ecosystem at which it is considered.

P6: The proportion of collective component of public value increases and individual component decreases when moving from lower to higher levels of a public ecosystem. This is because the number of ultimate beneficiaries (citizens) of public value increases at higher levels.

The structure of public ecosystems consisting of lawyers where the higher lawyers consist of the actors of the lower levels. Their interaction is characterized by institutionalized rules which may be tight or loose, formal or informal. On the lowest level, the grass-roots level, of a public service ecosystem, the individual citizen is the beneficiary. At higher levels, public value must serve increasing number of ultimate beneficiaries, in other words citizens. Consequently, when moving from lower to higher levels of ecosystem the proportion of collective component of public value increases and individual component decreases. The judgment of what represents value should aggregate the judgments of a larger number of citizens. These judgments become tangible in public decision making and communication.

Framework of public value in public service ecosystems

Based on the above literature analysis and propositions, we next suggest a conceptual framework of public value in public service ecosystems (Table 1). We understand that public value is the ratio between benefits and sacrifice (e.g., Ravald & Grönroos, 1996; Zeithaml, 1988), has both individual and collective components (Alford, 2016; Petrescu, 2019), and is ultimately perceived by citizens (Bozeman, 2019; Dahl & Soss, 2014; O’Flynn, 2007) in multiple arenas (Bryson et al., 2017) in the public sector. Thus, we understand that opinions and decisions dealing with public value are based on what citizens need to give for it and what they benefit from it.

Table 1. A framework of public value in public service ecosystems.

Certain service ecosystems models have divided service ecosystems into three levels (e.g., Akaka et al., 2013; Beirão et al., 2017; Petrescu, 2019), while others have four (Frow et al., 2016; Jaakkola et al., 2019) and still others have five levels (Frost et al., 2019). Institutions play a central role in service ecosystems. We understand that a public ecosystem has five levels, and they are the citizen, organizational, local and regional, national, and international levels. We propose that actors at all levels of a public services ecosystem consider both individual and collective components, but the emphasis varies. We also suggest that the emphasis is on individual component at the citizen level, and shifts toward collective component at local, national, and international level. This is because on the higher levels of the ecosystem the democratic process (Alford, 2016; Benington, 2011; Dahl & Soss, 2014) forces the elected representatives (Rhodes & Wanna, 2007) and the public administration to have a wider perspective and shift the emphasis from individual to collective value. In the following, we describe the framework in more detail.

We argue that public value has a different emphasis among different individuals and groups in a society and a case-specific definition is formed through the democratic political process and an authorized administration. This definition is directly reflected in the public service ecosystems since the layers of a service ecosystem reside at all levels of society. The definition becomes tangible in the decision making, for example, in public procurement, and communication guided by the elected representatives. Frow et al. (2016) refer to those institutions that form the context of a service ecosystem and help to regulate the value co-creation practices. This happens through common rules of resource integration practices in the ecosystem. Our framework has five ecosystem levels – user, service organization, local or regional, national, and international.

Vargo and Lusch (2011) argue that institutions determine general rules of the service ecosystem (Williamson, 2000). Institutions also determine the structure and facilitate the coordination of value co-creation. In the same vein, the importance of institutions for value co-creation is highlighted by Edvardsson et al. (2011). Akaka et al. (2013), however, note that the institutional rules vary between service ecosystems. While S-D logic emphasizes mutual service provision and value co-creation for the benefit of the actors involved (Vargo & Lusch, 2008b), these benefits are not at always shared equally since social consensus in the marketplace is always a compromise between what the customer wants, what the company wants, and what the institutionalized reality allows (Deighton & Grayson, 1995). Institutions are always present in value co-creation and service ecosystems. In our framework, a democratic political process and an authorized public administration are the institutional basis of a public service ecosystem and service co-creation, and the primary definer of public value in any decision-making.

Both the S-D logic (Akaka et al., 2013) and PSL (Petrescu, 2019) literature distinguish and analyze different levels or layers of ecosystems, as well as their natures and interconnections. We propose that value has a different emphasis at different levels of public service ecosystem depending on the value definer’s viewpoint. In our framework, the emphasis and interpretation of public value is defined by elected representatives, which belong or are authorized by the local and regional, national, and international level. Indeed, the literature understands that public value is determined through a democratic process (Alford, 2016; Benington, 2011; Dahl & Soss, 2014; Rhodes & Wanna, 2007), which is represented by a democratically authorized public government at different levels of society. It should be noted that the definers of public value at each level naturally need to consider the value at all the other levels as well. Thus, the nature of public value at different levels are intertwined and do affect each other (cf., Vargo & Lusch, 2011). The levels of our framework resemble earlier descriptions of service ecosystem that are called micro, meso, and macro (Akaka et al., 2013) and mega (Frow et al., 2016), but it clarifies them further in the public sector context.

The term, citizen level, refers to individual citizens of a public service ecosystem who are consumers and users of public services. In the private sector ecosystems, the grass roots level is called the customer level, because the consumer/user of that service is the same (individual or organization) who makes the buying decision and pays the price. However, in the public sector, the customer/buyer is different from the end consumer (Harviainen et al., 2019). Identifying citizens as one level of a public service ecosystem is in line with the earlier ecosystem models that refer to a micro-level exchange between a service organization and the “customer” (Akaka et al., 2013, p. 9), the “focal patient” (Frow et al., 2016, p. 27), “patient” (Beirão et al., 2017, p. 235), or “primary user” (Jaakkola et al., 2019, p. 505). At the citizen level, we see that public value is emphasized as follows: Public value is the ratio between benefits and sacrifice, which is perceived and defined individually by the citizen. Collective value is present (Bozeman, 2019), but plays a minor role. Collective value can be manifested e.g., in citizens’ consumption priorities that aim at enhancing sustainability and preventing climate change (Korkala et al., 2014), now characterized as the biggest collective health threat of the 21st century (Costello et al., 2009).

The organizational level of a public ecosystem refers to resource integration within an organization that is producing public service. It may take place in public, private, or 3^rd sector organizations, as well as their partners. Such organizations do not have to be public themselves (Alford, 2016). They can also be public-private-partnerships (PPP; Cabral et al., 2019). Moreover, they do not have to be formal legal entities, and they can include informal 4^thsector collaborations. Whereas third-sector volunteering is channeled through formal groups or organizations, fourth-sector volunteering consists of informal micro-level one-to-one aid (Williams, 2002), referring to self-organizing emergent civic activity that is based on family, kinship, neighborhood, and acquaintance relations (Raisio et al., 2019).

The organizational level can also include digital platform service providers and communities (Van Alstyne et al., 2016; Wirtz et al., 2019). From a policy perspective, digital platform organizations and their service ecosystems have massive implications for governance, taxation, and geographic boundaries, both positive and negative (Basole, 2019). Identifying service organization as a distinct level of public ecosystems is supported by the description of the meso level of an ecosystem by Akaka et al. (2013, p. 10) by referring to “firms-customer dyad,” Frow et al. (2016, p. 27) referring to “hospitals” and by Beirão et al. (2017, p. 235) referring to “clinics,” and “organizations.” At the organizational level, we understand that the emphasis of public value is as follows: Public value is the ratio between benefits and sacrifice, perceived by the users of the public service organization and defined by the public service organization authorized via the democratic political process. The emphasis is on the individual value of the users of the service provided by the public organization. Still wider collective value is important as well.

The local and regional level of a public ecosystem refers to resource integration and its orchestration regionwide. It is often done or strongly influenced by the local regional government and their collaborative arrangements. Orchestrating actors typically include, but are not necessarily limited to, organizations or individuals that are responsible for policymaking and government in cities, municipalities, and regions. Collaborative arrangements can consist of collaboration between administrative bodies of different cities, municipalities, and other regions. Such collaboration may also include cross-border regional collaboration (Makkonen & Rohde, 2016). Smart specialization (Piirainen et al., 2017) and economic and environmental synergies (Golev & Corder), for example, are motives for regional-level collaboration. Including the local level in our framework is in line with Akaka et al.’s (2013) meso level that covers local markets and Trischler and Charles’s (2019, p. 30) reference to “local government service” in service ecosystems. At the local and regional levels, we see that public value is emphasized as follows. Public value is the ratio between benefits and sacrifice, which is perceived by the citizens of the region and defined by the regional government authorized through the democratic political process. Collective value of the people of the region is likely to be more important than individual value. Individual value has an important role to play, but smaller than at the organizational level.

The national level of a public ecosystem refers to resource integration and its orchestration nationwide. It is often done or strongly influenced by the national government. Orchestrating actors typically include, but are not necessarily limited to, organizations or individuals that are responsible for policymaking and government in cities, municipalities, and regions. Using national level as one the levels of our framework is line with Akaka et al.’s (2013, p. 9) ecosystem model, which includes a national context at the macro level, Frow et al.’s (2016, p. 27) “state health authorities,” Beirão et al.’s (2017, p. 235) national level, and Jaakkola et al.’s (2019) regulative and political layer. At the national level, public value has the following emphasis. Public value is the ratio between benefits and sacrifice, which is perceived by citizens of the country and defined by the national government authorized through democratic political process. The emphasis is on collective value of citizens of the country. Individual value is still considered, however. For example, due to a pandemic, the national government may decide to temporarily close night clubs (low individual value to certain individuals) to protect larger masses (high collective value to the whole population).

The international level of a public ecosystem refers to resource integration and its orchestration that take place in the collaboration between nations. This process often happens through or involves international meta-organizations (Ahrne and Brunsson, 2005), such as the EU, UN, OECD, and NATO. It also takes place via bilateral and multilateral agreements between countries. We include the international level in our framework because services and ecosystems have become increasingly global (Basole, 2019), and because most often the large scale and difficult problems, called wicked problems (Head & Alford, 2015), are impossible to solve at the national level. Examples of wicked problems are global climate change, terrorism, health care, pandemics, crime, pandemics, water resource management, trade liberalization, stem cell use, biofuel production, biodiversity, forest fire management, and animal welfare (Batie, 2008). Including the international level in our framework is supported by Akaka et al.’s (2013) ecosystem description that considers various aspects of these international and global contexts.

At the international level, we see that public value is emphasized in the following fashion. Public value is the ratio between benefits and sacrifice, which is perceived by citizens of the contracting countries and defined by their representatives authorized through a democratic political process. Contracting countries are those that are involved in international agreements through meta-organizations or other bilateral or multilateral contracts. The emphasis is on the collective value of citizens of the contracting countries. Individual value is present but plays a very small role.

The interplay between the levels of the ecosystem can be exemplified with public services required in fighting Covid-19 pandemic. Due to the scope and difficulty of the challenge, all the levels of an ecosystem and their best possible interplay is required for efficient and effective public value creation. At the citizen level, individuals are required to obey lock down and other special regulations. They are also strongly encouraged to take vaccine as soon as it is available. At the organizational level, hospitals need to change their operation and take care of a large number of new patients in special circumstances. They also must provide information to the local government about the health situation of citizens. At the local level, the regional government is required to implement the national special legislations, rules and practices at service organizations of their region, for example, in hospitals, schools, and rescue and emergency departments. This includes modifying the exiting and rapidly developing new public services, such as drive-in Covid test. The regional government is also responsible for communicating the conditions and need of service of the citizens of their region to the national government. Based on the situation picture from the lower levels, the national government enacts new laws and regulations for the crisis circumstances, disseminates information both nationally and internationally, and coordinates national-level interplay of actors at lower levels. The national government also provides extra money and other resources to the lower levels of the ecosystem. In addition, the national government participates in international collaboration to fight against the pandemic. At the international level, countries share the latest information about the virus and approaches to fight it. Also, at international level, for example, the EU countries together, negotiate jointly procurement deals with the pharmaceutical industry to ensure fair and efficient vaccine distribution to all countries. Public vaccination program can be used to exemplify the nature of our definition for public value. The decisions related to vaccination program are made through the democratic process. The representatives of citizens in the democratic process define what represents public value collectively in most optimal manner. Ultimately, the public value is perceived by each citizen. However, public value as defined by the citizens’ representatives, does not represent value for all citizens. Some people do not want to take the vaccine to themselves and may even think that nobody should be vaccinated. Despite different perceptions and opinions at the citizen level, the representatives in the democratic decision making assume that the vaccination program eventually eliminates the pandemic and thus, the vaccination service represent public value.

Discussion and contributions

The main theoretical contribution of this paper is the further conceptualization of public value in the context of public service ecosystems. The ideas of S-D logic have increasingly attracted the attention of public management researchers. However, while the S-D logic (S.L. Vargo & Lusch, 2004) is essentially based on an established value conceptualization of private sector research, the research on PSDL/PSL has recognized that the concept of public value is different and currently unclear (S. P. Osborne, 2018). This study thus contributes firstly, by conceptualizing public value at a general level, and secondly, by describing its nature at the different levels of a public service ecosystem based on the theoretical propositions and the literature review. Next, we explain these theoretical implications in more detail.

Conceptualizing public value. Our general-level conceptualization of public value proposes that public value is collective value that represents aggregation of the value perceptions of citizens who are the ultimate beneficiaries. Representatives of citizens in democratic process define public value in public decision making, but ultimately public value is perceived by individual citizens. This conceptualization advances the understanding and analyzing of public value. The earlier conceptualizations of public value in the literature have included rather incoherent and scattered characterizations and properties of value, thereby making the concept vague. Our concept contributes by clarifying it. It distinguishes between the ultimate beneficiary (citizen) and the definer of value in public decision making (representatives authorized through the democratic process). In other words, citizens perceive but representatives define. While this idea is different from the S-D logic thinking (S.L. Vargo & Lusch, 2004) of the private sector, the collective component of public value (Alford, 2016; Eriksson, 2019; Petrescu, 2019; Stoker, 2006) does require different conceptualization (Grönroos, 2019; S. P. Osborne, 2018; Stoker’s, 2006), and our conceptualization responds to this call. Our concept proposes that public value is defined through a democratic process, instead of the ultimate beneficiary (except at the citizen level in an ecosystem). Our definition suggests that democratically elected representatives and authorized administration define during their decision-making the collective benefits and sacrifices of its citizens.

This view is supported by Roy (2017) and Stoker (2006), who note that, in opposite to value creation in the private sector, public value has no bottom line, and the creation of public value should be evaluated and measured in terms of collective democratic processes. This includes the dialogue between citizens, politicians and public managers about what is needed at what cost. Our concept highlights the point that public value should not straightforwardly be understood as the simple sum of public service user satisfaction or private value but rather result from the democratic process (Alford, 2016; Eriksson, 2019; Stoker, 2006). Our concept is further supported by Stoker (2006) who argues that public value management “bases its practice in the systems of dialog and exchange that characterize networked governance” (:41), and wherein politics is understood as a mechanism to “influence the basis for cooperation by changing people’s preferences and creating an environment in which partnership is possible” rather than simply opportunistic “party politics” (:46–47).

Our definition has limitations and deserves the following criticism. The definition is based on an assumption of democratic process. The main limitations stem from the general shortcomings of a democratic process to channel and integrate the opinion of individuals in public decision making. The case-specific definition of what represents public value depends on the capacity of the democratic process to consolidate the value definitions of individuals into a single collective definition, and consider this in decision-making. Also, it does not attempt to take a stand on short- and long-term aspects of value. Moreover, both individuals as well as democratic representatives may be unaware which value definition eventually maximizes the happiness or minimizes the suffering. Moreover, our definition of public value does not take a stand on ethical and moral issues, such minority protection, equality, and integrity. It does not take a stand on opportunism of representatives either. Thus, the definition of public value given by its representatives is as good as the democratic process. However, the current definition is proposed primarily to advance thinking of value in the context of public service ecosystems, where the actors are individuals, their representatives, public and private organizations. It aims at advancing analysis and decision making in public ecosystems instead of providing answer to question, what ideal public value is or should be. In other words, our definition does not take a stand what components and qualities public value should include, it rather refers to the process through which it is defined on different levels of public ecosystem. Since the public and private sector actors collaborate in ecosystems, a definition rooted to research from both sides advances understanding of public value in ecosystems. Moreover, the use of our conceptualization is likely to be limited for those who are skeptic toward democratic decision making in general, and favor for example dictatorship, authoritarianism, or kleptocracy, or some other form of public decision making.

different emphasis at different levels of a public service ecosystem, in other words the different aspects of public value are be emphasized differently. Our definition of public value contributes to the larger stream of literature that aims at renewing the classic theories of traditional Weberian public administration as well as currently popular new public management (NPM) by emphasizing networked government. The literature of the Neo-Weberian State (Pollitt & Bouckaert, 2004), a network-based approach (Klijn & Skelcher 2007), and New Public Governance (S. Osborne, 2006) are examples of theories dealing with networked government. However, they do not offer a clear conceptualization for public value or explain its nature at different levels of society. Our framework of public value in public ecosystems advances this same stream of literature by offering a simple construct that enables analyzing and understanding how different components of value can be emphasized differently at different levels of networked government and by whom.

Our framework includes two higher-level components, namely, collective and individual value (Alford, 2016). In practice, the individual and collective components are in practice manifested with several case-specific and detailed components. In addition to individual and collective components, our definition and framework do not aim at offering a detailed set of predetermined dimensions of public value.

Our framework advances the thinking by suggesting that the emphasis of individual versus collective aspect of value is different at different levels of a public service ecosystem. While the extant literature refers to “different ratios of private and collective value in the co-creation” of public service ecosystems (Petrescu, 2019, p. 6), so far the way that the proportions are emphasized at different levels of ecosystem has not been considered in detail. Our framework contributes by proposing that the emphasis shifts from individual to collective value when moving from citizen level to organizational, local/regional, national, and international levels. This shift is based on the different roles and authorities of the definers of public value in the decision-making at different levels of the ecosystem. The decision makers at the national level need to emphasize a wider scope than those at the local level government, for example, the local government is “responsible for planning, organizing and delivering a particular type of public service to local residents in a specific geographic locality in the country” (Chew & Vinestock, 2012, p. 481).

Public value at the different levels of a public service ecosystem. Our ecosystem framework highlights the need for considering public value from several viewpoints and at different levels of the ecosystem, including both the private and the collective aspects. We argue that this enables both providers and users of public service to better understand that they should not only create private value for themselves, but also contribute to the “common good” or “public interest” (Jørgensen & Bozeman, 2007) for the society as a whole, and that true public value is more than the instrumental efficiency of production with a limited scope of beneficiaries. According to Alford (2016), public value may cover deontological aspects, such as protecting children, upholding human rights, or assisting the poor. We argue, that while such aspects may not be in the primary interest of actors at a certain level of the ecosystem, awareness of the structure of a “public values universe” (Jørgensen & Bozeman, 2007, p. 359) and the “big picture” of that ecosystem’s value constellation decreases the likelihood of having public sector problems caused by narrow-minded management, sub-optimization (Smith, 1995), maladministration (G. Caiden, 2017; G. E. Caiden, 1991) and performance paradox (Van Thiel and Leeuw, 2002).

The efficiency and effectiveness of the value co-creation of a service ecosystem thus depends on the interplay of actors within and between the levels of the ecosystem (Chandler and Vargo, 2011, Akaka et al., 2013, Frow et al. 2016). The compatibility of all value propositions is essential to achieve network synergies in resource integration (cf., Beirão et al., 2017). While the official targets may seem very similar at different levels of public service ecosystems, their implementation and prioritization can be very different. Our framework, when combined with other more detailed value classification frameworks, such as Almquist et al.’s (2016) value pyramid, can aid understanding and revealing the case-specific nature of public value at different levels of the public service ecosystems.

While public value is different in different parts of the public ecosystem, our framework advances greater understanding and strong analysis of the complexity of public value both more systematically and holistically. It can also help turning a problem into an opportunity. As noted by Hardyman et al. (2015, p. 101), “variation in perspectives on ‘value’ is not necessarily a negative phenomenon, for multi-stakeholder value propositions are also seen as having a key role in the full co-creation of value ‘between stakeholders.’”

Conclusions

This article conceptualizes public value and develops a conceptual framework for understanding the nature of public value at different levels of public service ecosystems. The earlier literature widely highlights the need for new knowledge of this issue and our article responded to this need. Our general conceptualization of public value includes the ratio between perceived benefit and the sacrifice of citizens as well as defining the value in decision making through a democratic process. Our framework for public value in public service ecosystems includes both individual and collective components and indicates that their emphasis varies.

We suggest the following new avenues for further research. First, the emphasis on the individual and collective component of public value should be examined quantitatively in actual public service ecosystems. Secondly, public value propositions at different levels of service ecosystems should be examined in more detail. Third, combining public and private value co-creation within PPPs deserves more research. Fourth, the theory of wicked problems could be exploited to examine the approaches used for large-scale collective value co-creation in public ecosystems. Fifth, digital platforms and service ecosystems based on a platform economy (Van Alstyne et al., 2016; Wirtz et al., 2019) need additional knowledge on the public sector.

Disclosure statement

No potential conflict of interest was reported by the author(s).