Bureaucracy and Organizational Performance: Causality Arguments about Public Schools

and the anonymous reviewers for helpful comments on earlier drafts. Abstract One key policy dispute in the school choice debate concerns whether the education bureaucracy is a cause or a consequence of poor performance. This dispute is striking because both sides accept the same neo-institutionalist organization theory. This paper uses a large panel of school districts to address the dispute. The evidence suggests that poor performance results in a growing bureaucracy not vice versa. Further evidence then shows that the growth in bureaucracy is associated in an increase in teachers and smaller class sizes; in short, bureaucracy increases as schools take actions that are linked to improved performance. Few contemporary public policies are as controversial as school choice. School privatization advocates argue that market-based school systems can educate students better than public schools. example, contend that the institutional features of the public school system-particularly its bureaucratic structure and democratic governance-make it an ineffective organization that depresses student performance. Their remedy is to convert schools into more market-based institutions with less bureaucracy and less democratic control (Chubb and Moe 1988; 1990). Opponents of school choice contend the proponents' arguments lack empirical support, fail to consider the multiple goals of public education, and support policies that generate more costs than benefits Lost in the public debate is the realization that some points of dispute are important theoretical questions in their own right. Both Chubb and Moe (1990) and their harshest and somewhat intemperate critics (Smith and Meier 1994) use neo-institutional arguments derived from organization theory. Some issues at dispute, as a result, are relevant not only to public policy debates but are also testable propositions that promise theoretical insight into how institutions respond to and influence their environments (Thompson 1967; March and Olsen 1989). This research examines one small, but crucial, empirical question in the school choice debate-what is the relationship between levels of bureaucracy and organizational performance? Chubb and Moe (1990) contend that bureaucracy leads to poor performance on the part of public schools. Smith and Meier (1994), in contrast, argue that bureaucracy is an adaptation to poor performance, that when organizations recognize their failures, they often take actions that, at least in the short run, generate more bureaucracy. Our research strategy addresses the link between bureaucracy and 2 performance in five steps. First, we outline the institutional theory of Chubb and Moe (1990) as it relates to bureaucracy. Second, using …