Public service innovation to fight corruption: metrics and policy in Mexico 2019–2022

Abstract

The purpose is to identify and analyze some innovations in public services, PSI, between 2019 and 2022 to evaluate their attempts to deter corruption in a context where the current government’s Mexican public sector has been improving its capacity to fight corruption as the most critical problem. The research is designed to describe 12 PSI selected from the national level. Their innovativeness is measured through an INDICO index adapted from technology firms, which mainly has added a perception of its public value besides their use value. Corruption is measured based on the neo-institutional approach on three axes: public–private relations, its organization, and the agents’ behavior. The question is to measure the impact of the innovations in deterring corruption, which is estimated by the difference in magnitude between the current and the previous one.

The findings are:

• 1. The neo-institutional theory highlights corruption-related aspects rooted in public–private relations, however, complemented with social and management approaches.

• 2. The INDICO index measures, based on a pre-established 10-point quantitative maximum scale distributed between components on capacity -knowledge of the service, training, design, peer evaluation through external links- and on innovation results in public services—its legitimization through public value, and its possible replication (diffusion), which an expert in the field of innovation qualitatively evaluates.

• 3. The impact of the selected Public Service Innovations shows that there is a positive effect in reducing the level of corruption. The more systemic or institutionalized corruption is, the more difficult it is to develop effective strategies proving their long-term value.

The PSIs have been managed by the government’s leadership founded on legitimate authority, secured from the victory in the 2018 elections in Mexico, enabling it to put forward its top-to-bottom anti-corruption program. A more extended period, a group of experts, and more cases are desirable to assess PSI sustainability. However, the methodology could be extended to other contexts for policymakers or practitioners in public services and corruption.

Introduction

The Mexican government inaugurated in December 2018 introduced discontinuities in the goals and operation of Mexico’s public administration that can be classified as public service innovations (PSI). This context of change called the 4th transformation,¹ offers an exceptional opportunity to observe and analyze public policy innovations that are now being introduced. From the academic point of view, this context could be regarded as a public service laboratory because the government is designing and implementing its public policy innovations in many areas and is therefore challenging theoretical and methodological precepts that were the result of economic, administrative, social, and political studies of innovations in public services.

However, the problem that the government has paid the most attention to is corruption. Consequently, it is noteworthy that a large part of the transformations is focused on addressing this problem.

Corruption

In Transparency International’s Perception of corruption index, Mexico ranked 126th out of 180 countries with a score of 31 in 2022 (Transparency International 2022). Its lower score of 28 in 2018 could be attributed to Mexico’s General Law of the National Anticorruption System (NACS), which came into force on 18 July 2016 and paved the way for a constitutional amendment to tackle a problem that has plagued the country for far too long. The impact of corruption costs Mexico 5% of its GDP per year (OECD, 2017).

“Corruption is generally defined as the abuse of public power for private gain” and is seen in various types of corruption. Corruption is detrimental to the general welfare in several ways. It harms society by reducing human capital, heightening inequality, and lowering interpersonal trust. In the public sphere, it reduces investment, creates fiscal instability, drains public resources, and exacerbates government illegitimacy (Rose-Ackerman & Truex, 2016, p. 59).

Corruption is a social order where exchange rules are based on arbitrary exclusionary and favoritism relationships, instead of basing them on impersonal and impartial modes of authority. Such an order can manifest itself in different levels from individual or collective, and even institutionalized social behaviors, based on actions that disregard ethical principles and integrity (Sandoval Ballesteros, 2016; Stiglitz, 2012; Teorell, Seim, & McMann, 2020).

There are two leading economic theories used to analyze corruption. The first is a microeconomic theory “emphasizing a cost–benefit calculus that structures individual choices and decision-making processes”. The second theory is “neo-institutionalism, focusing on both the mechanisms that regulate interactions in corrupt exchange networks and the role played by formal and informal institutions to shape the social actor’s expectations and beliefs” (Vanucci, 2015). There is a third social theory “emphasizing how political culture affects individuals’ moral preferences and normative constraints, which are shaped and transmitted within a particular political culture” (Vannucci & Rios-Petrarca, 2020, p. 316).

Corruption is conceptualized with three axes: The Public–Private Partnerships (P-p P), which is analyzed under the neo-institutionalism theory since it involves rules, which generate costs arising from economic transactions as well as compliance costs. In Mexico, the law governing Public–Private Partnerships was passed in 2012 by a neoliberal regime to legalize the “gradual process of weakening the State” to advance business interests. However, these same interests are also represented inside the government, which defeats the benefits or advantages of public value and instead favors private interests or groups, whether nationals or foreigners, to the detriment of the general welfare (Witker, 2015). Those partnerships combine the worst of the “public” and “private” spheres because they are neither privatizations in the strict sense, in which the business community assumes risks and responsibilities, nor are they traditional public structures since they do not have any accountability mechanisms (Sandoval-Ballesteros, 2015).

Another aspect under study is the organization of corruption, which involves collaboration to infringe regulations. The organization of corruption is part of a relationship between government centralization and the distribution of rents (Bussell, 2013). Then the PSI has its own organization, but the organization of corruption influences it.

Moreover, the third axis is the behavioral perspective of social construction and internalization of social norms and the ethical values that underpin the actions of social agents that could help us understand corrupt behavior, which involves quantitative as well as qualitative issues of inter- or multi-disciplinary economic analysis (Muramatsu & Bianchi, 2021).

Public service innovation (PSI)

Public Service Innovation, PSI, focusing mainly on social welfare, is defined as the creation and implementation of new processes, products, services, and delivery methods, or their discontinuity, that involves the participation of organizations, suppliers, and clients (Moore, Sparrow, & Spelman, 1997; Mulgan & Albury, 2003; Osborne & Brown, 2005; Bason, 2005; Osborne & Brown, 2013; Mazzucato, 2014).

PSI was conceptualized as part of an evolutionary process from a firm’s technological vision, including service innovation. Then, recently, it expanded further and began to be applied to the government. Along this path, major public sector reform movements like New Public Management (NPM) and e-government emerged (de Vries et al., 2015) as potential sources of innovations. This movement tried to overlap with the Traditional Public Administration (TPA), which features bureaucratic behavior, hierarchical coordination modes, and formal political control of processes. By contrast, NPM introduces market logic, competition, and new management styles in public administration in which citizens are approached more as customers. A further step was taken by New Public Governance (NPG), which refers to horizontal and networked governance structures and public–private relationships in collaborative innovation (Desmarchelier et al., 2019). 

The evolution of theoretical perspectives in studies of service innovation began with assimilation, demarcation, inversion, and integration/synthesis; each stage “throws light on particular issues confronting public service innovation, and … in this sphere is highly diverse” (Djellal et al., 2013). This diversity is constellated by “Public–Private innovation Partnerships” and “collaboration with civil society” themes; the private (profit, non-profit) approach by “social entrepreneurship”; and themes relating to “co-creation, co-production processes”, in which innovation happens at all levels and through all actors (Merlin-Brogniart et al., 2022, p. 9 Table 2). In big innovation projects, “the private sector finds the courage to invest only after an entrepreneurial state has already made the high-risk investments” (Mazzucato, 2014, 2017).

Three ideas are proposed for innovation in public management at the individual and organizational levels (Moussa et al., 2018): (1) leadership behaviors that have a positive effect on innovation; (2) an organizational climate and organizational culture that positively impact innovation; and (3) barriers (e.g., poor communication, lack of resources, workplace politics) that have a negative influence on innovation.

Focusing on Mexico, the two lines of research have been combined: public service innovation and the characterization of corruption.²

Methodology

What is the impact of Mexico’s PSIs on deterring or diminishing corruption?

To answer this question, some types of corruption are proposed, which can be scaled in the following section.

Corruption typology

Corruption is first classified based on two axes that define its domain. The first axis is public–private relationships and their degree of corruption, depending on how clear or blurry (fuzzy) they are. The second axis is the degree of the agents’ organization to perpetrate corruption and whether participation is individual or collective (Fig. 1).

Fig. 1

Types of corruption in two out of three axes

From two axes, black and blue, four types of corruption can be described as follows (Fig. 1):

• 1. Casual: Corruption occurs in isolated cases. However, formal and informal rules (cultural and social norms) operate so that they punish acts of corruption. As a result, casual corruption only occurs casuistically or opportunistically.³

• 2. Organized corruption occurs when agreements are reached between companies or individuals to engage in corrupt practices, but the public sector does not take part and continues to penalize them. If there is collective participation, the cultural norms partially approve of corruption. This type of corruption involves illegal associations and embezzlement.

• 3. Corruption agreements: Such agreements blur the line between public and private relationships to favor a private entity by granting advantageous conditions with some gain to the civil servant involved but to the detriment of the collective welfare. While it remains at an individual level (e.g., agreements between a civil servant and a firm’s executive), the rules are general to do not validate this behavior. Therefore, this behavior is divided into extortion⁴ and public-office corruption.⁵

• 4. Institutionalized or systemic corruption is an extreme and broad example of corruption in which the rules allow its replication as legal or simulating legal behavior. Laws are passed to favor people and constitute social or collective behavior. A formal differentiation is made between public and private relations, but their purposes are interwoven with systemically corrupt practices. In this context, private agents can choose what roles to play and how they play them.⁶ This type of corruption includes the two levels of white-collar crime and institutional (rules) agreements.

Second, the behavioral axis, which captures the degree to which the agent’s decisions deviate from or adhere to the rules, is added. This axis is then divided into two levels: normal or standard, and abusive.

To sum up, these three axes, based on independent variables, allow an upright picture of corruption: (1) public–private relationships that move from one stage of formality and real differentiation to another stage in which the relationship is still formal but, in reality, tends to be fuzzy or is ignored; (2) the agent’s association or organization, ranging from individual to collective; and (3) the agent’s behavior and how it relates to standard or abusive corruption within the rules.

As has been proposed, there are two sub-levels per axis, which makes a potential set of 8 (2³) corruption types in all.

Third, to refine, a further breakdown is introduced to divide each corruption sub-level into three corruption scales, resulting in 6 scales per axis. Consequently, there are potentially 216 (6³) corruption classifications (see Table 3).

INDICO index

An INDICO (innovation, diffusion, co-value) index is applied⁷ to measure the innovativeness of each selected public innovation. This PSI Index considers a metric of 7 related innovation parameters relating to capacities and results. The PSI Innovativeness is calculated on the distribution of a maximum of 10 points (distributed between 5 to Capacity and 5 to Results), as follows (Table 1):

Table 1 PSI innovativeness—INDICO index components: maximum values*

Hypotheses

Based on this methodology, the following hypotheses are formulated:

• H1: The higher the degree of innovation, measured by the INDICO index, the better the expected results in reducing corruption (See Result 3.3.1).

• H2: When corruption operates at the systemic or highest institutionalized level, more complex prescriptions must be applied longer to deter corruption significantly (Result 3.3.2).

Systemic or institutionalized corruption depends on the deeply embedded level, making eradicating it more difficult. However, it could also be a more complex issue, such as corruption linked to other national and international phenomena. For example, insecurity in Mexico is related to drug and liberal arms trafficking, and migration, which even could increase or diversify with some isolated or partial prescript innovations.

Results

The main objective is to develop a methodology to connect public intervention’s innovativeness to deter corruption. Therefore, the selected 12 Mexico PSI and their place in the public goals are described first.

Second, the INDICO index is applied to evaluate PSI innovativeness. The PSI corruption measure is done by assigning a scale on each of the three axes and then calculating the hypotenuse value. The difference between the corruption values before and after the PSI gives the gaining in corruption for each PSI.

Third, a statistical regression shows the impact of the PSI INDICO on the anti-corruption gain. Therefore, given the result of the hypothesis.

PSI cases

The 12 innovations’ identification, analysis, and documentation describe their impacts, risks, and sustainability in Mexico 2019–2022 (Table 2).

Table 2 List of the 12 public service innovations

The source for innovation derives from the implementation of PSI in a way that contrasts with how services were provided in the past, i.e., during the “neoliberal” economic model, which ran from the 1982 crisis until at least 2018, to achieve “a minimal state” with less intervention, to grease the wheels of market forces.⁸

Certain cases of PSI are documented with a focus on the following issues: diagnostic problems, solutions and the involved agents, impacts (on the public and users), and co-value (intrinsic/extrinsic).

Considering that the scope of innovations is part of the government’s broader main goals, they are grouped into: well-being, reducing unequal distribution, justice, democracy, honesty (absence of corruption), and sovereignty (Table 4).

PSI innovativeness

To measure the innovativeness of the PSIs, the INDICO index is applied to each Mexico case, evaluating its impact on corruption before and after the PSI. The difference between them is the anti-corruption gain (see Table 3). This analysis considers the co-value incorporated by different users of the public innovation during the understanding and improvement of its operation.

Table 3 Corruption level in three axes: before and after the PSI

PSI impact on corruption

To sum up, the following questions and answers related to the hypothesis can present the results.

What is the impact of innovations on the fight against corruption?

Public and user values will be assigned to each PSI case to evaluate their impact on reducing or increasing corruption.

The innovativeness values (INDICO index) of the 12 PSI cases ranged from a minimum of 2.74 to a maximum of 5.79, while the gain in anti-corruption ranged from 1.72 to 6.65 points (see Table 4).

Table 4 Impact of PSI on corruption

Consequently, the regression analysis proves that public service innovations have a neutral, instead of a positive, effect in diminishing corruption (H1).

A positive impact of innovation on anti-corruption gain is obtained with a quadratic function, but with a low level of explanation:

Y = − 3.40 + 3.28 X − 0.34 X²; R² = 0.22

t Stat (− 0.70) (1.58) (− 1.60)

P value (0.50) (0.15) (0.14)

Hence, two other variables have been added to the regression analysis: The institutionalized embeddedness of corruption (X1) and the public and social support for the PSI (X2) (Table 3) (Figs 2, 3).

Fig. 2

12 ISP, impact on anti-corruption gain

Fig. 3

Impact of INDICO, Institutional corruption, social support

Y = − 1.45 + 0.61 X + 0.43 X1 + 1.04 X2, R² = 0.64

t Stat (− 0.76) (2.28) (3.77) (0.59)

P-value (0.47) (0.05) (0.005) (0.57)

So, we can conclude that Social Support (X2) and public awareness of systemic corruption (X1) are needed in addition to the PSI (X). The marginal impacts on the anti-corruption gains (Y) are 1.04 for systemic corruption, 0.61 for the PSI, and 0.43 for social support. Accordingly, with the t Stat, the social support (X1) can better explain the anti-corruption gain; then is innovation (X), and finally, the level of institutionalization of corruption (X2). Therefore, considering that this is an important variable, and since there are only 9 degrees of freedom, its statistical test with a higher PSI number is pending.

How does the PSI’s initial application affect the level of corruption?

When the level of corruption is higher at the beginning of the PSI application, it is expected that more complex solutions will be needed, and the impact on corruption will be uncertain (H2).

Therefore, we will examine below the three PSI cases with the highest level of corruption in the three axes (P-P corruption, Organization, and Behavior) at the beginning of the PSI application. The maximum corruption is 18 points, as each axis has a maximum of 6 points (see Table 3).

• 8. Fuel theft or “Huachicoleo”⁹

It had a maximum corruption level (Fig 1), a score of 18 points. The anti-corruption gain is 6.65 points, the highest of all the 12 PSIs (see Table 3).

The innovation consisted of the deployment, at the same time, of a large contingent of soldiers and civil guards to watch over oil pipelines and cut off oil supply, thereby drastically diminishing the exposition of oil to crime. This action had nationwide and significant negative impacts on the oil supply to consumers. Military surveillance was coupled with gasoline transported by trucks to service stations. Although the end users were not consulted, they did accept the temporary but harsh collateral effects of gasoline shortages. Until 2022 fuel and gasoline theft was stable at around 3–4% of the initial losses, as few criminal groups continued to operate.

• 7. Internationally consolidated drug purchases

The score at the beginning of the PSI intervention is 16 points. The anti-corruption gain was 4.69 points (see Table 3).

To eradicate institutional corruption, a strategy was devised to move from a corrupt national delivery system to an international call for tenders from pharmaceutical firms selected by the United Nations Office for Project Services (UNOPS). This change did away with entrenched corrupt practices in which 10 big commercial companies held 80% of the market. However, there were some shortages of medicines, which led to social protests for the scarcity of childhood cancer drugs.

• 11. Power transmission tariffs; and 9. Renegotiation of energy contracts with Pemex and the Federal Electricity Commission (CFE).

Both cases had 15 corruption points before the PSIs, and the anti-corruption gain is 4.54 points (Table 3).

Since 1992, Mexico has allowed large companies to generate their energy supply. On the supposed target of producing energy at a lower cost than that supplied by the CFE, to compete on the world market and under the rules of the 1994 Free Trade Agreement (FTA). In 2010, these companies with their private power supply were also granted a preferential or lower cost rate for the so-called “green carrying”. Mexico’s 2013 electricity reform expanded the scheme so that those who generate their electricity supply could be registered or be migrated to the group of “qualified users”. The CFE has been transferring resources via low transmission tariffs and allowing other large business chains without direct power generation to receive a share of those subsidies if they are associated as users of the energy-generating companies.

The PSI proposed a 2022 electricity reform bill that failed to pass by Congress (because it did not garner an absolute majority in Congress, two-thirds of total votes). Then, the Mexican government is renegotiating case-by-case the CFE supply contracts receiving subsidies.

As a result, given a high level of initial corruption, mainly institutional corruption, another variable to deter corruption is to have broad public support from users and other agents, depending on how embedded the corruption is in the institutions and society.¹⁰ Also, the PSI would expected to substantially diminish the transaction costs (Disch et al., 2009, p. 55).

Discussion

The findings of this article can be presented as follows:

• 1) The neo-institutional theory sheds light on aspects of embedded corruption in public–private relationships, whether formal or informal. Its main concern could be that systemic corruption increases transaction costs. However, the societal and administration perspectives are necessary to gain an effective diminishing of corruption.

• 2) Metrics: An Indico index adapted from technology firms to PSIs was used to measure their innovativeness. For the level of corruption, three axes (P-P partnerships; corruption organization; and corrupt behavior) were evaluated, dividing each axis into a higher and lower-case corruption. Each case is further deployed on three levels generating 216 possible values.

• 3) Context: Mexico’s present government (2018–2024) has established an anti-corruption program containing a myriad of PSIs, from which 12 have been selected from 2019 to 2022.

  PSI selected are implemented from top-to-bottom to tackle the institutionalized corruption in the public and private sectors. However, this approach could be complemented with bottom-to-top innovations, fostering an intrapreneur environment. “Intrapreneurship is a process whereby employee(s) recognizes and exploit opportunities by being innovative, proactive and by taking risks” (Neessen et al., 2019), located in public organizations to generate public value and get better service performance.

• 4) Results: The impact of the PSIs in deterring corruption has been estimated. However, regression needs other variables to obtain anti-corruption gains: the degree of institutionalization and social support of the PSI. Also, a larger number of PSI will perform better statistical results.

Conclusions

Mexico’s government, since 2019, has assigned the highest priority to fighting corruption. Its strategies are based on universal values of sovereignty, honesty, equality, democracy, and well-being.¹¹

A methodology is developed and applied to measure the PSI’s innovation and its impact on reducing corruption during the government of Mexico 2019–2024. This methodology could be applied in other contexts but considering its characteristics. For example, an important aspect not sufficiently explicit in this article is the leadership of the Mexico group in power to build and apply anti-corruption strategies.

The innovativeness of the 12 PSI from the statistical point of view has no impact on diminishing corruption (hypothesis 1); therefore, the innovativeness is complemented by the degree of corruption institutionalization and by adding specific social support. Then innovativeness, institutionalized corruption, and social support positively impact the anti-corruption gains.

The more prevalent systemic or institutionalized corruption, the higher the cost of time and resources needed to reduce it. Social support from users is necessary since the institutional and cultural apparatus supporting corruption must be transformed.

Developing effective strategies to demonstrate their worth over the long run is more difficult. Such is the case of the PSIs, Fuel theft, Enhancing drug public purchasing internationally, and Power transmission tariffs, which before the PSIs had the highest corruption index (Table 3).

Therefore, the validation of the hypothesis implies that: (1) the type and complexity of PSIs to fight institutionalized corruption require coordination with the relevant agencies, along with systemic strategies; (2) PSI innovativeness must be greater to deter institutional corruption and (3) the sustainability of the anti-corruption gains could be tested in the long run using a follow-up of the institutional changes and disrupted innovations.

Even if corruption occurs at the individual level, its reduction (or elimination) would require greater scale costs because preventing and controlling isolated cases is expensive (Graf Lambsdorff, 2015).

One important and positive aspect of the government’s anti-corruption strategy is that public corruption savings fund social programs and big infrastructure projects.¹²

The overlooked corrupt public–private partnerships to separate the economic interests from the public values will require regulations of standards and specific rules to obtain corruption-free impacts. This challenge requires permanent public and social monitoring to separate economic interests from political goals. This opens new lines of research in which public service innovations, PSI, described in the framework of the evolutionary economic theory, is accompanied by institutionalist theory, mainly rules and incentives to prevent and punish, and the evaluation of transaction costs of corruption, as well as the management, particularly on the role PSI leadership, and the analysis of the social approach of corruption.