Public finance as a lever for strengthening the entrepreneurial capabilities of local governments: a conceptual and theoretical analysis

Abstract

This article develops a conceptual and theoretical analysis of the links between three fields that the literature still treats separately: public financial governance, the organisational resilience of local governments, and their entrepreneurial capabilities. To date, no study has articulated these three constructs within a single framework; the article addresses this gap by laying the foundations of an integrated analytical model, grounded in a critical and interdisciplinary review spanning management science, public economics, and entrepreneurship. Following a theory-synthesis approach, it formulates three propositions. The first establishes that it is the quality of budgetary steering, rather than the abundance of resources, that drives the development of entrepreneurial capabilities. The second conceives of these capabilities as a multidimensional construct with four components: institutional, financial, organisational, and relational. The third posits organisational resilience as the mediating variable in the relationship between budgetary governance and entrepreneurial capabilities : public financial governance (PFG) would strengthen organisational resilience (OR), which would in turn foster the development of entrepreneurial capabilities (EC). Tested against the paradox of budgetary surpluses among Moroccan local governments, the framework shows that the accumulation of resources does not mechanically translate into an effective capacity for action. Analytically, the implications of this work call for a reconsideration of local public governance from an entrepreneurial perspective, drawing on the combined contributions of New Public Management and the resource-based view and dynamic capabilities.

JEL Classification: H70; L26; M10; O18

Paper type: Theoretical Research