Research note. How to Become an Independent Agency

Eva Ruffing (2014) How to Become an Independent Agency: The Creation of the German Federal Network Agency, German Politics, 23:1-2, 43-58.

Research note by Eva Ruffing

Independent regulatory agencies seem to be almost ubiquitous nowadays and many quantitative studies demonstrate that they result from processes of diffusion, driven either by isomorphic or functional pressure. The creation of the German Federal Network Agency (FNA) is a particular interesting case in point as Germany was a laggard with regard to the establishment of an independent energy regulator and in 2005 the only European Union member state without energy regulator. Nevertheless, the creation of an independent energy regulator in Germany remains an empirical puzzle for two reasons. First, it is surprising that an energy regulator was established at all given the fact that this establishment was long opposed by parties across the whole political spectrum. Second, the FNA maintains an exceptional position in the German agency landscape, for it has a far-reaching independence from political influence and is often referred to as one of the few German cases of agencification. My article explores whether this puzzle can be plausibly solved by the approach of institutional isomorphism, testing it against the concurring functionalist approach. If we can witness processes of diffusion in quantitative studies on a macro-level, we should also be able to identify the mechanisms inducing these processes in single cases.

For the conceptualization of institutional isomorphism I followed the differentiation between the three mechanisms developed by DiMaggio and Powell: (1) Coercive isomorphism refers to the formal and informal pressures that an organisation faces to adapt to models of other organisations because it is either dependent on these organisations and has to create a structural fit with them or faces cultural expectations to do so. (2) Mimetic isomorphism results from uncertainty. If policy-makers are unsure about the causes of their problems or of the effects of available alternative solutions, they mimic other decision-makers and the solutions they chose. (3) The third form of isomorphism involves normative pressure from professionalisation. In this mechanism of institutional isomorphic change, the common education and socialisation of large groups of administrative personnel might lead to shared normative beliefs and cognitive bases. In particular the first and the second mechanism seem to be highly plausible explanations for the creation of the FNA.

Just how can these mechanisms of isomorphism be operationalised for the analysis of concrete decision-making processes? If the organisational design of the FNA mirrors prominent solutions in other sectors and if this choice is substantiated with reference to the fact that ‘we do so because others do so as well’, the assumption of mimetic isomorphism is confirmed. In contrast, if the empirical results of the analysis mirror a solution, accurately fitting the functional needs of the electricity sector, and if the choice for this solution is substantiated by these functional needs, it seems unlikely (although not impossible) that the organisational design was chosen in a process of mimetic isomorphism. The reasons given for a decision thereby provide the most valuable clue as to whether or not mimetic isomorphism is underway. The operationalisation of coercive isomorphism is much more complicated. Formal pressure explicitly includes binding laws, or mandates. However, such formal pressures do not allow for the formulation of operationalisable expectations that deviate from purely rational approaches. To operationalise coercive isomorphism with respect to informal pressure, such pressure must first be identified. Second, the reaction of political actors to this pressure must be analysed. If these actors respond to this pressure and if their decision to do so is substantiated by reference to the pressure, then the assumption of coercive isomorphism is confirmed. Such substantiations could for example refer to the necessity to create an organisational fit.

The concurrent functionalist hypothesis is operationalised in a similar way: If actor chose establish a certain kind of organization because became convinced of its functional superiority, what is researched analysing the reasons they gave for their decision, then the hypothesis is corroborated. From a functionalist perspective, organisational change can only be induced by learning in a rational way, i.e. updating one’s beliefs in light of new information.

My empirical analysis demonstrated, the exceptional position of the Federal Network Agency in the German agency landscape can be explained by institutional isomorphism. The creation of an independent regulatory agency for the energy sector seems to be appropriate in the context of the European Union and fits very well with the explanation of coercive and mimetic isomorphism. On the one hand, the German government and legislators were under great pressure to create an independent regulator to exert influence on the regulatory networks at the European level, as the Federal Ministry of Economice got not access to the European network of regulatory agencies. On the other hand, the German legislators faced a high degree of uncertainty concerning the institutional design of the regulatory agency. This problem was solved by following the guiding model of an independent regulator and copying the institutional design of an existing regulatory agency in Germany, although the requirements of energy regulation differed substantially from the requirements of other network industries. This fact is also mirrored by the fact that almost all other EU member states decided to establish separate regulators for the different network sectors.



Dr Eva Ruffing is a senior researcher at the University of Hannover, Department of Political Science. Her research focuses on the effects Europeanisation has on national administrative systems and the role of agencies in multi-level policy-making.

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