The literature on governing public sector agencies mirrors the private corporation literature in many ways, with the roles of shareholders and managers replaced by citizens and public officials. Like the literature on corporations, these studies also focus on governance as a set of relationships, goal-setting processes, and incentive structures. However, public sector agencies face a number of additional issues because they respond to a larger number of interest groups. When an organization answers to multiple groups, the ability of any one group to achieve its goals is diluted and the resulting organizational performance is influenced by contesting principals (see, for example, Spiller 1990 and Spiller & Urbiztondo 1994). The existence of multiple principals can create space for the organization to pursue goals that are beneficial to its own staff, promoting their vested interests, rather than the agency‟s public purpose. The agency is also vulnerable to capture by particular groups who have a strong interest in the agency‟s actions when other groups are less strongly affected and, therefore, less likely to organize and pursue their interests (Olsen 1971).

A recent study in this literature defines public governance as, “The ways in which stakeholders interact with each other in order to influence the outcomes of public policies.” (Bovaird and Löffler 2003).This definition emphasizes two key aspects of the public sector governance literature: that governance involves the interaction of multiple stakeholders and that its relevance depends on how it influences outcomes.

A third literature focusing on governance concerns international development. The World Bank has played a central role in developing an entire research agenda around the question of how governance affects a country‟s ability to grow and benefit its citizens. Studies in the late 1990s were concerned with poor performance of many countries receiving aid and found the explanation might lie in the quality of how the recipient countries were governed. Over the last decade numerous studies have looked at governance indicators – ranging from perceptions of corruption to the strength of property protections – to see if they influence economic and social outcomes.

A notable aspect of this literature has been the effort to systematically measure governance at the country level. In the early 1990s, few measures were available, but today, a number of organizations – including the World Bank, the World Economic Forum, Transparency International and Freedom House – publish and update such indicators regularly. In this work, the World Bank defines governance as: ...the traditions and institutions by which authority in a country is exercised, This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.<sup>2</sup> This definition is utilized in the Governance Matters series (which now includes annual data on countries from 1996 through 2006, see Kaufmann, Kraay and Mastruzzi, 2007) and it draws attention to the difficulty of measuring governance. How can we measure “processes,” “capacities” and “respect?” Kaufmann and Kraay (2008) describe the effort

> 2 Kaufmann, Kraay and Zoido-Lobatón (1999) appears to be the first statement of this definition.

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