Do organizational forms matter? Innovation and liberalization in the German wastewater sector

In the German wastewater sector, innovations are often regarded to be the key to better service provision. Our focus is on the question of whether less direct control by the authorities does improve the innovativeness of providers of wastewater services. On the basis of data from a survey among German service providers a structural model explaining firms’ innovativeness is estimated. Estimation results suggest that firm size improves in novativeness; however, the organizational arrangement, i.e. the legal dependency on municipalities does not. We conclude that reforms directed towards increased legal autonomy have only limited effects on innovations if not accompanied by market liberalization.