Unleashing Cities’ Dynamic Capabilities
By Fernando Monge, Ruth Puttick, and Rainer Kattel
Why do some cities seem to tackle complex challenges more effectively than others? Is Helsinki really able to address housing issues more nimbly than Sydney? If so, why? Or why does Cape Town excel in crisis response but not in addressing persistent problems like informal settlements? Our recently published research suggests that — at least in part — the answer lies not just in the cities themselves but in the broader environment in which they operate.
Urban governments are facing mounting pressure these days. Complex challenges from climate change to affordable housing demand new approaches, and cities are turning to everything from data-informed governance, govtech labs, and design practices, to overarching mission-oriented strategies in response. But underneath these visible initiatives lies something more fundamental: dynamic capabilities. These capabilities allow cities to sense opportunities and threats, connect policy with delivery, and develop new approaches to tackle complex challenges.
The catch? These capabilities don’t develop in isolation — they’re profoundly shaped by the national context in which they operate. Specifically, the degree of autonomy and the level of alignment that these cities can draw from. In other words, dynamic capabilities — and their evolution — look dramatically different depending on where in the world you are.
The Missing Piece: Directionality and Alignment
When working with cities across different countries, we noticed something striking — the same capability-building approaches that worked beautifully in one country often fell flat in another. Why?
From July to September 2024, we conducted 58 semi-structured interviews in five countries. We supplemented these interviews with analysis of policy reports and expert assessment from country lead researchers who provided contextual characterizations for each nation.
Based on this fieldwork, we found three critical dimensions of national context that make all the difference:
- Convergence — Is there agreement about which societal goals matter most?
- Autonomy — Can city governments make independent decisions and access resources?
- Administrative tradition — Does the public administration paradigm enable or hinder addressing complex challenges?
We also sought to map the five countries across these dimensions, coming up with four distinct contexts within which cities operate.
DISCLAIMER: Our research into these five countries is exploratory in nature. We don’t pretend to make definitive claims about any of these nations or their city governments. The portraits painted below are meant as illustrations — windows into how context might shape capabilities rather than comprehensive assessments.
OK, now that this caveat is off our chest, we can show the results:
Finland: The Strategic Autonomy Sweet Spot
Finnish city governments like Helsinki, Turku and Espoo showcase what’s possible in the right context. With broad agreement on societal goals and high autonomy for local officials, these cities have developed impressive capabilities across the board. Civil servants can be entrepreneurial while bringing diverse actors together. One official told us how they have the mandate to think about the future and test new approaches, not just implement what’s decided from above.
Australia: The Aligned Dependence Challenge
Australian city governments face a different reality. While there’s good alignment around challenges like housing affordability, local governments have limited powers compared to state and federal levels. Sydney and Melbourne excel at strategic thinking and building coalitions but struggle with adapting and transforming capabilities. As one Sydney official put it, city governments often have strategies but limited levers to pull — so they are constantly working through partnerships because they lack direct authority.
Brazil: A Tale of Varying Models
Brazil presents fascinating contrasts. City governments have structural autonomy on paper, but political instability creates practical limitations. Political appointees can drive change quickly while career civil servants face bureaucratic constraints. In São Paulo, officials drove collaborative policy development incorporating teachers, nutritionists, and parents — but this capability varied dramatically across policy areas.
South Africa: Opportunistic Autonomy in Action
South African city governments show remarkable adaptation to their context. With constitutional autonomy but high political instability, officials become adept at seizing opportunities where they arise. For example, Cape Town has often demonstrated stronger capabilities in addressing external shocks than solving entrenched problems like informal settlements.
India: Navigating Erratic Dependence
Indian city governments typically operate with the most constraints. Civil servants face limited autonomy and frequent transfers between roles, making consistent capability development difficult. Despite this, cities are increasingly mobilizing resources from civil society and the private sector. One official shared how they must work around the system to get things done, building coalitions outside government when internal structures won’t bend.
Again, these examples serve primarily to bring our framework to life and suggest promising directions for deeper investigation. The real value lies not in country-specific conclusions but in recognizing how profoundly context — as shaped by the bureaucratic paradigm, the autonomy and directionality — shapes the development and expression of dynamic capabilities across different city governments.
Why This Matters — Swimming in Varied Waters
Understanding these contextual differences has real-world implications:
If you’re working with multiple city governments across different countries, recognize that what works in Finland likely won’t work in India without significant adaptation. One-size-fits-all approaches to building dynamic capabilities are doomed to disappoint. If you’re a city leader in an “aligned dependence” context like Australia, you might need to pay special attention to developing internal capabilities to avoid over-reliance on external contractors, which can lead to capability atrophy over time.
For national policymakers, consider how your structures either enable or constrain local dynamic capabilities. Small changes in autonomy or alignment can have outsized impacts on how effectively cities can respond to challenges.
This journey of understanding how context shapes capabilities is just beginning. Like the fish in David Foster Wallace’s famous “This is Water” commencement speech, we often fail to see the most obvious and important realities — the water we swim in daily. The national context surrounding city governments is precisely that kind of water: omnipresent, essential, yet often invisible to those working within it.
How can cities maximize their dynamic capabilities within the contexts they inhabit? Are certain environments better suited for addressing particular challenges, much like some waters sustain certain species better than others? How have historical trajectories and other currents shaped these models over time?
The most important reality is often the hardest to see. Dynamic capabilities matter enormously for city governments facing complex challenges — but recognizing the water they swim in matters just as much. By making the invisible visible, by understanding the contextual factors that enable or constrain these capabilities, we can help cities become conscious of their environment and navigate it more skillfully.
Over the coming months, we will further explore how a city government’s context affects how it operates and behaves. By using publicly open data on structural capacity — the conditions that shape city governments — we will test the link between the city government’s context and its ability to develop and deploy dynamic capabilities. The clustering enables us to hypothesise that peer groups of similar types of city governments will have similar dynamic capabilities. A technical note on our conceptualisation of structural capacity and how we are using it to cluster city governments will be published soon, and in a few months, we will publish our findings about the links between structural capacity and dynamic capabilities.
What’s your experience with how national context shapes local government capabilities? What water are you swimming in that you might not fully see? We’d love to hear your thoughts as we continue exploring these depths together. Please contact us via Ruth Puttick, r.puttick@ucl.ac.uk
This blog post is based on research conducted as part of UCL Institute for Innovation and Public Purpose’s Public Sector Capabilities Index project. The full working paper “Contextualising city government capabilities” provides a more detailed analysis of the findings.
