Globalization or Glocalization – Managerialism Versus Sustainability in Territorial Reforms

1. Introduction

Local self-government refers to the right and ability of local communities, within the limits of the law, to direct and manage an essential part of public affairs under their own responsibility and in the interests of their residents [1]. The key task of the local government is to understand local development. Thus, it is the primary subject of harmonization of the economic, social, and environmental aspects inherent in the idea of sustainable development [2]. It is at this level that one of the principles of sustainable development - think globally and act locally [3] – is directly implemented. Effective exercise of these competencies should be served by an appropriate territorial organization, matching the size of the unit to the nature and scope of the tasks [4]. On the other hand, the local government’s territorial organization should serve the convergence of separate administrative areas.

Institutional models for the functioning of municipalities have been formed in different countries in specific historical and socio-political contexts. Consequently, the size and power of these basic administrative units vary dramatically from country to country, and the science of public administration groups them into several distinct models [5]. For example, in France and the Czech Republic, the average size of a municipality is approximately 1,500 residents, while in Ireland, it is approximately 170,000. Although the size of municipalities varies from country to country, there is a clear trend toward increasing their size. This is mainly motivated by economies of scale and increasing quality of public service delivery. In particular, the idea of economizing administration has been promoted by a broad trend of reforms known as New Public Management (NPM). This has become known as a global trend in local administration reforms [6]. Thus, it can be concluded that the processes of globalization are not only economic and cultural but also influence trends in the organization and management of administration. One manifestation of such influence is the call for territorial reorganization of local governments, eliminating their allegedly overly fragmented nature [7].

As it relates to changes at the local level, it seems necessary to combine global trends with local-scale actions, enabling the adaptation of universal solutions to specific local conditions. This approach is known as glocalization. In the context of territorial reforms, glocalization becomes a tool that allows the general principles of New Public Management (NPM) to be critically transformed so that they are better suited to local social, economic, and environmental conditions. This approach is consistent with the idea of sustainable development, which requires consideration of the long-term consequences of administrative actions in areas, such as environmental protection, social equity, and economic efficiency. Glocalization poses the challenge of ensuring that global trends that promote efficiency and economies of scale are implemented in a way that considers the specifics and needs of local communities [8,9,10].

The purposes of this study are as follows:

• Identifying the scope and scale of territorial reforms and assessing their global nature;
• Assessing the real effects of these reforms in terms of economies of scale;
• Pointing out a more sustainable direction for reform using the concept of glocalization

The scope of this study was reforms to change local government structures through consolidation and scale-up.

This study uses a literature review method to critically analyze the existing body of research on consolidation reforms inspired by the New Public Management (NPM) trend in various countries. This review focused on empirical analyses and meta-analyses describing the effects of consolidation reforms, such as changes in local government structures and their impact on economies of scale and the quality of public services. The literature review included articles and reports from databases such as Web of Sciences, Scopus and Google Scholar, using the keyword combination of "local government," "consolidation reforms" and "municipal amalgamations. The time span covered the resources published between 2000 and 2024. The review was based on an ex-post analysis of the reforms’ results, excluding ex-ante analyses that focused on the anticipated benefits rather than their actual effects. In this way, international studies present crosscutting analyses of the effects of reforms in different national and institutional contexts. This approach aimed to draw general conclusions about global consolidation trends while considering the specifics of local contexts, making it possible to examine their sustainability. This approach allowed for an in-depth understanding of the relationship between global trends and the local adaptation of reforms, which is part of the main objective of this work.

This work consists of several key sections. The theoretical discussion of the assumptions of consolidation reforms helped to introduce, among other things, the concept of economies of scale, providing a framework for further analysis. The next section provides an overview of consolidation reforms around the world, showing their varying effects, and emphasizing the role of local conditions. The final section provides an interpretation of the results, emphasizing that universal reforms that do not consider local specifics can have negative social and economic effects. The whole is crowned with the final conclusions of both scientific and applied nature.

2. Theoretical Background of Consolidation Reforms

The amalgamation of municipalities or the process of merging administrative units has become an important topic in the study of local governance and territorial reform. The literature distinguishes various theoretical bases for this phenomenon, including economic, political, and social aspects. The dominant conviction in academic debate, especially among economists, is the impact of economies of scale, which allows larger units to achieve lower unit costs of performing public services. Stigler first emphasized the importance of economies of scale in the manufacturing sector [11]. Additionally, administrators commonly believe that larger units are cheaper and more efficient. According to these opinions, an increase in the size of municipalities allows for a better allocation of financial, material, and personnel resources. This trend can be encapsulated in the phrase that "bigger is better" (bigger is better). It is assumed a priori that reducing the number of units and increasing their size will rationalize administration. This postulate is commonly formulated in most public debates on the operation of public-sector units. The basic argument is to refer to the aforementioned economies of scale, which assume that as the scale of production (in this case, the scale of public service provision) increases, the unit cost of the product (e.g., administrative services) decreases.

The first applications for the public sector and local governments were made by Hirsch [12] and Boyne [13]. They considered public administration a productive unit in the private sector. An in-depth conceptualization of this issue, taking into account the peculiarities of public sector operation, was made by Houlberg [14] and Faulk and Hicks [15]. The reduction in unit costs as the scale increases usually does not exhibit a linear trend. The large size of firms results in higher transaction costs, which reduce the benefits of scale. If these costs exceed the benefits, we may experience diseconomies of scale. Thus, in reality, the curve of average production costs takes a "U" shape. It follows that at the lowest point of the "U-shaped" curve, costs are minimal, which indicates the optimal volume of production [16].

If so, theoretically, there should be an optimal size for the basic territorial division. Already in antiquity Plato expressed the opinion that the size of a city should be around 25,000-30,000 inhabitants [17]. This has inspired modern researchers to search for such optimal values. Theoretical considerations [18] led to the conclusion that the optimal size of a city starts at 25,000 residents. Danish and Japanese studies reported similar sizes [19,20,21,22,23].

Other authors have set the optimal level at a slightly lower value. German and U.S. studies have argued that municipalities with approximately 8,000-10,000 residents are the most effective [24,25,26,27].

Unfortunately, despite the use of increasingly sophisticated research methods and large datasets, no universal value has been found. Many authors have noted that economic analyses do not provide hope for an optimal figure. This is due to the fact that local government services are not homogeneous and have their own unique production characteristics. It is difficult to determine the functionally optimal size of municipalities because different types of municipal activities are optimum in completely different locations [28,29,30,31]. Many authors are careful when summarizing their inconclusive findings. Some have concluded that the differences in the unit costs of small and large administrative units are insignificant. Several other factors had a greater impact on the evolution of this value. This situation reflects the fact that the question of the optimal size of municipalities "optimal size of municipalities" is a typical "difficult problem" difficult problem, and there is no absolute answer to it [32].

A derivative of the belief in economies of scale is also the view of the greater financial potential of larger units. It is often cited in public debates as a matter of course. It assumes that larger consolidated budgets represent greater potential for the implementation of development projects, which consequently affects the dynamics of economic development. Similarly, larger units are assumed to legitimize themselves with better management and higher-quality public services [33,34].

Another argument is that, in systems with large entities, it is easier to reduce the phenomenon of free-riding (a situation in which locally produced services are used by taxpayers in other functional zones). In other words, consolidation helps reduce discrepancies between functional zones and the spatial extent of the services provided by the entities in question. The size of the areas of provision of public services should be based on naturally formed draw zones and the identification of residents with a particular functional unit [35,36]. Theoretical studies have also pointed out that larger units provide a more balanced distribution of budget revenue. This is because the fragmentation of structures is associated with greater diversification of tax bases, which automatically translates into greater inequality in budget spending [37,38,39,40].

The dominant view among mainstream economists and administrativists is that of economies of scale (in both productive and public sectors) and institutionalists. Political scientists and sociologists, for example, show greater distance from such a belief. They accuse the former of having too narrow a view of how public institutions function. Following North [41], they draw attention to the role of informal constraints, which are part of the cultural conditions of a given society, system of ideas, or habits. These informal rules have a kind of inertia, which causes the change that is made to the formal rules (e.g., laws, structures, or, more broadly, the economic system) to not have the desired effect. Smaller units have greater social control and a greater sense of government accountability [42]. Proponents of smaller units fear a loss of local identity, distancing of government from citizens, a decline in community involvement, and a deterioration in access to services [43,44].

This group of views is much less heard in public debates, giving way significantly to the belief in the superior efficiency of larger units. This conviction is so profound that it often takes the form of an undisputed paradigm, which seduces many reform authors. Reviews of changes in the territorial structure of countries clearly indicate that reform authors are inspired by this idea [22,26,45].

Despite these obvious objections, politicians often propose consolidation reforms as if they were the best panacea for existing dysfunctions. Meanwhile, the territorial system is so important that its changes should be made with great caution. From a modernist perspective, each era has created new conditions and contexts that can result in adequate structures. As the conditions for change are global, the corresponding responses are also unified. Thus, we deal with the global trends in change. On the other hand, traditionalists believe that the permanence of structures is a value in itself [36,46]. Evidence of this can be seen in the settlement system in Europe formed in the 12th-13th centuries, which has survived many socioeconomic changes (agrarian and industrial revolution, urbanization, etc.). This should reflect the implementation of universal methods and the need to adapt them to local conditions. Thus, this is a typical glocalization process [47].

3. Consolidation Reforms and Their Effects

The first studies on the effects of consolidation processes were conducted in the 1970s and the 1980s [48,49,50,51,52]. Byrnes and Dollery [53] conducted the first meta-analysis of earlier studies that did not produce strong evidence of significant economies of scale in the provision of municipal services. The authors concluded that 29% of the research papers argued that economies of scale take the shape of a U, 39% found no statistical relationship between per capita spending and municipal size, only 8% identified economies of scale, and 24% identified diseconomies of scale.

Despite these findings, the late 1990s and early 21st century brought about a new wave of territorial reforms in many European countries. Deep changes have been implemented in Greece, Macedonia, Georgia, and Denmark. In several other countries (Great Britain, Estonia, Finland, the Netherlands, Iceland, Germany), a process of gradual change was observed, which could be described as a "quiet revolution." There was no single clear period of reform in it - changes occurred in a stepwise fashion, often expanding in scope.

Another wave of consolidation reforms followed the 2008 financial and economic crisis. These include Latvia (2009), Greece (2011), Luxembourg (2011), Ireland (2014), Turkey (2014), and Albania (2015). In addition, in the midst of reforms that may soon lead to a reduction in the number of municipalities are Armenia, Estonia, Italy, Norway, and Ukraine. For example, in Norway, the government expects the number of municipalities to be reduced from more than 400 to approximately 100. To date, the number of Norwegian municipalities has decreased from 428 to 354. The vast majority of mergers have been voluntary, but in a dozen cases, it was a central decision, despite local opposition. In some cases, the process has been rapid and intense, as in Georgia, where the number of local governments has decreased more than tenfold. In contrast, in other countries, such as Germany (Lower Saxony), the changes were much milder, involving less than 10% of the local units. Consequently, there was a clear trend in consolidation reforms. In less than two decades (2000-2017), 17,000 municipalities were reduced in European countries, about 13% of their 2000 total [54,55].

Municipal mergers are a major form of local government reform in most developed countries outside Europe. Many OECD countries have planned or implemented local government mergers over the past 20 years. One example is Japan, in which the central government promoted local government mergers after 1999. As a result, there were 649 municipal mergers, most of which (83%) occurred between 2004 and 2005, reducing the number of municipalities from 3,232 in 1999 to 1,718 in 2014. The wave of municipal mergers between 1999 and 2010 is referred to as the Great Consolidation of the Heisei Municipalities. At the same time, there was a consolidation of local government units in South Korea, which led to the country having the largest basic subdivisions among OECD countries (224,000 inhabitants) [56].

The effects of consolidation reforms in Australia and New Zealand have been well documented. They were undertaken in a wave of NPM-motivated reforms, in which both countries were recognized as leaders. In New Zealand, radical amalgamation was carried out, resulting in the merger of 700 councils and special-purpose bodies into 86 local governments. In Australia, consolidation has been carried out in several waves with varying degrees of intensity from state to state. Consequently, in the last decade, the number of municipalities has decreased from 841 to 556 [57].

In the 1990s and the 2000s, the Canadian government engaged in one of the largest consolidation programmes in the country. In 1995, there were 850 municipalities, but by 2000, their number had reduced to 444. Much of the change took place in metropolitan areas (including Toronto, Montreal, and Quebec), where Toronto's two-tier metropolitan government was abolished and transformed into a single-tier government. In the US, these processes mainly take place in the form of consolidation of cities and counties (two-tier). They mainly concern urban areas, where the central unit takes over the tasks of other levels of local government. The horizontal consolidation of municipalities is somewhat less important, although the authorities of individual states strongly support them [58].

With modernization and the construction of welfare societies, the size of local government units inherited from earlier periods was often considered too small to capture economies of scale in the provision of public services.

Thus, municipal merger projects have been implemented in almost all the developed countries. Thus, these reforms have been carried out worldwide, giving them a global dimension. However, it should be mentioned that not all countries have undergone these processes. It is clear, for example, that poorer countries (Africa, Southeast Asia) or those that liberated themselves from previous regimes (Central and Eastern Europe, Central America and South Africa) maintained the size of their municipalities or even reduced them. In these countries, democratization meant fragmentation of basic territorial units. Over time, however, consolidation trends revived in these groups of countries as well.

The large scope of consolidation reforms is, of course, an excellent testing ground for research into their effects. While the issue previously received little attention from researchers, the situation has changed significantly over the past two decades. The last decade has seen a significant increase in the number of empirical studies dealing with the effects of the amalgamation of local governments. In addition to individual studies covering specific regions or countries, there have also been meta-analyses, and studies generalizing findings from multiple countries. This body of work means that we know more and more to what extent the rationale for the reforms has been realized, and whether the intended effects have been achieved. Key in this regard are recent studies by Tavares [54], Koprić [55], Kuhlmann and Wollmann [59], Gendźwiłł et al. [60] by Blom-Hansen et al. [61], and especially Swianiewicz et al. [45]. Synthesizing the results presented therein, it can be concluded that there is a consensus that larger local government units can perform better in terms of administrative efficiency. However, ex-post studies often do not confirm this effect, or note its much smaller scale (in view of the reformers' assumptions). The situation is similar in terms of improving the quality of services, which not only fails to produce the expected results, but in many cases is recorded as worsening. According to researchers, this is often due to a failure to take into account local social, economic, political, or institutional conditions when planning and implementing reforms [62,63,64].

According to a study by Swianiewicz's team [65], which diagnosed consolidation reforms in European countries in depth, the results of research on their effects are inconclusive. While the benefits of reduced spending on public administration can be noted, there is no such effect in other spheres. In some types of public services, there is even an increase in unit costs in consolidated entities. Meta-analyses by Schwab et al. reach similar conclusions. [66], identifying the effects of local government reforms from an international, comparative perspective. They point out the need for good preparation and implementation of reforms. Acting too hastily definitely distances the achievement of the intended effects. The analysis points to the need for flexible strategies that take into account specific local conditions and the complexity of local government services to promote sustainable development under consolidation.

According to Ting [67], the poor effects of consolidation are due to a failure to recognize that local government is essentially a bundle of different types of public services (administrative, social, technical). Each of these services may have its optimum with different scope of performance. Treating local government as a unified institution means that consolidation processes can have mutually canceling effects. Scaling up one service can result in savings, while at the same time, for another service, it can mean losses. Therefore, the results of local government reorganization are globally indifferent.

Similar conclusions were reached by a team led by Gemez-Reino [68] who found that empirical evidence of economies of scale in local governments remains elusive. This is due not only to the diverse nature of services, but also to the generally lower-than-expected optimal size of local government. While the so-called conventional wisdom sees this optimum in the vicinity of 25-50,000 residents, the studies mentioned above estimate it at 10,000 residents. Thus, consolidating municipalities above this size may already bring dissecting effects of scale [69].

A very interesting thread in these analyses is the issue of declining voter turnout in consolidated units. Careful inquiries clearly show that the decline in political activity and co-determination of local affairs, occurs primarily in the areas of abolished municipalities, usually farther away from the new center [70,71,72]. This indicates a kind of apathy and frustration among residents, who perceive that their opportunities to influence political decisions, are diminished. Thus, in large units, the peripheralization of the annexed areas deepens, in the face of the rise of central areas [73].

This effect of political behavior, is also reflected in local development processes. Consolidation does not guarantee development, but it usually exacerbates the differences in dynamics between central areas and peripheries devoid of self-determination. This is the effect of flushing out resources that were usually associated with the functioning of local administration. Interestingly, a common motive for amalgamation reforms is population decline. However, it turns out that the reforms do not stop these processes - on the contrary, they contribute to making them more dynamic. Areas deprived of public services are subject to even greater shrinkage [74,75].

Thus, it can be considered that looking at consolidation reforms through the lens of the concept of sustainable development, allows a critical assessment of these processes and their effects. Studies of consolidation reforms from the perspective of ZR show that reducing the number of administrative units or merging them does not always lead to the desired results, especially in social and environmental areas. It is worth noting here that the consolidation of territorial units to achieve economies of scale does not always bring the expected benefits for sustainable development. Loss of local identity, decline in civic engagement and reduced access to public services are side effects that can negatively affect the social and ecological dimensions of SD. For this reason, reform should take local conditions into account, thus maintaining a balance between economic efficiency and the needs of local communities and the environment [76,77,78,79].

In summary, a surprising result of these analyses is the lack of confirmation of the seemingly common-sense view that larger units are more efficient. Many authors cautiously summarize the results of their studies as inconclusive, with some concluding that consolidations have not resulted in relatively cheaper operations, while others conclude that the differences in unit costs of small and large units are insignificant. There are even opinions that the costs of disrupting the memory of institutions and the costs of employee opportunism are clearly underestimated by the authors of the reforms and many times outweigh the achieved effects from consolidation. A peculiar "upward equation" effect has also been noted, where in a consolidated unit both salaries and services provided take on the highest level among the component units [80]. In such cases, it is not even difficult to have a dissecting effect of scale, where the costs of operating large municipalities become significantly higher than smaller ones. Such negative effects are particularly noticeable in those categories of services that are labor-intensive (social services). In turn, the most frequent decrease in the unit cost of services, along with an increase in the scope of their provision, is noted in infrastructure services. At this point, it is worth emphasizing that each type of service may have its optimum in a different place. Therefore, it is difficult to determine unambiguously the optimal size for their diverse bundle. The academic literature even indicates that the search for a universal optimal jurisdictional size is, so far, futile. All in all, consolidation processes may lead to a deepening polarization of socioeconomic development, which fits more into the neoliberal paradigm than the sustainable development model.

4. Discussion

With such an extensive body of research conducted, one would expect the effects of consolidation and scaling up organizations to be well recognized. Especially since the belief that "bigger is better" is part of the so-called intuitive knowledge that is firmly entrenched among government and political representatives. A review of the aforementioned meta-analyses, however, leads to a surprising conclusion. The focus on economies of scale, taken in economic terms, does not provide conclusive results - there was no consensus among researchers on this point.

The surprising result of the analyses indicates a lack of confirmation of the seemingly obvious assumption that larger organizations are more efficient. The authors of these studies cautiously summarize the results as inconclusive, far from unequivocally confirming the "economies of scale" hypothesis. Some conclude that consolidation has not resulted in relatively lower operating costs, while others find little difference in unit costs between small and large units. This is particularly evident when comparing the costs of reforms and losses due to economies of scale. It is also mentioned that the costs of institutional memory disruption and employee opportunism are often underestimated by reform developers, making them outweigh the benefits of consolidation. There is also a peculiar "upward equalization" effect, where both salaries and scope of services are higher in the consolidated entity. In such cases, there can even be a "defect of scale," in which the operating costs of large entities are significantly higher than those of smaller ones. The negative effects are particularly pronounced in labor-intensive service categories, such as social services. In contrast, infrastructure services are more likely to see a decrease in unit costs as the scale of their provision expands. However, each type of service may have an optimal point at a different level, making it difficult to determine the ideal size for a diverse package of services.

These opinions point to the need for changes within units, increasing organizational freedom and flexibility in service delivery, rather than territorial reforms. Since research does not confirm the correlation between efficiency and the size of a local government unit, why is there such a strong belief in this correlation in the public debate? Why do many organization and management theorists consider this statement a priori? The public sector differs in specifics from the manufacturing sector; here, theories that work well in manufacturing do not necessarily apply fully. In the public sector, we have to deal with more complex conditions, referred to as institutional norms, resulting from, among other things, the structure of governance, the tendency to fragment units, distortions in the flow of information, the tendency to hoard resources and the suppression of the main goals of activity.

The problem is determining the point at which further unit growth begins to produce adverse economies of scale, which happens when the level of transaction costs increases. As research indicates, consolidation is a popular way to implement reforms, regardless of the initial size of units, and is justified both in countries with high fragmentation (such as France, the Czech Republic, Slovakia) and in countries with large units (Denmark, England, Ireland, South Korea). However, studies indicate that excessive fragmentation can increase costs, and the optimal size may be relatively small - between 8,000 and 20,000 residents. It is possible that the advantages of scale are followed by disadvantages at a relatively low level, which may escape those who look for them only in large units. In this context, the term "large" takes on a relative character.

Another factor contributing to the inconclusive results of the study is the complex structure of services provided by local governments. Economies of scale can vary from one area to another, which can even lead to negative interactions in which economies of scale from one service, such as municipal services, are offset by costs associated with another, such as social or administrative services. Social control, more direct in smaller units, is also a very important aspect. Large structures seem more abstract to local communities, which can increase the anonymity of officials and undermine the transparency of administrative operations.

These findings demonstrate the importance of local institutional conditions. The automatic adoption of reform patterns can produce different results in different places, so an in-depth analysis of local conditions is necessary before implementing changes. Global and one-size-fits-all solutions can produce different results in local conditions, which underscores the importance of the glocalization process [81].

5. Conclusions

The purpose of this study was to examine the global nature of territorial reforms inspired by the New Public Management trend and to assess their actual impact on economies of scale. Based on a review of the literature and meta-analyses of studies from different countries, it was possible to confirm that territorial consolidations are an important trend in global public management. At the same time, the analysis showed that the implementation of these reforms does not always bring the desired economies of scale, and their success is strongly dependent on local institutional, social and economic conditions. Therefore, it can be considered that the purpose of the work has been fulfilled - the work not only confirmed the global nature of the reforms, but also provided a critical assessment of their effectiveness, suggesting the need for local adaptation through a glocalization approach. The results of the study indicate the need for critical adaptation of global trends to local institutional conditions. Local government is not only an administration, but also a social construction, a unit of economy and power, which requires an interdisciplinary approach that takes into account legal, sociological, economic and political aspects.

The research gap concerned the limited knowledge of the real impact of consolidation reforms on sustainable development, especially in the context of adapting global trends to local specifics. The work appears to contribute to this gap by highlighting the importance of glocalization as a tool for critically adapting universal NPM concepts to local conditions. Through a systematic analysis of international empirical studies, the work provides evidence that reforms that do not take into account local specificities can lead to negative social and economic consequences. Thus, the article deepens existing knowledge about the need to integrate NPM goals with sustainable development principles, an important addition to the field of sustainable public management.

This study is mainly based on a literature review and meta-analyses of empirical studies on consolidation reforms in different countries. One limitation is that the available studies are not always methodologically consistent, and the analyzed data come from countries with different administrative and economic structures, which may affect the comparability of the results.

Future research would do well to conduct more detailed analyses of the impact of consolidation reforms on different types of public services, such as infrastructure, social services and administrative services, which would help identify where economies of scale are achievable and where diseconomies of scale may occur. In addition, future research could focus on analyzing the long-term effects of consolidation, with a particular focus on its impact on local sustainability. It is also worth considering comparative studies between countries with different approaches to glocalization to better understand how local adaptation of reforms affects their success and effectiveness in different institutional contexts.

The analyses conducted, also bring practical value. It relates to the fact that uncritical adoption of global public management trends, such as NPM, can lead to unintended consequences that move reforms away from the goals of sustainable development. Therefore, glocalization, understood as the process of adapting global solutions to local conditions, should become an integral part of territorial reforms. The following approach is recommended for policymakers:

• before implementing a consolidation reform, a detailed analysis of local needs and the institutional context that can significantly affect the outcome of the reform should be made;
• Instead of imposing rapid change, it is worth considering gradual consolidation, which will enable local communities to adapt to new structures and avoid destabilizing public management systems.
• local government units provide a variety of services that are at their optimal sizes. It is recommended that consolidation be selective and focus on those areas where economies of scale are clearly evident, avoiding changes where they could lead to diseconomies of scale.
• the introduction of mechanisms for monitoring and regular evaluation of the effects of reforms will enable the adaptation of measures in the event of unexpected side effects, which supports long-term sustainable development goals.

In conclusion, adapting global trends to local conditions is essential for achieving effective and sustainable public management. Glocalization enables simultaneous consideration of economic efficiency and social and environmental needs, which promotes sustainable development and minimizes the risk of diseconomies of scale.