Digital Transformation as a Tool Transaction Costs Reduction in Municipal Management

Abstract

Lack of quantitative metrics to assess the level of institutional trust in public governance systems makes it difficult to diagnose the causes of their inefficiency. This problem is especially acute in personnel systems of local self-government, where shortage of candidates for leading positions is traditionally explained by "personnel hunger" rather than institutional barriers. The purpose. Development, testing and verification of quantitative methodology for diagnosis of institutional barriers in the system of competitive selection of heads of municipalities, as well as formulation of the principles of targeted digital transformation of this system on its basis. The methods. The study is based on mixed methods. To quantify the gap between human potential and institutional trust, the PAM/TAM/SAM/SOM market segmentation model was adapted, within which the S-Conversion indicator (SAM-SOM conversion) was introduced as a proxy variable for the level of trust. They were quantified as part of transaction costs theory. The empirical base was compiled by data on 15 competitions in Orel Region (2023-2024), expert interviews (n = 5) and a survey of 87 municipal employees. The results. Diagnosis revealed critically low level of S-Conversion (22%), stating the dominance of institutional rather than quantitative constraints. It is empirically confirmed that transaction costs of the system are 35-40% of the cost of the competition, being a material expression of the identified barriers. On the basis of diagnostics, the principles are formulated and digital transformation model ("digital trust model") is economically justified, integrating regulatory, technological and evaluation mechanisms. Financial modeling demonstrates effectiveness of the proposed approach (NPV = 4.2 million rubles, IRR = 28.5%). Conclusions. The concept of S-Conversion was developed and tested as a measure of institutional trust in human resources systems. It was found that the main problem is not shortage of candidates, but a low level of trust in procedures, materializing in high transaction costs. Theoretically based architecture for digital transformation, aimed at targeted reduction of identified barriers through technologically provided transparency, formalization and external control is proposed. The results of the study provide authorities with diagnostic tools and clear principles for investing in reforms aimed at building trusting and competitive environment.