Addressing governance challenges in the provision of animal health services: A review of the literature and empirical application transaction cost theory

•Williamson’s discriminating alignment hypothesis is better approach than public and private analytical approach to animal health service delivery.•Paraprofessionals are cost effective for animal health services that require care and attention and veterinarians are cost effective for services that require technical expertise.•Given the limited state and community capacity, a referral animal health care system is more cost effective than paraprofessional and veterinarians.•Any reform on animal health service delivery should optimize the synergistic relation between veterinarians and paraprofessionals. Providing adequate animal health services to smallholder farmers in developing countries has remained a challenge, in spite of various reform efforts during the past decades. The focuses of the past reforms were on market failures to decide what the public sector, the private sector, and the “third sector” (the community-based sector) should do with regard to providing animal health services. However, such frameworks have paid limited attention to the governance challenges inherent in the provision of animal health services. This paper presents a framework for analyzing institutional arrangements for providing animal health services that focus not only on market failures, but also on governance challenges, such as elite capture, and absenteeism of staff. As an analytical basis, Williamson’s discriminating alignment hypothesis is applied to assess the cost-effectiveness of different institutional arrangements for animal health services in view of both market failures and governance challenges. This framework is used to generate testable hypotheses on the appropriateness of different institutional arrangements for providing animal health services, depending on context-specific circumstances. Data from Uganda and Kenya on clinical veterinary services is used to provide an empirical test of these hypotheses and to demonstrate application of Williamson's transaction cost theory to veterinary service delivery. The paper concludes that strong public sector involvement, especially in building and strengthening a synergistic relation-based referral arrangement between paraprofessionals and veterinarians is imperative in improving animal health service delivery in developing countries.