Management Capacity, Financial Resources, and Organizational Performance: Evidence from State Transportation Agencies

Abstract

Scholars have shown the importance of financial resources to organizational performance. More money should enhance performance. However, this predicted link between funding and performance is often unrealized—more resources do not automatically improve the production of public organizations. We contend the skillset of management in charge of that money matters in the funding-to-performance link. We test how managerial capacity moderates how financial resources shape organizational performance. We hypothesize that a higher managerial capacity can lead to a stronger relationship between financial resources and organizational performance in the public sector. This is empirically tested in the context of road infrastructure development with data from all 50 U.S. state transportation agencies from 1995 to 2013. We find that the relationship between improvements in road quality (organizational performance) and capital and physical maintenance expenditures (financial resources) is stronger with high scores on the Government Performance Project quality of capital and infrastructure management (managerial capacity).

Keywords:

• managerial capacity
• organizational performance
• public budgeting
• transportation agencies

Notes

1 The funds analyzed are state-level contributions—not federal dollars to the states. Likewise, the road quality analyzed is for state-owned roads that are not part of the federal highway system. The federal government’s aid for state infrastructure is not part of this study.

2 The GPP Capital Management Score and the Capital/Physical Maintenance Expenditure variables have a correlation of 0.09 in the sample. Higher managerial capacity does not necessarily imply that a state has greater financial resources.

3 GPP data are only available for four years (1997, 2001, 2005, and 2009). The study assumes that state management grades will remain constant in the short term, so this research uses available GPP data by extrapolation from 1995 to 2013.

Additional information

Notes on contributors

Carla Flink

Carla Flink, Ph.D. is Associate Professor in the Department of Public Administration & Policy, School of Public Affairs, American University, Washington, DC, USA.

Can Chen

Can Chen, Ph.D. is Associate Professor, Andrew Young School of Policy Studies, Georgia State University, Atlanta, GA, USA.