Policy Stability and Organizational Performance: Is There a Relationship?

Abstract

Many scholars have struggled to explain stability and change in public resource allocation. What ultimately matters to most citizens, however, are the effects of such spending patterns on organizational performance. In this article, we investigate the relationship between stability of resource allocation and organizational performance. Using time-series data on municipal school budgets and population data on more than 140,000 students including their examination scores as well as detailed information about the socioeconomic status of their parents, the analysis lends empirical support to the more or less implicit proposition underlying much literature on budgetary incrementalism, namely that stable budgets have a beneficial effect on organizational outcome. In that way, this article not only renews the old interest in budget incrementalism but also raises new perspectives for research on the performance of public organizations.