How do innovation and financial reporting influence public sector performance in a transition market?

Abstract

PurposeDrawing on new public management (NPM) theory and institutional theory, this research examined the direct and indirect effects of an innovation-oriented culture on organisational performance as measured based on financial reporting quality and accountability. The investigation involved public organisations in Vietnam, which is a transition market.Design/methodology/approachA survey was administered to accountants and finance managers working in the public sector, and 248 valid questionnaires were subjected to analysis. The research model and hypotheses were tested via partial least squares-structural equation modelling.FindingsResults indicated that an innovation-oriented culture favourably affects the performance of public sector organisations. The quality of financial reporting and accountability mediate the relationship between the aforementioned culture and performance.Originality/valueThis study is the first to examine the chain of activities that spans innovation, financial reporting quality, accountability and organisational performance in the context of public sector organisations in an Asian transition market.