Overspending in Public Organizations: Does Strategic Management Matter?

In the wake of the financial crash, many governments across the globe are seeking to curb expenditure in public sector organizations. To assess the extent to which public organizations can make strategic choices that might result in lower expenditure, we explore the relationship between strategic management and overspending in English local governments. The effects of strategic stances and actions on overspending are tested using multivariate statistical techniques. The empirical results show that an innovative strategic stance results in overspending as does a commitment to the development of new services, while a reactive strategic stance and decentralized decision making are associated with lower levels of overspending. Our analysis provides support for arguments that public organizations can make strategic choices that result in tighter control of their budgets.