Empirical observations on New Public Management to increase efficiency in public research--Boon or bane?

New Public Management (NPM) was the catch phrase of the reforms in the public research and higher education sector for the last decades. The postulated effect of the NPM reforms is increased efficiency in governmental resource spending on the public higher education and research institutions. Though backed by theoretical considerations, this hypothesis has hardly been tested empirically. Using a unique dataset of German research units, this paper deals with the influence that NPM mechanisms have on research performance. Controlling for different university mission, it can be shown that both greater internal hierarchy (especially "strong presidents") as well as greater operative flexibility for the researchers themselves increase research performance. Some of the variables, including the presence of research councils, have a positive effect on research efficiency under some definitions of research output. On the other hand, the introduction of resource accounting systems has a negative impact. All in all, we conclude that the public science sector reforms implemented in most of the Western economies were heading into the right direction by providing greater performance incentives and increasing allocative efficiency in resource spending. Also we provide some ideas of how NPM may be combined in order to construct a sensible governance system. We conclude that the mechanisms should be selected based on the mission of the university.