Public sector commercial orientation and the social contract

Purpose - The aim of this paper is to study the workings of commercial orientation, with a focus on performance management, in an environment that is characterised by limited competition between the public and the private sectors and a high level of government social responsibility. Design/methodology/approach - An interpretive case study approach is adopted for this study. It draws on primary data from interviews with key personnel in public sector organisations, and on secondary data from government publications such as annual reports and budget papers. Findings - This study shows that the market‐based performance management system has failed to achieve its intended objectives because it was introduced in a socio‐economic context that is hardly supportive of market management practices. The study shows that service delivery to the public has remained driven by social rather than economic imperatives. In the absence of other service providers, the Government's social responsibility towards its citizens has compelled service provision irrespective of the cost and reduced the cost‐benefit relationship in having informative costing systems. Practical implications - Examining the workings of a market‐based performance management system in a non‐competitive setting provides evidence of the difficulty of achieving the intended benefits from the adoption of commercial practices in public sector agencies in some cases. Originality/value - Whereas extant literature focuses on the adoption of business practices in the process of public sector reform, no prior study has looked at this concept in a non‐competitive market. Understanding the workings of the market practices in such an environment where contestability is limited is fundamental to policy makers and researchers.