Performance-Based Budgeting (PBB) has been, and continues to be, implemented

within developed and developing countries as part of a wider public sector reform

process. The purpose is to embed accurate performance measurement within public

sector organisations (see Franklin, 2006, Aristovnik and Seljak, 2009, Schick, 2007)

and provide a more efficient and effective approach to resource allocation (Shah and

Shen, 2007). PBB adoption and implementation has not been without criticism and

there is ongoing debate as to the real use and effectiveness of PBB. The historical

context within which PBB developed, and the justification for why countries decide

to implement PBB, has been the subject of scant research, which has led to a lack of

understanding as to its purpose and effects.

This thesis undertook an historical examination of PBB as part of fiscal reform within

the public sector. It specifically used a case study regarding the adoption and

implementation of PBB within the Indonesian government as its central field of

analysis. The study used qualitative research methodology, beginning with a

historical review of the evolution of PBB as the new public budgeting system, using

the Lüder FMR model (2002) as a conceptual framework. It then utilized new

institutional sociology (NIS) theory as a theoretical framework to examine the extent

to which isomorphism was evident during PBB implementation within the

Indonesian central government. Finally, the Lüder FMR model (2013) was employed

as a conceptual framework to investigate the motives that underpinned the

development of PBB within Indonesian local government, and the factors

influencing its implementation.

This study offers three conclusions about the historical context of PBB evolution and

the decision by countries to adopt. First, PBB was initially implemented in the

United States in 1949 and expanded to developing countries through United States

(US) and United Nations (UN) funded projects. Using the Lüder FMR model (2002),

this study finds that the primary motive underpinning PBB implementation in the

US was public sector demand for more informative and measured budgets. Similar

motives were also found in the UK, Australia and Denmark. That the

implementation of PBB within the US and UK budgeting systems were largely seen

as positive, was the primary stimulus for PBB implementation across the globe.

Furthermore, this study found the outcome of budgetary reform varied between

countries, from that of a single format that involved traditional budgeting methods,

to 'old PBB', to a dynamic approach involving multiple stages that culminated in

PBB modification.