Institutional isomorphism and cash management practices in Mississippi

Abstract

Purpose The purpose of this paper is to draw on the theory of institutional isomorphism to investigate how Mississippi’s centralized cash management policy affects the cash management practices in the state’s rural and urban counties. Design/methodology/approach The study uses a sequential exploratory mixed methods design involving a qualitative documentary analysis and a quantitative analysis of a survey of Mississippi counties. Findings The study finds that institutional isomorphism drives cash management practices in the counties by influencing how they follow state and agency mandates. Moreover, while urban counties have superior socio-economic indicators compared to their rural counterparts, no differences exist regarding standardized financial indicators, which suggest that local governments in the state may be imitating the practices of one another. Practical implications First, states should consider the different financial and economic conditions of their local governments when prescribing cash management policies because uniform policies could stifle local innovation and reduce efficiency in cash management. Second, when there is pressure from a higher-level government or a state agency, local governments may end up imitating one another rather than exploring opportunities for innovation within state policies. Third, state policies should consider requiring education and training in cash management practices that help identify strategies to add value to public funds within the scope of local fiscal capabilities. Originality/value The study uses one state to investigate a unique case of centralized cash management practices. The lessons learned can apply to other states seeking to develop a policy for their small local governments without placing the larger ones at a disadvantage.