The purpose of this paper is to investigate how benchmarking affects transparency and economic performance in the public sector.
The paper applies a quasi‐experimental method to 1989‐2000 time series data on benchmarking and non‐benchmarking water utilities in The Netherlands.
Benchmarking immediately enhanced transparency, but only affected utility economic performance after benchmarking information entered the public domain. This confirms that benchmarking enhances transparency and performance. The findings do not support the yardstick regulation hypothesis that utility managers will only tighten financial discipline when benchmarking is embedded in a regime of managed competition.
The main limitation of this study is its single‐industry scope. Further testing of benchmarking effects in other public services is needed to validate its findings.
The paper presents evidence from the Dutch water supply industry focusing on transparency and performance in collaborative benchmarking.
