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THE DIFFUSION OF NEW PUBLIC FINANCIAL MANAGEMENT INNOVATION IN
DEVELOPING COUNTRIES: EVIDENCE FROM SRI LANKA
A thesis submitted in fulfilment of the requirements for the
degree of Doctor of Philosophy
THUSITHA KUMARA DISSANAYAKE
B.Com Hon (Deakin University) Australia
B.Bus Accounting (Victoria University) Australia
Ad.Dip in MA (C.I.M.A.) Sri Lanka
MAAT Sri Lanka
School of Accounting
College of Business
RMIT University
July 2017
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DECLARATION
I certify that except where due acknowledgement has been made, the work is that of the author
alone; the work has not been submitted previously, in whole or in part, to qualify for any other
academic award; the content of the thesis is the result of work which has been carried out since the
official commencement date of the approved research program; any editorial work, paid or unpaid,
carried out by a third party is acknowledged; and, ethic procedures and guidelines have been
followed.
I acknowledge the support I have received for my research through the provision of an Australian
Government Research Training Program Scholarship.
Thusitha Dissanayake
July 2017
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ACKNOWLEDGEMENT
This thesis would not have been possible without the support and help of many people. I am
sincerely grateful to everyone whose encouragement and generous dedication of their time and
energy have enabled this thesis to become a reality.
First, my profound gratitude goes to my senior supervisor, Professor Steven Dellaportas, for his
guidance and supervision throughout my doctoral study. His positive attitude and confidence in my
study immensely encouraged me to complete this study. He was always a great mentor who showed
me much patience and kindness. Thank you for your all support, generosity with time and wisdom
that made this thesis a reality. Next, I extend my gratitude to my second supervisor Associate
Professor Prem Yapa. His suggestions, comments and guidance helped me through the research and
the writing process. In particular, his knowledge of public sector reforms in a developing country has
significantly contributed to the development of this thesis.
Second, I would like to thank all the interview participants and survey respondents from the public
sector organisations in Sri Lanka. Special thanks go to Dr B.M.S. Batagoda, Deputy Secretary to the
Treasury and R.A.A.K. Ranawake, Secretary to the Ministry of Local Government and Provincial
Council for giving me approval to conduct interviews with public sector officials. I would like to
express my sincere appreciation to the academics and my colleagues at RMIT who provided their
feedback and comments with regards to the draft interview questions and survey instrument.
Third, I thank the entire academic and admin staffs in the School of Accounting at RMIT University
for their extended support, encouragement, facilitation and also giving me the opportunity to teach
throughout my candidature.
Finally, I am deeply grateful to my family for their unconditional love and support throughout my
journey. Special thanks go to my parents and sister for their blessing and to my lovely wife for
believing that I was ‘capable’.
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TABLE OF CONTENTS
DECLARATION ......................................................................................................................................... ii
ACKNOWLEDGEMENT ............................................................................................................................ iii
TABLE OF CONTENTS .............................................................................................................................. iv
LIST OF TABLES ....................................................................................................................................... ix
LIST OF FIGURES ...................................................................................................................................... x
LIST OF ABBREVIATIONS ........................................................................................................................ xi
PEER-REVIEWED CONFERENCE PUBLICATION ...................................................................................... xii
ABSTRACT ............................................................................................................................................. xiii
CHAPTER ONE ......................................................................................................................................... 1
INTRODUCTION ....................................................................................................................................... 1
1.1 Chapter overview .................................................................................................................... 1
1.2 Background of the study ......................................................................................................... 1
1.3 Research setting and justification ........................................................................................... 3
1.4 The purpose of the study ........................................................................................................ 6
1.5 Research questions ................................................................................................................. 6
1.6 Theoretical background .......................................................................................................... 7
1.7 Research method and findings ............................................................................................... 9
1.8 Motivation and significance of the study ............................................................................. 10
1.9 The Structure of the thesis.................................................................................................... 12
1.10 Definitions of key terms ........................................................................................................ 15
1.11 Chapter Summary ................................................................................................................. 16
CHAPTER TWO ...................................................................................................................................... 17
PUBLIC FINANCIAL MANAGEMENT REFORMS IN SRI LANKA ................................................................ 17
2.1 Chapter overview ........................................................................................................................ 17
2.2 The country profile ...................................................................................................................... 17
2.3 The structure of Sri Lankan public sector ................................................................................... 18
2.4 Historical overview of the public sector reforms in Sri Lanka .................................................... 20
2.5 Sri Lankan public financial management reforms in 2000s ........................................................ 24
2.5.1 Government moving into accrual basis accounting practice ............................................... 30
2.6 Chapter summary........................................................................................................................ 32
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CHAPTER THREE .................................................................................................................................... 35
THEORETICAL PERSPECTIVE .................................................................................................................. 35
3.1 Chapter overview ........................................................................................................................ 35
3.2 Diffusion of an innovation: a descriptive typology ..................................................................... 35
3.3 Elements of diffusion .................................................................................................................. 40
3.3.1 The innovation ..................................................................................................................... 41
3.3.2 Communication channels..................................................................................................... 45
3.3.3 Time ..................................................................................................................................... 46
3.3.4 Social system ........................................................................................................................ 51
3.6 Empirical evidence on DOI .......................................................................................................... 52
3.7 Chapter summary........................................................................................................................ 58
CHAPTER FOUR ..................................................................................................................................... 61
LITERATURE ON PUBLIC SECTOR REFORMS .......................................................................................... 61
4.1 Chapter overview ........................................................................................................................ 61
4.2 New Public Management (NPM) reforms ................................................................................... 61
4.3. New Public Financial Management (NPFM) reforms ................................................................. 66
4.3.1 Elements of public financial management reforms ............................................................. 68
4.4 Public sector reforms and challenges in developing country context ........................................ 70
4.4.1 Public sector reforms and challenges in Sri Lanka ............................................................... 74
4.5 Introducing financial accounting innovation in line with NPFM reforms ................................... 76
4.5.1 Diffusion of accounting innovation from theoretical perspective ....................................... 78
4.6 Chapter summary........................................................................................................................ 88
CHAPTER FIVE ....................................................................................................................................... 90
RESEARCH METHODOLOGY .................................................................................................................. 90
5.1 Chapter overview ........................................................................................................................ 90
5.2 Identification of research paradigm............................................................................................ 90
5.3 Research method/method of inquiry ......................................................................................... 91
5.4 Data collection ............................................................................................................................ 93
5.4.1. Phase one- Interview source ................................................................................................... 95
5.4.1.1. Preparation for interviews ............................................................................................... 96
5.4.2The population and sample selection ....................................................................................... 97
5.4.2.1. Population and unit of analysis ........................................................................................ 97
5.4.2.2 Sample selection ............................................................................................................... 98
5.4.3 Interview guide ...................................................................................................................... 101
