Institutional logics and soft budget constraints: a study of financial management practices at a public university faculty

Purpose This study explores why soft budget constraint (SBC) practices emerged and flourished within a Norwegian public university faculty, what drove and sustained these practices and their impact on financial discipline, resource allocation and efficiency. Design/methodology/approach Theories on institutional logic and SBC theory underpin the paper’s analysis. An explorative research design and document analysis methods were employed, analyzing three unrelated professional departments within one university faculty. Findings SBC practices were rooted in a dysfunctional department structure and centralized, non-transparent financial management. Competing institutional logic – academic, bureaucratic and business – drove the practices. Academic logic prioritized research over economic efficiency, while bureaucratic logic centralized financial decisions, shielding departments from accountability. Business logic, though present, was secondary, limiting its impact on monetary discipline. Research limitations/implications While SBC theory has traditionally been applied to state-owned enterprises, its application to academic institutions suggests that the concept has broader relevance across various organizational types. This extension enriches SBC theory by demonstrating how SBCs manifest in non-corporate entities, thus expanding our understanding of financial discipline and organizational efficiency in diverse settings. The study addresses interdisciplinary collaboration by highlighting the lack of synergies between academically unrelated departments with distinct operational models. It suggests that fostering interdisciplinary synergies is crucial for optimizing both research and educational outcomes. This has theoretical implications for organizational structure, offering a foundation for further exploration of how universities can be restructured to promote collaboration and efficiency across departments. Practical implications This research contributes to the literature on financial management in academic institutions by exposing misalignments between activity levels, such as student enrollment and resource allocations. It underscores the importance of aligning economic resources with institutional goals, offering a critical perspective on the need for more effective financial planning processes in higher education. The findings suggest that the sustainability of universities depends on governance structures that support transparent, accountable and goal-oriented resource management. Social implications The study illustrates how financial management practices driven by institutional logic influence SBC practices, impact faculty motivation and productivity, and induce interdepartmental conflicts. This ties into organizational behavior theories by revealing the intricate relationships between financial incentives, employee motivation and performance outcomes, particularly in public-sector educational institutions. Originality/value Unlike previous studies emphasizing external factors, this research focuses on internal organizational structures and cultural dynamics, offering a unique perspective on how SBC practices can persist in academic institutions.