Scholars have shown the importance of financial resources to organizational performance. More money should enhance performance. However, this predicted link between funding and performance is often unrealized—more resources do not automatically improve the production of public organizations. We contend the skillset of management in charge of that money matters in the funding-to-performance link. We test how managerial capacity moderates how financial resources shape organizational performance. We hypothesize that a higher managerial capacity can lead to a stronger relationship between financial resources and organizational performance in the public sector. This is empirically tested in the context of road infrastructure development with data from all 50 U.S. state transportation agencies from 1995 to 2013. We find that the relationship between improvements in road quality (organizational performance) and capital and physical maintenance expenditures (financial resources) is stronger with high scores on the Government Performance Project quality of capital and infrastructure management (managerial capacity).
