PurposeThe aim of this research is to illustrate how a change from cash‐based accounting to accruals‐based accounting in the core public sector of New Zealand occurred.Design/methodology/approachThe grounded theory research strategy is used in a field study setting.FindingsThe findings suggest that there were six antecedents of the change – key people, axial principles, communicating ideas, contextual determinants, ethos, and knowledge. All of these converged to create the synergistic process of change that led to policy innovations. In this change process, accounting change was a means to an end, where accrual accounting was introduced in order to achieve ministerial control and measure performance of government entities to provide relevant information for management decision making.Research limitations/implicationsSince this is a case study based on a single country, not all analytical categories will be relevant to other contexts/countries. However, the study provides a conceptual framework that identifies constructs that are insightful for other settings.Practical implicationsThe findings of the study will be useful to researchers and policymakers interested in appreciating the causes and catalysts of major policy shifts in public sector accounting. The findings suggest that there are no general reform formats that can be applied to all countries.Originality/valueThe insights were derived from participants who were directly involved in the change. The strength of grounded theory strategy used in this study was that, by not being bound by an a priori theory, one was able to ground one's understanding in the factors surrounding the change.

We examine how employees learn from a performance measurement system. Employing the social construction of reality theory, we analyse how actors constructed knowledge in their specific setting. Qualitative research within a local government entity involved interviews, observation of meetings and examination of archival records. We find that the process of individual learning from a performance measurement system is based around aligning varying episodic experiences of individuals at differing levels. The outcome of these findings is that learning by individuals is a socio-technical process in which the use of performance measures is embedded in everyday thinking of the social world examined.

Despite the growing significance of performance measurement systems, theoretical evidence suggests that unique and complex characteristics in the public sector prevent performance measures being used for internal managerial purposes. A paucity of empirical studies suggests a need to shift the research agenda to interpretive methods to understand how the measures are used in a public‐sector entity. A field study approach employing grounded theory is advocated to connect what is happening in practice with scholarly work.

Organizational learning from a performance measurement system is typically a complex and dynamic process, but research in this area tends to be more normative or functionalist in orientation, rather than interpretive embedded in the everyday activities of practice and the particular social world examined. To overcome this, a substantive grounded theory about how organizational members learn from performance measures in their everyday working life is developed. Using qualitative data, the study documents how organizational learning from a performance measurement system within a single strategic business unit of an Australian public sector utility entity occurred, thereby, providing a contextualized understanding of organizational learning that is grounded in the everyday world of the particular social world examined. The research findings are complete enough to capture the factors that influenced organizational learning and sufficiently parsimonious to follow and grasp.