This dissertation contributes to a better understanding of performance management systems (PMS) by examining adoption, stringency, and impact of performance-based funding (PBF) in public institutions of higher education within the United States. The public sector has been under increasing pressure to be more accountable to stakeholders--that is, to perform better at lower cost. Yet, tracking the effectiveness of performance systems has been challenging, given the host of factors that affect results. Because of the growing use of performance systems, it is important to understand what factors affect the adoption and stringency of such systems, as well as their effectiveness. Currently, 39 American states have adopted PBF models to hold public institutions of higher education accountable for reaching state-mandated goals. To assess the stringency of PBF models, the present study develops a novel measure: the Performance Funding Uncertainty Index (PFUI). This index consists of five components reflecting the major elements of PBF models adopted across the nation. Analyzing 15 years of panel data from research institutions of higher education in 39 states the study finds that adoption and stringency of the performance systems are not determined by the same factors. While PBF adoption is more likely in politically conservative states with underperforming education systems, it does not spread in a geographical pattern as diffusion theory predicts. Republican-led state legislatures tend to implement more stringent PBF models. Yet, PBF systems do not gradually become more stringent over time. Rather, the systems reach a saturation point and eventually stagnate. Using a difference-in-differences analysis, the study also finds that the PBF adoption and operation failed to deliver on its main goal--that is, to increase graduation rates of public universities. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com.bibliotheek.ehb.be/en-US/products/dissertations/individuals.shtml.]