The recent business environment raises many questions about the nature of organizational structures and intra-firm labor markets. According to Drucker (1992; 1995), firms seem to be moving from hierarchies to flatter network structures. While company statements proclaim the importance of people, teamwork and mutual trust, trends such as downsizing raise questions about the direction of employee dependency on top management and corporate hierarchies.^ Management control systems offer a context in which to examine whether substantive support exists for the reported shift away from hierarchies toward the network organization. Such changes would require companies to rely more heavily on employee empowerment and participative processes, such as bottom-up budgeting. Most budget participation research has reported the results of experiments and has focused on the individual level of analysis. Drawing on network theory from the organizational sociology literature, this dissertation develops and tests a model that addresses the unanswered question of which organizational factors determine how employees influence the budgeting process.^ Data were collected from all 51 managers who participate in the budgeting process at a major, NYSE-listed apparel manufacturer. Social network analysis, as it applies to an organization\u27s managerial network, was employed to measure how a firm\u27s underlying social structure impacts the budgeting process. Social network analysis is an empirical sociological method which allows researchers to measure and map an organization\u27s (group\u27s) underlying social structure. Social network analysis also provides quantitative data about the relationships amongst group managers which may be used in traditional statistical analyses to complement qualitative data about the organizational context.^ The results show that budgetary influence is structurally determined and resides with managers holding central positions in the organizational network. Thus, while formal procedures determine which employees are involved in budgeting activities, only centrally-positioned managers actually influence budgetary outcomes. These findings indicate that influence, not involvement, is the key to empowerment in the budgeting process. This dissertation suggests that researchers and practitioners should be aware of an organization\u27s social structure when examining participative processes. The difference between formal design and emergent influence is indicative of a rhetoric-reality gap which can impair management control system effectiveness.