Location of Repository

Towards an effective design of management control systems : a contingency approach

By Mohammed Abdul Rahim Al-Dahiyat

Abstract

In an attempt to provide a better understanding of MCS design, this study has utilised the\ud contingency theory approach to investigate the contingent relationships between perceived\ud environmental uncertainty (PEU), business strategy, organisational structure and various\ud attributes of MCS simultaneously. This study has also investigated the mediating effect of two\ud structural dimensions (centralisation and formalisation) on the relationship between PEU,\ud business strategy and MCS design. In addition, this study has investigated the implications of fit,\ud internal consistency or coalignment between the contextual variables and MCS attributes on\ud organisational effectiveness, thus adopting a systems approach to fit recommended in the\ud contingency literature. This study also builds on the works of Simons (1987) and Chenhall and\ud Morris (1986) in terms of developing a wider and comprehensive view of MCS design. Seven\ud MCS attributes have been investigated in this study including budgetary control system practices,\ud budgetary control system usage, cost control systems, broad scope information, managerial\ud evaluation and rewards system, aggregation and timeliness of information.\ud \ud \ud A cross-sectional survey employing a questionnaire method of data collection was adopted. A\ud total of 274 usable responses were received representing a response rate of 28%. For purposes of\ud analysis, the research utilised structural equation modeling (SEM) multivariate statistical\ud technique enabled by EQS 5.7 version software (Bentler, 1995). Thus, this study is one of the first\ud studies in MC contingency literature to utilise SEM for validating the research constructs,\ud controlling measurement error and for testing the structural relationships between the constructs\ud simultaneously.\ud \ud \ud The results of this study confirmed the multi-dimensional nature of PEU, business strategy and\ud organisational structure and the differential effects each dimension has on MCS design. Also the\ud results indicated that the different approaches to fit (i. e., bivariate and systems approaches)\ud utilized in this research resulted in insightful findings relating the contingent relationships\ud between the contextual variables and MCS attributes. In addition, the structural dimension of\ud formalisation was found to have significant positive relationships with many of the MCS\ud attributes and also mediated the relationship between differentiation strategy and MCS attributes\ud of budgetary importance, cost control systems and non-financial performance measures.\ud \ud \ud The results of this study also raise several implications for future MC contingency researchers\ud and fill some gaps in the existing MC contingency literature. This study also contributes to the\ud body of knowledge by providing guidance for future MC contingency researchers to implement\ud the SEM method. SEM has a greater potential for testing theories, controlling measurement error,\ud validating research constructs and testing structural relationships among multiple contextual\ud variables and multiple MCS attributes simultaneously

Topics: HD28, HD
OAI identifier: oai:eprints.hud.ac.uk:5939

Suggested articles

Preview

Citations

  1. (1998). 1h edition
  2. (1996). A Beginner's Guide to Structural Equation Modeling (New Jersey: Lawrence Erlbaum Associates)
  3. (1979). A conceptual framework for the design of organizational control mechanisms",
  4. (1974). A conspectus of management control theory: 1900-1972",
  5. (1981). A contextual model of information systems",
  6. (1988). A contingency approach to strategy implementation at the business unit level: Integrating administrative mechanisms with strategy",
  7. (1978). A contingency framework for management accounting systems research",
  8. (1976). A contingency framework for the design of accounting infon-nation systems",
  9. (1990). A critical analysis of accounting thought: Prognosis and prospects for understanding and changing accounting systems design",
  10. (1994). A general approach to representing multifaceted personality constructs: application to state self-esteem",
  11. (1979). A reappraisal of the contingency approach to organization",
  12. (1994). A review of current practices for evaluating causal models in organizational behavior and human resources management research",
  13. (1989). A strategy for the development of theories in management control",
  14. (1993). Accounting and Law: Partners in juridification of the public sector in the UK", Critical Perspectives on accounting,
  15. (2002). Accounting and organisations",
  16. (1991). Accounting and organizational culture: A field study of the emergence of a new organizational reality",
  17. (1987). Accounting control systems and business strategy: An empirical analysis",
  18. (1985). Accounting for Management Control
  19. (1990). Accounting for Management Control, 2nd edition (London:
  20. (1981). Accounting information and the evaluation of subordinate performance: A situational approach",
  21. (1983). Accounting, budgeting and control systems in their organizational context: Theoretical and empirical perspectives",
  22. (1972). An empirical study of the role of accounting data in Perfon, nance evaluation",
  23. (1985). An examination of the alternative forms of contingency theory",
  24. (1998). An overview of the social and behavioral sciences approaches in management control research",
  25. (1998). Antecedents of participative budgeting",
  26. (2003). Antecedents to management accounting change: A structural equation approach", Accounting, Organizations and Society,
  27. (1999). Antecedents, consequences, and mediating effects of perceived moral intensity and personal moral philosophies",
  28. (1996). Applications of structural equation modeling in marketing and consumer research: A review",
  29. (1984). Appropriateness of accounting data in performance evaluation: An empirical examination of environmental uncertainty as an intervening variable",
  30. (2001). Assessing empirical research in managerial accounting: A value-based management perspective",
  31. (1998). Basics of Structural Equation Modeling (Thousand Oaks,
  32. (1978). Budget use and managerial performance",
  33. (1975). Budgetary control and organizational structure",
  34. (1885). Budgetary systems and the control of functionally differentiated organizational activities",
  35. (1991). Business Research Methods
  36. (1997). Business Research: A Practical Guide for Undergraduate and Postgraduate Students
  37. (1972). Characteristics of organizational environments and perceived environmental uncertainty",
  38. (1999). Commitment in auditor-client relationships: antecedents and consequences",
  39. (1985). Competitive Advantage: Creating and Sustaining Superior Performance
  40. (1980). Competitive Strategy Techniques for Analyzing Industries and Competitors
  41. (1978). Complex Organizations
  42. (1983). Concepts of control: The contribution of cybernetics and systems theory to management control",
  43. (1975). Contingency formulations of organisational structure: Implications for management accounting",
  44. (1975). Contingency theories of organizational structure",
  45. (1998). Contingency theory, management control systems and firm outcomes: Past results and future directions",
  46. (1984). Contingency theory: Some suggested directions",
  47. (1995). Contingency-based research on management control systems: Categorization by level of complexity",
  48. (1964). Control, controls and management",
  49. (1972). Cost Accounting: A Managerial Emphasis
  50. (1995). Decentralization, management accounting systems, information characteristics and their interaction effect on managerial performance: A Singapore study",
  51. (1986). Developing Control Concepts in the 201h Century
  52. (1968). Dimensions of organization structure",
  53. (2000). Does management accounting follow business strategy? ", Unpublished working paper presented at the 23d EAA conference in Munich
  54. E4. New product development
  55. (1973). Effect of competition on the structure of top management control",
  56. (2001). Environmental uncertainty and managerial attitude: Effects on strategic planning, non-strategic decision-making and organizational performance",
  57. (1995). EQS Structural Equations Program Manual
  58. (1997). Equifinality: Functional equivalence in organization design",
  59. (1995). Estimates and tests in structural equation modeling",
  60. (1995). Evaluating model fit",
  61. (1958). Evidence and inference in social research".
  62. (1989). Exploring fit and misfit with multiple contingencies",
  63. (2000). Exploring mediation between environmental and , structural attributes: The penetration of communication technologies in manufacturing organizations",
  64. (1974). framework for management control systems",
  65. (1995). Further evidence on the validity of the self typing approach: Miles and Snow strategic archetypes in banking",
  66. (1995). How to Conduct Self-Administered and Mail Surveys (Thousand Oaks,
  67. (1999). Impact of job formalization and administrative controls on attitudes of industrial salespersons",
  68. (1999). Implementing business unit strategies: The role of management control systems",
  69. (1999). In defence of the survey method: An illustration from a study of user information satisfaction",
  70. (1993). Incentive compensation design, strategic business unit mission, and competitive strategy",
  71. (1981). Inforination in organizations as signal and symbol",
  72. (1982). Innovation in conservative and entrepreneurial firms",
  73. (1996). Investigating the relationship between an organisation's strategy and its management control systems",
  74. (1995). Levers of Control (Boston:
  75. (1985). Linking control systems to business unit strategy: Impact on perfon-nance",
  76. (1999). Logistics research methods: Employing structural equation modeling to test for construct validity",
  77. (1995). Mail Surveys - Improving the Quality (Thousand Oaks,
  78. (1978). Management Accounting and Behavioural Science
  79. (1994). Management Accounting and Control Systems: An Organizational and Behavioural Approach (Chichester:
  80. (1995). Management accounting systems and contingency theory: In search of effective systems",
  81. (2001). Management accounting systems and organizational configuration: A life-cycle perspective",
  82. (1984). Management accounting systems, perceived environmental uncertainty and organisational structure: An empirical investigation",
  83. (2000). Management and Cost Accounting, 5h edition (London:
  84. (1987). Management control systems and departmental interdependencies: An empirical study",
  85. (1997). Management control systems and strategy: A critical review",
  86. (2003). Management control systems design within its organisational context: Findings from contingency-based research and directions for the future",
  87. (2001). Management Control Systems, 10'h edition
  88. (1983). Management control systems: Whence and whither",
  89. (1982). Management Information and Control systems (Chichester:
  90. (1965). Management Planning and Control Systems: A Frameworkfor Research
  91. (1998). Management, 7 th edition
  92. (1997). Managerial Accounting
  93. (1975). Managerial and organizational factors associated with company performance - Part 11: A contingency analysis"
  94. (1999). Market competition, management accounting systems and business unit performance",
  95. (2001). Marketing Research, Oh edition
  96. (1990). Matching an organization's planning and control system to its environment",
  97. (1994). Matching business-level strategic controls to strategy: Impact on control system effectiveness",
  98. (1992). Methodsfor Business Research
  99. (1995). Model specification: Procedures, strategies, and related issues",
  100. (1998). Modem Management Control Systems (Upper Saddle River,
  101. (1998). Multivariate Data Analysis, 5th edition (Upper Saddle River,
  102. (2000). On strategy and management control: The importance of classifying the strategy of the business",
  103. (1995). One application of structural equation modeling from two perspectives: Exploring the EQS and LISREL strategies",
  104. (1977). Organisational Behaviour in its Context (London:
  105. (1983). Organisational effectiveness and management control",
  106. (1972). Organisational structure and strategies of control: A replication of the Aston study",
  107. (1976). Organisational Structure in its Context: The Aston Programme I (Westmead-Famborough, Hants:
  108. (1976). Organisational Structure: Extensions and Replications: The Aston Programme II (Westmead-Famborough, Hants:
  109. (1967). Organization and Environment
  110. (1976). Organization and Management-A Contingency Approach
  111. (1988). Organization behavior: Strategy, structure and environment and Technology",
  112. (1988). Organization Theory, P edition (London: Allyn and Bacon).
  113. (1977). Organization: A Guide to Problems and Practice (London: Harper and Row).
  114. (1967). Organizational Analysis: A Sociological View
  115. (1989). Organizational contingencies and accounting configurations",
  116. (1989). Organizational control: An evolutionary perspective",
  117. (1985). Organizational controls and discretionary program decision making: A field study",
  118. (1983). Organizational Effectiveness: A Comparison of multiple models
  119. (1982). Organizations and Organization Theory
  120. (1967). Organizations in Action
  121. (1998). Per fiormance Measurement and Control Systems for Implementing Strategy: Text and Cases (Upper Saddle River,
  122. (1990). Performance implications of strategic coalignment: A methodological perspective",
  123. (1999). Performance management: A framework for management control systems",
  124. (1978). Planning management control systems",
  125. (1987). Practical issues in structural modeling",
  126. (1981). Problems with contingency theory: Testing assumptions hidden within the language of contingency theory",
  127. (1998). Processes of case study methodology for postgraduate research in marketing",
  128. (1988). Progressing toward a theory of marketing control: A comment",
  129. (1978). Psychometric Theory
  130. (1992). Questionnaire Design, Interviewing and Attitude Measurement
  131. (1982). Recent developments in structural equation modeling",
  132. (1997). Reexamining a model for evaluating information center success using a structural equation modeling approach",
  133. (2001). Reflections and reviews: Opportunities for improving consumer research through latent variable structural equation modeling",
  134. (1997). Reflections on a contingent view of accounting",
  135. (2000). Regulation in services: OECD patterns and economic implications", paper presented at OECD/Australia workshop on innovation and productivity in services
  136. (1988). Relating Porter's business strategies to environment and structure: Analysis and performance implications",
  137. (1967). Relationship of centralization to other structural properties",
  138. (1997). Relationships between Business strategy, environment and controls: A three-country study",
  139. (1987). Relevance Lost: The Rise and Fall of Management Accounting
  140. (1983). Reliance on accounting performance measures, task uncertainty, and dysfunctional behavior: Some extensions",
  141. (1986). Research and control in complex organizations: An overview",
  142. (1994). Research Design: Qualitative and Quantitative Approaches (Thousand Oaks:
  143. (1995). Research in management control: An overview of its development",
  144. (1999). Research in managerial accounting: Learning from others' experiences",
  145. (2000). Research Methods for Business Students, 2 nd edition (London:
  146. (1993). Research note: Fitting management control systems to competitive advantage",
  147. (1990). Role of environmental, organizational and technological factors in information technology implementation in advanced manufacturing: An innovation adoption-diffusion perspective",
  148. (2001). SEM being more effective than multiple regression in parsimonious model testing for management development research",
  149. (1991). Social Sofiware of Accounting and Information Systems (Chichester:
  150. (1998). Some reflections on the evolution of organizational control",
  151. (1997). Strategic choices, environmental uncertainty and SBU performance: A note on the intervening role of management accounting systems",
  152. (1986). Strategic Planning and Management Control Systems for Survival and Success
  153. (1990). Strategic types, distinctive marketing competencies and organizational performance: A multiple measures-based study",
  154. (1997). Strategy, budgeting, and crisis in Latin America",
  155. (1990). Strategy, control systems and resource sharing effects on business unit performance",
  156. (1980). Strategy, distinctive competence and organizational perfon-nance",
  157. (1996). Strategy, environment and performance in two technological contexts: Contingency theory in Korea",
  158. (1990). Strategy, organisation and control: Some possibilities for accounting research",
  159. (2000). Strategy, strategic control systems and firm performance", Unpublished Ph.
  160. (1991). Strategy, structure, planning and control systems and performance evaluation-Rumenco Ltd",
  161. (1995). Structural contingency theory revisited: Main effects versus interactions in child's national study of manufacturing and service sectors",
  162. (1987). Structural contingency theory: A multivariate test",
  163. (1992). Structural contingency theory: A reappraisal",
  164. (2002). Structural equation modeling in management accounting: Critical analysis and opportunities", Unpublished paper, Departement of Accounting and Finance,
  165. (1988). Structural equation modeling in practice: A review and recommended two-step approach",
  166. (1994). Structural Equation Modelling with EQS and EQSIWindows
  167. (1995). Structural equation models with nonnormal variables: Problems and remedies",
  168. (1991). Symbolism, collectivism and rationality in organizational control",
  169. (1994). Tbe effects of management accounting systems, perceived environmental uncertainty and decentralization on managerial performance: A test of three-way interaction",
  170. (1990). Tbe role of budgetary information in performance evaluation",
  171. (1996). Testing a cognitive model of budgetary participation processes in a latent variables structural equation framework",
  172. (1999). Testing contingency hypotheses in budgetary research: An evaluation of the use of moderated regression analysis",
  173. (1990). The case for strategic management accounting: The role of accounting information for strategy in competitive markets",
  174. (1985). The concept of fit in contingency theory",
  175. (1989). The concept of fit in strategy research: Toward verbal and statistical correspondence",
  176. (2000). The consequences of customization on management accounting system design",
  177. (1969). The context of organization structures",
  178. (1980). The contingency theory of management accounting: Achievements and prognosis",
  179. (2000). The design and effects of control systems: Tests of direct and indirect-effects models",
  180. (1984). The design of accounting systems: A general theory with an empirical study of the Church of England",
  181. (1981). The design of the corporate budgeting system: Influences on managerial behavior and performance",
  182. (2002). The differential effect of environmental dimensionality, size, and structure on budget system characteristics in hotels",
  183. (1972). The effect of different types of competition on the use of accounting controls",
  184. (1997). The effect of strategy and organisational structure on the adoption and implementation of activity-based costing",
  185. (1991). The effects of management accounting systems and environmental uncertainty on small business managers performance",
  186. (1978). The External Control of Organizations
  187. (1938). The Functions of Executive
  188. (1968). The Game of Budget Control
  189. (1952). The Impact of Budgets on People (Ithaca, NY: The Controllership Foundation).
  190. (1999). The impact of contextual and process factors on the evaluation of activity-based costing systems",
  191. (1990). The impact of environmental uncertainty, managerial autonomy and size on budget characteristics",
  192. (1986). The impact of structure, environment and interdependence on the perceived usefulness of management accounting systems",
  193. (1988). The Management Control Function,
  194. (1961). The Management of Innovation
  195. (1981). The Organizational Context of Management Accounting
  196. (1981). The Organizational Context ofManagement Accounting
  197. (1998). The relationship between strategic priorities, management techniques and management accounting: An empirical investigation using a systems approach",
  198. (2000). The relationship between two consequences of budgetary controls: Budgetary slack creation and managerial short-term orientation",
  199. (1988). The role of accounting information in the control of organizations: A review of the evidence",
  200. (1995). The role of management accounting in the development of manufacturing strategy",
  201. (1990). The role of management control systems in creating competitive advantage: New perspectives",
  202. (1986). The social construction of management control systems",
  203. (1992). The Sociology of Organizations: Themes, Perspectives and Prospects (London: Harvester Wheatsheaf).
  204. (1992). The strategy of control",
  205. (1987). The structural and environmental correlates of business strategy",
  206. (1995). The structural equation modeling approach, basic concepts and fundamental issues",
  207. (1979). The Structuring of Organization (Upper Saddle River,
  208. (1947). The Theory of Social and Economic Organization
  209. (2000). Theory and Method in Organization Studies, Paradigms and Choices (Thousands Oaks,
  210. (1981). Toward a new contingency approach: The search for new gestalts",
  211. (1985). Toward an integrative framework of organizational control",
  212. (1983). Towards a descriptive theory of management accounting",
  213. (1988). Towards a theory of marketing control: Environmental context, con I trol types and consequences",
  214. (2001). Understanding the relationships between involvement, commitment and future behaviour intentions of kayakers and canoeists using structural equation modeling",
  215. (1995). Writing about structural equation models",

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.