On the Interplay between Strategy and Management Control Systems

Aernoudts, R.H.R.M. (2008): On the Interplay between Strategy and Management Control Systems.

Abstract

There is considerable academic interest for the interplay between strategy and management control systems (MCS). Strategic performance measurement systems (SPMS), such as Simons’ levers of control and Kaplan and Norton's balanced scorecard were introduced in the normative literature as vehicles for developing and implementing strategy. But there are also numerable case studies and surveys that investigate empirical evidence of the interplay between management control and strategy derived from management practices. This paper is a review of the extant literature aimed at identifying developments and gaps within this specific area of accounting research. To this end literature from six fields of research has been searched in a structured manner using exhaustive search algorithms. Studies are analysed using Mohr’s (1982) approaches to explanation and frameworks of Langfield-Smith (1997) and Keating (1995). The review by Langfield-Smith (1997) indicated that literature in this specific area of scholarly inquiry is characterized by a diversity of research designs and ambiguity in operationalization of - among other variables - strategy. Analysis of survey & case based research performed during the last decade reveals that operationalization of strategy is more than often based on one of the established strategy frameworks and is currently not as diverse as reported in Langfield-Smith (1997). Several scholars indicate that knowledge in this area is still rather limited, however comparison among studies provides insights that have not been made explicit.

• Item Type: MPRA Paper
• Language: English
• Keywords: Management control; Control; Strategy
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting

References

Abernethy, M.A., & Brownell, P. (1999). The role of budgets in organizations facing strategic change: an exploratory study. Accounting, Organizations & Society 24, 189-204.

Auzair, S.M., & Langfield-Smith, K. (2005). The effect of service process type, business strategy and life cycle stage on bureaucratic MCS in service organizations. Management Accounting Research 16, 399-421.

Baines, A., & Langfield-Smith, K. (2003). Antecedents to management accounting change: a structural equation approach. Accounting, Organizations & Society 28, 675.

Ballantine, J., Brignall, S., & Modell, S. (1998). Performance measurement and management in public health services: a comparison of U.K. and Swedish practice. Management Accounting Research 9, 71-94.

Benbasat, I., Goldstein, D.K., & Mead, M. (1987). The Case Research Strategy in Studies of Information Systems. MIS Quarterly 11, 368.

Bhimani, A., & Langfield-Smith, K. (2007). Structure, formality and the importance of financial and non-financial information in strategy development and implementation. Management Accounting Research 18, 3-31.

Bisbe, J., Batista-Foguet, J.-M., & Chenhall, R. (2007). Defining management accounting constructs: A methodological note on the risks of conceptual misspecification. Accounting, Organizations & Society 32, 789-820.

Bourne, M., Wilcox, M., Neely, A., Mills, J. and Platts, . (1998). Embedding performance measurement systems in SMEs: 3 longitudinal case studies. Operations Management: Future Issues and Competitive Responses (EurOMA Conference Proceedings). Dublin: University of Dublin, pp. 93-98.

Bourne, M.a.W., M. (1998). Translating strategy into action. Manufacturing Engineer 77, 109-112.

Campbell, R.K.Y.a.D.T. (2003). Case Study Research. London: Sage Publications Inc

Carr, C., & Tomkins, C. (1998). Context, culture and the role of the finance function in strategic decisions. A comparative analysis of Britain, Germany, the U.S.A. and Japan. Management Accounting Research 9, 213-239.

Chapman, C.S. (1997). Reflections on a Contingent View of Accounting. Accounting, Organizations & Society 22, 189-205.

Chapman, C.S. (2005). Controlling Strategy. New York: Oxford University Press Inc.

Chenhall, R.H. (2005a). Content and Process Approaches. In C.S. Chapman, Controlling Strategy. New York: Oxfor University Press Inc., pp. 10-36.

Chenhall, R.H. (2005b). Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: an exploratory study. Accounting, Organizations & Society 30, 395-422.

Chenhall, R.H. (2003). Management control systems design within its organizational context: findings from contingency-based research and directions for the future. Accounting, Organizations & Society 28, 127-168.

Chenhall, R.H., & Langfield-Smith, K. (1998). The Relationship between Strategic Priorities, Management Techniques and Management Accounting: an Empirical Investigation Using a Systems Approach. Accounting, Organizations & Society 23, 243-264.

Collier, P.M. (2005). Entrepreneurial control and the construction of a relevant accounting. Management Accounting Research 16, 321-339.

Davila, A., & Foster, G. (2007). Management Control Systems in Early-Stage Startup Companies. Accounting Review 82, 907-937.

De Haas, M., & Kleingeld, A. (1999). Multilevel design of performance measurement systems: enhancing strategic dialogue throughout the organization. Management Accounting Research 10, 233-261.

Dent, J.F. (1990). Strategy, Organization and Control: Some Possibilities for Accounting Research. Accounting, Organizations & Society 15, 3-25.

Dess, G.G., & Davis, P.S. (1984). Porter's (1980) Generic Strategies as Determinants of Strategic Group Membership and Organizational Performance. Academy of Management Journal 27, 467-488.

Dixon, J., Nanni, A. and Vollmann, T. . (1990). The New Performance Challenge: Measuring Operations for World-Class Competition. IL.: Dow Jones Irwin.

Dixon, R. (1998). Accounting for Strategic Management: A Practical Application. Long Range Planning 31, 272-279.

Eisenhardt, K.M. (1989). Building Theories from Case Study Research. Academy of Management Review 14, 532-550.

Feagin, J.R., Orum, A.M., & Sjoberg, G. (1991). A Case for the Case Study. Chapel Hill: UNC Press.

Ferreira, L.D.a.M., K. A.,. (1992). Field research in management accounting and control: a review and evaluation. Accounting, Auditing and Accountability Journal 5, 3-34.

Fitzgerald, L., Johnston, R., Brignall, T. J., Sivestro, R. and Voss, C. (1991). Performance Measurement in Service Businesses. London: CIMA.

Gersick, C.J.G. (1988). Time an Transition in Work Teams: toward a New Model of Group Development. Academy of Management Journal 31, 9-41.

Glaser, B.G.a.S., A. (1967). The Discovery of Grounded Theory: Strategies For Qualitative Research. New York: Aldine Publishing Co.

Globerson, S. (1985). Issues in developing a performance criteria system for an organisation. International Journal of Production Research 23, 639-646.

Guilding, C., Cravens, K.S., & Tayles, M. (2000). An international comparison of strategic management accounting practices. Management Accounting Research 11, 113-135.

Hansen, S.C., & van der Stede, W.A. (2004). Multiple facets of budgeting: an exploratory analysis. Management Accounting Research 15, 415-439.

Hayes, R.a.W., S. (1984). Restoring Our Competitive Edge. New York: John Wiley & Son.

Hitt, M.A., Hoskisson, R.E. and Moesel, D.D. (1996). The market for corporate control and firm innovation. Academic Management Journal 39, 1084–1119.

Hudson, M., Smart, A., & Bourne, M. (2001). Theory and practice in SME performance measurement systems. International Journal of Operations & Production Management 21, 1096-1115.

Ittner, C.D., & Larcker, D.F. (1997). Quality Strategy, Strategic Control Systems, and Organizational Performance. Accounting, Organizations & Society 22, 293-314.

Ittner, C.D., & Larcker, D.F. (2001). Assessing empirical research in managerial accounting: a value-based management perspective. Journal of Accounting & Economics 32, 349-410.

Kaplan, R.S., & Cooper, R. (1998). Financial management from `ABC to Z.' Public Manager 27, 59.

Kaplan, R.S., & Norton, D.P. (1992). The Balanced Scorecard--Measures That Drive Performance. Harvard Business Review 70, 71-79.

Kaplan, R.S., & Norton, D.P. (2001a). Transforming the Balanced Scorecard from Performance Measurement to Strategic Management: Part I. Accounting Horizons 15, 87-104.

Kaplan, R.S., & Norton, D.P. (2001b). Transforming the Balanced Scorecard from Performance Measurement to Strategic Management: Part II. Accounting Horizons 15, 147-160.

Kaplan, R.S., & Norton, D.P. (1996). Using the Balanced Scorecard as a Strategic Management System. Harvard Business Review 74, 75-85.

Karlsson, C., & Ahlstrom, P. (1997). Perspective: Changing Product Development Strategy -- A Managerial Challenge. Journal of Product Innovation Management 14, 473-484.

Keating, P.J. (1995). A Framework for Classifying and Evaluating the Theoretical Contributions of Case Research in Management Accounting. Journal of Management Accounting Research 7, 66-86.

Kloot, L., & Martin, J. (2000). Strategic performance management: A balanced approach to performance management issues in local government. Management Accounting Research 11, 231-251.

Kotha, S., & Vadlamani, B.L. (1995). Assessing Generic Strategies: an Empirical Investigation of Two Competing Typologies in Discrete Manufacturing Industries. Strategic Management Journal 16, 75-83.

Laitinen, E.K. (2001). Management accounting change in small technology companies: towards a mathematical model of the technology firm. Management Accounting Research 12, 507-541.

Langfield-Smith, K. (1997). Management Control Systems and Strategy: a Critical Review. Accounting, Organizations & Society 22, 207-232.

Langley, A. (1999). Strategies for Theorizing from Process Data. Academy of Management Review 24, 691-710.

Li, L. (2000). An analysis of sources of competitiveness and performance of Chinese manufacturers. International Journal of Operational Production Management 20, 299-315.

Li, Y., Li, L., Liu, Y., & Wang, L. (2005). Linking management control system with product development and process decisions to cope with environment complexity. International Journal of Production Research 43, 2577-2591.

Lillis, A.M. (2002). Managing multiple dimensions of manufacturing performance--an exploratory study. Accounting, Organizations & Society 27, 497-529.

Luft, J., & Shields, M.D. (2003). Mapping management accounting: graphics and guidelines for theory-consistent empirical research. Accounting, Organizations & Society 28, 169-249.

Lukka, K., & Kasanen, E. (1995). The problem of generalizability: anecdotes and evidence in accounting research. Accounting, Auditing & Accountability Journal 8, 71-90.

Lynch, R.a.C., K. (1991). Measure Up! Yardsticks for Continuous Improvement. Oxford: Blackwell.

Malina, M.A., & Selto, F.H. (2004). Choice and change of measures in performance measurement models. Management Accounting Research 15, 441-469.

Marginson, D.E.W. (2002). Management Control Systems and Their Effects on Strategy Formation at Middle-Management Levels: Evidence from a U.K. Organization. Strategic Management Journal 23, 1019.

Maskell, B. (1989). Performance measures for world class manufacturing. Management Accounting Horizons, 32-33.

Miles, R.E., & Snow, C.C. (1978). Organisational Strategy, Structure, and Process. New York: McGrawhill Book Company. Miller, D., & Friesen, P.H. (1982). Innovation in Conservative and Entrepreneurial Firms: Two Models of Strategic Momentum. Strategic Management Journal 3, 1-25.

Miller, D., & Friesen, P.H. (1986). Porter's (1980) Generic Strategies and Performance: An Empirical Examination with American Data Part I: Testing Porter. Organization Studies (Walter de Gruyter GmbH & Co. KG.) 7, 37-55.

Miller, J.G., & Roth, A.V. (1994). A Taxonomy of Manufacturing Strategies. Management Science 40, 285-304.

Mohr, L.B. (1982). Explaining Organizational Behavior. San Francisco: Jossey-Bass.

Naranjo-Gil, D., & Hartmann, F. (2007). Management accounting systems, top management team heterogeneity and strategic change. Accounting, Organizations & Society 32, 735-756.

Neely, A., Mills, J., Platts, K., Richards, H., Gregory, M. and Bourne, M. . (1996). Developing and testing a process for performance measurement system design. Manufacturing Strategy (EurOMA Conference Proceedings). London: London Business School, pp. 471-476.

Neely, A., Richards, H., Mills, J., Platts, K. and Bourne, M. . (1997). Designing performance measures: a structured approach. International Journal of Operations & Production Management Accounting Horizons 17 1131-1152.

Nilsson, F. (2000). Parenting styles and value creation: a management control approach. Management Accounting Research 11, 89-112.

Otley, D.T., & Berry, A.J. (1994). Case study research in management accounting and control. Management Accounting Research 5, 45-65.

Parker, L.D. (2001). Reactive planning in a Christian Bureaucracy. Management Accounting Research 12, 321-356.

Perera, S., McKinnon, J.L., & Harrison, G.L. (2003). Diffusion of transfer pricing innovation in the context of commercialization--a longitudinal case study of a government trading enterprise. Management Accounting Research 14, 140.

Pinfield, L.T. (1986). A Field Evaluation of Perspectives on Organizational Decision Making. Administrative Science Quarterly 31, 365.

Porter, M.E. (1980). Competitive Strategy. New York: Free Press.

Porter, M.E. (1985). Competitive Advantage. New York: Free Press.

Roslender, R., & Hart, S.J. (2003). In search of strategic management accounting: theoretical and field study perspectives. Management Accounting Research 14, 255-279.

Ryan, B., Scapens, R.W. and Theobald, M. (2002). Research method and methodology in finance and accounting. London: Thomson.

Saravanamuthu, K., & Tinker, T. (2003). Politics of managing: the dialectic of control. Accounting, Organizations & Society 28, 37-64.

Shortell, S.M., & Zajac, E.J. (1990). Research Notes. Perceptual and Archival Measures of Miles and Snow's Strategic Types: a Comprehensive Assessment of Reliability and Validity. Academy of Management Journal 33, 817-832.

Simon, H.A. (1957). Models of Man. New York: John Wiley & Sons.

Simons, R. (1994). Levers of Control: How Managers Use Innovative Control Systems to Drive Strategic Renewal Harvard Business School Press.

Simons, R. (1995). Control in an Age of Empowerment. Harvard Business Review 73, 80-88.

Slagmulder, R. (1997). Using management control systems to achieve alignment between strategic investment decisions and strategy. Management Accounting Research 8, 103-139.

Strauss, A. (1987). Qualitative Analysis For Social Scientists. New York: Cambridge University Press.

Strauss, A.L.a.C., J. (1990). Basics of Qualitative Research: Grounded Theory Procedures and Techniques. Newbury Park: Sage Publications.

Tuomela, T.-S. (2005). The interplay of different levers of control: A case study of introducing a new performance measurement system. Management Accounting Research 16, 293-320.

Van de Ven, A.H., & Huber, G.P. (1990). Longitudinal Field Research Methods for Studying Processes of Organizational Change. Organization Science 1, 213-219.