Combinations of the Levers of Control in Product Development

Abstract

This paper contributes to the recent literature on the relationship between management control systems (MCS) and innovation (e.g. Bisbe & Otley, 2004; Bisbe & Malagueno, 2009) by considering how the four levers of control (LOC), i.e. interactive and diagnostic control systems, as well as beliefs and boundary systems, are combined in product development (PD). In a survey of 468 manufacturing firms, I employ cluster analysis to determine how the LOC are combined, depend-ing on the type of strategy formation (i.e., intended or emergent) and the degree of innovativeness of the firm. I identify three clusters and label them “Values and Norms Control”, “Performance Measures Control”, and “Limited Control”. While the first two clusters are consistent overall with my hypotheses, thus representing a situation of fit between strategy, LOC, and environment, and are equifinal in terms of PD performance and organizational performance, the third cluster has a significantly lower performance. The results contribute to research in that (1) they respond to the call for analysis of “packages” of control instead of isolated MCS components; (2) they provide first quantitative evidence of the relationship between strategy formation and LOC and thus build on previous qualitative results; and (3) they enrich the MCS-innovation literature by addressing the combinations of LOC that are capable of generating the highest performance. Practice can profit from my results by identifying the best combination of LOC, which depends on the manifestation of strategy and environment variables.