Industrial Relations, Budgetary Participation and Budget use: An Empirical Study

Abstract

This study examines the mediating influence of strategic business unit (SBU) managers’ participation in their SBU budget-setting process in the association between industrial relations risk and budget use in SBU performance evaluation. We draw our study's motivation from the industrial relations literature and the management accounting literature. In this study, industrial relations risk refers to a firm's four interrelated workplace relations situations: (a) actions of labor unions; (b) strikes/work stoppages; (c) conflicts between labor unions, and (d) linkages of labor unions with national political parties. Data were collected using a postal survey of 55 Australian coal-mining SBUs. Our path analysis provides support for the mediating effect of budgetary participation on the relationship between industrial relations’ risk and budget use. The implications of our research show that understanding the industrial relations factors that impact when budgets should be used and the resultant impact of using these budgets is critical for an organization. This study adds to the limited knowledge of the interaction of accounting and industrial relations in organizations.