Supplier Relationships, Management Control Systems and Performance

Abstract

Supplier relationships induce the manufacturers’ demand for management control systems (MCSs), obtaining information to avoid the loss of improper control. Based on the contingency theory, this study examines how supplier relationships (trust and collaboration) indirectly affect firm performance with the use of MCSs. This study’s investigation is conducted using questionnaire survey. The survey was conducted among the 1000 manufacturing firms in Taiwan listed on CommonWealth Magazine. The use of MCSs is investigated using two dimensions. One is basic MCS and the other is strategic performance measurement systems (SPMS). Basic MCS is used to collect information for planning and establishing basic operations. SPMS presents managers with financial and non-financial measures covering different perspectives, both combining to provide a way of translating strategy into a coherent set of performance measures. The results include: (1) the influence of trust in suppliers is positively associated with the use of SPMS, (2) basic MCS and SPMS provide partial mediating effects for the associations between collaboration with suppliers and delivery, (3) the basic MCS and SPMS provide full mediating effects for the associations between collaboration with suppliers and flexibility, (4) the trust in suppliers is positively associated with collaboration with suppliers.