The effect of Porter’s competitive forces on competitive advantage and organisational performance and the moderating role of management accounting practices

Abstract

This study examines the effect of the intensity of competitive forces on organisational performance and competitive advantage and the moderating role of the use of traditional and contemporary management accounting practices on this relationship. Using survey data collected from 505 US-based financial managers, the findings indicate that the use of traditional management accounting practices was found to positively moderate the effect of the intensity of competitive forces on competitive advantage. Additional exploratory analysis revealed that the extent of use of contemporary management accounting practices positively moderates the effect of the intensity of competitive forces on organisational performance in a product differentiation/high-force environment. The extent of use of contemporary management accounting practices was also found to positively moderate the effect of the intensity of competitive forces on competitive advantage in a low-cost/high-force. However, the extent of use of contemporary management accounting practices was found to negatively moderate the effect of the intensity of competitive forces on competitive advantage in a product differentiation/low-force environment. Finally, the extent of use of traditional management accounting practices was found to negatively moderate the effect of the intensity of competitive forces on organisational performance in the product differentiation/high-force model. These findings provide a preliminary insight into the important role of management accounting practices in the management of competitive forces.