Abstract
ABSTRACT The study investigates the effect of generic strategic choices and management control systems (MCS) on the organizational performance of large and medium-sized companies located in Espírito Santo, using Contingency Theory as the theoretical framework. It is a quantitative study, using a survey as the data collection technique. 73 questionnaires were validated, after being completed by those responsible for the controlling or related area of these enterprises over the period between February and April of 2014. The data analysis was performed using the structural equations modeling technique. The main results indicate that: (i) competitive forces shape the strategy adopted by the organizations surveyed, however, contrary to what the literature predicts, those companies that operate in more competitive environments choose a strategy of cost leadership instead of differentiation; (ii) the design and use of the MCS is influenced by the strategy chosen, and the use of contemporary management practices is associated with a differentiation strategy; (iii) strategic choices and the MCS have a positive impact on organizational performance. In addition, those companies that combine differentiation strategy with contemporary management practices perform better than the other companies analyzed.
Highlights
In the field of organizational studies, contingency theory has provided a coherent paradigm for analyzing the structure of organizations (Donaldson, 2001), and it is one of the main theories used in studies regarding managerial control (Chenhall, 2003; Burkert, Davila, Mehta, & Oyon, 2014) that analyze the influence of organizational contexts on the design and use of management control systems (MCS) (Hyvönen, 2007)
For McKinley and Mone (2003), the studies by Donaldson represent an evolution in contingency theory and indicate three common elements that exist in different approaches: (i) a connection between contingency and structure; (ii) a process in which changes in contingent variables cause changes in structure; and (iii) adjustment of structure based on contingencies that affect organizational performance
This result supports the results found by Chenhall and Langfield-Smith (1998), that is, a good number of companies in the sample that operate in a highly competitive environment opt for a cost strategy, those that chose a differentiation strategy used contemporary management control practices
Summary
Contingent forces influence the structure of organizations and, the MCS (Covaleski, Dirsmith, & Samuel, 1996) In this case, one of the tendencies for identifying and analyzing the appropriate MCS structure is examination of its relationship with organizational performance, considering the effect of the contingent variables, such as environment, technology, and strategy (Chenhall & Langfield-Smith, 1998; Aguiar & Frezatti, 2007; Guerra, 2007; Espejo, 2008; Hyvönen, 2008; Junqueira, 2010). Studies that present empirical evidence regarding the relationship between the formulation of strategic priorities, MCS design, and performance, can offer important theoretical contributions for studies on managerial control that use contingency theory as a theoretical base
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