The impact of culture on the relationship between budgetary participation, management accounting systems, and managerial performance: An analysis of Chinese and Western managers

Abstract

This study tests the hypothesis that the behavior and attitudes of Chinese and Western managers to budgetary participation will be different because of cultural differences. Chinese managers are used to represent managers from a high-collectivist, large-power distance, and long-term orientation culture while Caucasian expatriate managers are used to represent a culture that is low-collectivist, small-power distance, and short-term orientation. Data were collected from 51 Chinese subunit managers in Xian, China and 38 Caucasian expatriate subunit managers in Hong Kong who were requested to respond to questionnaires designed to measure the ‘availability’ of broad scope and timely management accounting systems (MAS), budgetary participation, and their managerial performance. Multiple regression analysis showed that the three-way interaction term was significant, thus, suggesting that the interaction effects of MAS and budgetary participation on managerial performance were different, depending on the cultural background of the managers. More specifically, the relationship between MAS information and managerial performance of Chinese managers was negative for high levels of participation but positive for Caucasian managers. These results have implications for the design of effective control subsystems and suggest that the management accounting theories developed in the context of Western economies may not be generalizable to the Chinese environment.