The mediating role of organizational capabilities between organizational performance and its determinants

Shafique-Ur Rehman,Rapiah Mohamed,Hazeline Ayoup

doi:10.1186/s40497-019-0155-5

Shafique-Ur Rehman, Rapiah Mohamed + Show 1 more

Open Access

https://doi.org/10.1186/s40497-019-0155-5

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Abstract

The objective of the current research is to determine the influence of management control system (MCS) as a package on organization performance, and organizational capabilities play an important role to explain this relationship. Data were collected from general managers and chief financial officers from the textile industry of Pakistan to empirically test hypotheses of this study. One hundred sixty questionnaires were used in the analysis through partial least square equation modeling technique. The findings elucidated a significant influence of cybernetic, rewards and compensation, and administrative controls on organizational performance. The same findings were found with cultural, cybernetic, rewards and compensation, planning, and administrative controls with organizational capabilities. Despite this, planning controls and cultural controls have no influence on organizational performance. Organizational capabilities mediate the relationship between all five elements of MCS as a package and organizational performance. The findings provide insights to top management of the textile industry to enhance organizational performance by focusing on indicators mentioned in the study. In addition, improvements in organizational capabilities will also enhance organizational performance. The current research is the pioneer study that tests the mediating role of organizational capabilities between MCS as a package and organizational performance with the help of resource orchestration theory and resource-based view theory.Subjects: management accounting, business, performance management

Highlights

Organizations work in a competitive environment, and if they want to exist in the current market, they face lots of challenges that reduce their performance
The major contribution of the current study is that we introduced organizational capabilities as a mediating variable for the first time, and it significantly mediates between management control system (MCS) as a package element and organizational performance
Organizational capabilities significantly mediate the relationship between cultural controls, planning controls, cybernetic controls, rewards and compensation controls, administrative controls, and organizational performance

Summary

Introduction

Organizations work in a competitive environment, and if they want to exist in the current market, they face lots of challenges that reduce their performance. Organizational performance is a vital indicator of any organization success or failure. Organizational performance playing a significant role for organizations especially in Rehman et al Journal of Global Entrepreneurship Research (2019) 9:30 that environment where organizations face issues regarding higher competition (Cania, 2014). Organizational performance means the effectiveness of an organization in the achievement of their desired goals (Henri, 2004). Organizational performance playing a vital role in the existence of any kind of organizations such as profit-making organizations and non-profit making organizations (Abu-Jarad et al 2010)

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