The Use of Management Control Systems (MCS) Information in the Small Business Sector and the Relationship between MCS, Strategy and Performance

Abstract

This paper is based on an analysis of 183 responses from managing directors of small Finnish companies. The study describes the extent to which small Finnish firms have adopted traditional and contemporary MCS practices and how systematically they use the MCS information. Additionally, the use of MCS information is examined in a contingency framework that includes strategy (harvest, hold and build) and past financial performance of firms. The emergent results of this research suggest at least two contributions to the current literature on MCS. First, the study provides insights on a little known diffusion of the use of MCS information and practices in the small business sector. The evidence suggests that, overall, small Finnish firms have widely adopted various MCS practices and do use quite comprehensive MCS information. A second contribution of this research pertains to the relationship between MCS, strategy and past performance, especially in the context of small business. The findings based on the structural equation modeling (SEM) approach indicate that strategy has a significant impact on the use of MCS information. Nevertheless, the use of MCS information has no significant impact on the performance of the small Finnish firms.