Manufacturing Business Units Research Articles

The relationship between the role of management accountants, advanced manufacturing technologies, cost system sophistication and performance: a path model

Purpose This paper aims to test a contingency-based path model that concurrently links the role of management accountants (MA) and advanced manufacturing technologies (AMTs) to cost system sophistication (CSS), as well as linking the latter to improvements in organisational performance through improving cost management and product planning decisions. Design/methodology/approach This paper used the questionnaire survey strategy to collect data from 373 medium and large manufacturing business units based in the UK, then subjected the data to structural equation modelling analysis to test a contingency-based path model. Findings The results show that the role of MAs and AMTs positively influence CSS. Moreover, it was found that the latter is positively associated with improvements in cost management decisions which, in turn, lead to improvements in organisational performance. However, no support was found for the association between the level of CSS and improvements in product planning decisions, although the latter was found to be positively associated with organisational performance. These results confirm the theory and empirical findings regarding the role that MAs and AMTs play in designing the cost accounting system, and support the argument that adopting sophisticated cost systems does not lead directly to improvements in organisational performance, unless the benefits of such systems, in terms of improved decision-making and cost applications, are used. Originality/value This research contributes to the literature by testing a contingency-based path model that incorporates hitherto underexamined contextual factors, namely, the role of MAs and AMTs; examining the effect of CSS on a critical output, organisational performance and the mechanisms of this effect; and considering the complexity of the business environments through the concurrent testing of the relationships involved in the research model.

Analysis of Some Factors Affecting Foreign Investment in The Manufacturing Industry East Java

The industrial sector is a sector that plays a vital role in economic development because it can increase economic growth. The industrial sector also plays a role as a factor productive in maximizing the development of the industrial sector marked only by the volume of production but by an increase in various products produced. This study aims to determine the factors that influence investment mode; results in the East Java manufacturing industry. This research method uses secondary data collected from the Central Statistics Agency of East Java Province. The population in the study is data on foreign investment, manufacturing business units, foreign exchange rates, and inflation, and the data used as a sample is annual data (time series). Data collection techniques using documentation and library studies. The data analysis technique used in this research is multiple linear regression. The survey results show that manufacturing industries, foreign exchange rates, and inflation significantly affect the foreign investment variable simultaneously. In contrast, partially, manufacturing industries and inflation have no significant positive impact on foreign investment. In contrast, the foreign exchange rate has a significantly positive effect on foreign investment.

Analysis of Some Factors Affecting Foreign Investment in The Manufacturing Industry East Java

The industrial sector is a sector that plays a vital role in economic development because it can increase economic growth. The industrial sector also plays a role as a factor productive in maximizing the development of the industrial sector marked only by the volume of production but by an increase in various products produced. This study aims to determine the factors that influence investment mode; results in the East Java manufacturing industry. This research method uses secondary data collected from the Central Statistics Agency of East Java Province. The population in the study is data on foreign investment, manufacturing business units, foreign exchange rates, and inflation, and the data used as a sample is annual data (time series). Data collection techniques using documentation and library studies. The data analysis technique used in this research is multiple linear regression. The survey results show that manufacturing industries, foreign exchange rates, and inflation significantly affect the foreign investment variable simultaneously. In contrast, partially, manufacturing industries and inflation have no significant positive impact on foreign investment. In contrast, the foreign exchange rate has a significantly positive effect on foreign investment.

Servitization and performance: the moderating effect of supply chain integration

This research aims to explore how supply chain integration moderates the relationship between servitization and performance. Based on the resource-based view and transaction cost economics, we identified both the benefits and disadvantages of supply chain integration in servitization. Consistent with prior research, we differentiated basic services from advanced services. Hypotheses were tested using international survey data from 931 manufacturing business units. The results indicate that basic services are positively related to sales growth, while advanced services are positively related to return on sales (ROS) growth. Regarding the moderating role of supply chain integration, supplier integration enhances the positive relationship between basic services and sales growth. Customer integration strengthens the relationship between advanced services and ROS growth but weakens the relationship between basic services and ROS growth. Our results suggest that the choice of supplier and customer integration should be aligned with the types of services to maximize the benefits of servitization.

Management accountants and strategic management accounting: The role of organizational culture and information systems

This study aims to contribute to the scant contingency theory literature on the determinants of strategic management accounting (SMA) practices and the role management accountants play. We develop and test a more complex theoretical model than in prior studies, to simultaneously examine the role of three variables: management accountant networking, information systems (IS) quality and organizational culture. These have not been examined in a single model before in the SMA literature. Using data from 149 UK manufacturing business units and the partial least square structural equation modeling, our findings document a positive relationship between management accountant networking and the implementation of SMA practices. However, this relationship is positively moderated by IS quality, which further enables management accountants to implement SMA practices. Unlike IS quality, we do not find empirical support for similar moderating effects by the outcome-oriented culture and innovation-oriented culture. Instead, the innovation-oriented culture has a significant indirect positive effect on SMA implementation through management accountant networking but not a direct one. In contrast, we find a direct positive impact of outcome-oriented culture on SMA implementation but not an indirect one through management accountant networking. These results suggest that in outcome-driven business units, the implementation of SMA practices may not be limited to the accounting function. Managers in other functions may be motivated to implement SMA practices even when management accountants are not part of the process.

Levers of control, management innovation and organisational performance

Purpose This study aims to reinforce the important role of management control systems (MCSs) in managing change through adopting a unique approach to the conceptualisation of Simons’ (1995) levers of control, specifically focussing on the enabling (beliefs and interactive) and constraining (boundary and diagnostic) levers of control and empirically examining their association with management innovation and organisational performance. Design/methodology/approach A mail survey questionnaire was used to collect data, with the Dillman (2007) tailored design method used in regards to the development of questions, and the personalisation and distribution procedures. A total of 645 questionnaires were distributed to either the Financial Controller or Chief Financial Officer of manufacturing business units identified in the OneSource database. Findings The findings reveal that the use of enabling controls was directly associated with organisational performance and with three management innovation dimensions (new structures, processes and practices) with new structures positively associated with organisational performance. It was also found that the use of constraining controls was indirectly, through the extent of adoption of new management techniques, associated with organisational performance. Practical implications The findings have important implications for managers in respect to how they use controls to enhance innovation and organisational performance. Originality/value The findings highlight the importance of the use of MCS, specifically both enabling and constraining controls, in facilitating change (management innovation) and performance. Hence, the findings provide empirical evidence in support of Simons’ (1995, 2000) theoretical assertion that the levers coexist to provide benefits to organisations.

Capability antecedents and performance outcomes of servitization

PurposeThe purpose of this paper is to theoretically articulate and empirically test an integrated model of capability antecedents and performance outcomes of servitization strategies. The authors characterize servitization strategies based on the offering of two types of services: basic services (BAS) and advanced services (ADS).Design/methodology/approachHypotheses are tested based on statistical analyses of a large survey of manufacturers from different countries and sectors.FindingsThe authors find that manufacturing capabilities associate with the provision of BAS, while service capabilities associate with both BAS and ADS; BAS do not impact financial performance, but support the offering of ADS; there seem to be naturally occurring servitization trajectories involving the gradual development of balanced levels of BAS and ADS and adequate levels of manufacturing and service capabilities.Research limitations/implicationsThe findings on servitization trajectories are based on the observation of manufacturing business units at different stages of servitization (cross-sectional data).Practical implicationsManufacturers wishing to servitize should distinguish between BAS and ADS and deploy a balanced adoption of BAS and ADS, using BAS as a platform. This should be accompanied with the building of appropriate capabilities.Originality/valueThis is one of the first studies to show an explicit link between different servitization strategies, capabilities, and servitization maturity. It provides new insights into the servitization paradox and servitization trajectories.

An Empirical Investigation in Sustaining High‐Quality Performance

ABSTRACTMany organizations that were once quality leaders have had challenges sustaining high‐quality performance. Although research has examined frameworks and concepts that lead to high‐quality performance, few studies examine how to sustain high‐quality performance. Sustaining performance may require additional capabilities from what it takes to achieve it. Drawing on quality management literature, organizational resilience literature, and the theory of dynamic capabilities in the strategy literature, this study empirically investigates the effects of four capabilities that help sustain high‐quality performance. The analysis shows that capabilities in improvement, innovation, sensing weak signals, and responsiveness all help sustain high‐quality performance. This suggests that what it takes to achieve high‐quality performance is different, in part, from what it takes to sustain it. The data comes from a survey of 147 manufacturing business units. The analysis shows that the relative benefits of these capabilities may depend on the level of competitive intensity and environmental uncertainty. The findings provide empirical support for a theoretical model and practical guidance for sustaining quality performance.

Diagnosing barriers to make strategic decisions in manufacturing business units

Diagnosing barriers to make strategic decisions in manufacturing business units

Activity-based innovations in the UK manufacturing sector: Extent, adoption process patterns and contingency factors

This study defines Activity Based Innovations (ABI) as ‘any management accounting practice that uses the concept of ‘activities’ as its hard core’. Based on this definition, this study investigates the extent of ABI adoption in UK manufacturing business units, explores the adoption process patterns, and examines the influence of nine factors on ABI initiation and adoption; and five factors on ABI extent of use. These factors relate to the perceived innovation attributes, organisational factors and the perceived environmental uncertainty. Data were collected by mail survey questionnaire of a random sample of business units, with questionnaire design and distribution based on Dillman's Tailored Design Method.Analysis indicates that 32% of respondents are serious ABI users. This is higher than previous UK surveys and could reflect the wide definition used in this survey, or, more likely, increasing take-up of ABI. The study also reveals that, based on a wide definition of ABI together with detailed analysis of stages of implementation, almost 72% of the business units sampled have had experience or interest in ABI and we therefore conclude that ABI can now be regarded as mainstream management accounting practice. Moreover, this study reveals that a large group of respondents adopted non-unitary or ad hoc adoption process patterns not reported in previous literature. Significantly, in 11% of cases ABI adoption was mandated on business units. Multivariate analysis reveals that top management support and level of overhead were associated with ABI initiation and adoption while, at the initiation stage, the ABI attributes, relative advantage and cost were also significant. The extent of ABI use was associated with top management support and an ABI champion.This is the first study that investigates activity-based innovations as a set of inter-related techniques. Its results show that the adoption process could follow different patterns and highlight the importance of including innovation attributes in comprehensive contingency studies. Furthermore, it emphasises the importance of controlling for forced adoption cases, the organisational variables of top management support and innovation champion, and any innovation-specific contextual factors (such as level of overhead) in management accounting innovation studies.

The moderating effect of organisational life cycle stages on the association between the interactive and diagnostic approaches to using controls with organisational performance

This study examines the moderating effect of organisational life cycle (OLC) stages on the association between the approach to using controls (interactive versus diagnostic) with organisational performance. Analysis is conducted in respect to Miller and Friesen's (1984) organisational life cycle (OLC) stages (birth, growth, maturity, and revival). Data were collected by a survey questionnaire from a random sample of 343 General Managers in Australian manufacturing business units. The results indicate that the interactive approach was positively (negatively) associated with organisational performance in the growth (revival) stage. The use of the diagnostic approach was positively (negatively) associated with organisational performance in the revival (maturity) stage. The study contributes to the literature linking management control systems and OLC stages by providing knowledge regarding the suitability of interactive and diagnostic approaches to using controls for business units within specific OLC stages.

Management control systems from an organisational life cycle perspective: The role of input, behaviour and output controls

AbstractThis study examines the association between the use of three types of controls (input, behaviour and output) and Miller and Friesen's organisational life cycle (OLC) stages (birth, growth, maturity, revival and decline). Data were collected by a survey questionnaire from a random sample of 1,000 General Managers in Australian manufacturing business units. The results indicate that the extent of use of different controls is associated with OLC stages. Specifically, both behaviour and input controls were found to be used to a significantly greater extent than output controls in both the birth stage and the growth stage, while all three types of controls were used to a similar level in the maturity and revival stages. An examination of the extent of use of controls across OLC stages revealed that each type of control was used to a significantly greater extent in the growth and revival stages than the birth and maturity stages. The study contributes to the literature by linking management control system studies to OLC studies. Most importantly, the study assists Australian manufacturing business units in identifying the appropriate use of controls both in and across OLC stages.

The Slack Mechanisms in the Regulated Vs De-Regulated Environment: The Empirical Study from Indonesian Manufacturing Business Units

This study examines the impact of regulatory environment on the slack mechanisms of business units in Indonesia. The slack mechanisms of this study, specifically is conducted by testing the impacts of competitive forces and diversification on the use of accounting performance measures and financial and budgetary slack. Furthermore, this study then examines whether the impact of regulatory environment in which the company operates may affect those mechanisms. Multi-level structural equation modeling is used to test 122 firm-specific responses from manufacturing industry. The results indicate that the regulation affect the impact of competitive forces, diversification and use of accounting numbers for performance evaluation on the financial and budgetary slack.

Antecedents and consequences of combinative competitive capabilities in manufacturing

PurposeExtant manufacturing strategy research dichotomizes the trade‐off model and the cumulative model, but fails to explain each strategic result. The purpose of this paper is to propose four key antecedents of a trade‐off versus a cumulative model by manufacturing business units (MBUs), and in turn, their association with business performance.Design/methodology/approachThe authors first review literature pertaining to the history and major themes of manufacturing strategy. Next, the authors present a theoretical model with explanations of the methodology and research design used. The model is empirically tested, and conclusions, managerial implications, and future research opportunities that stem from this research effort are provided.FindingsStrategic time orientation, as well as manufacturing practices of supply chain integration intensity and advanced manufacturing technology, are empirically found to be associated with MBUs' combinative competitive capabilities. More specifically, manufacturers following these practices are more apt to realize higher levels combinative capabilities, as depicted by the cumulative model.Originality/valueThe paper shows that these manufacturing practices may extend the time within which the MBU reaches its capability frontiers, and therefore, increase the odds that it can exploit its current resources. Moreover, MBU size negatively moderates the relationship between advanced manufacturing technology and the cumulative model.

Evolutionary model of an anonymous consumer durable market

An analytic model is presented that considers the evolution of a market of durable goods. The model suggests that after introduction goods spread always according to a Bass diffusion. However, this phase will be followed by a diffusion process for durable consumer goods governed by a variation-selection-reproduction mechanism and the growth dynamics can be described by a replicator equation.The theory suggests that products play the role of species in biological evolutionary models. It implies that the evolution of man-made products can be arranged into an evolutionary tree. The model suggests that each product can be characterized by its product fitness. The fitness space contains elements of both sites of the market, supply and demand. The unit sales of products with a higher product fitness compared to the mean fitness increase. Durables with a constant fitness advantage replace other goods according to a logistic law. The model predicts in particular that the mean price exhibits an exponential decrease over a long time period for durable goods. The evolutionary diffusion process is directly related to this price decline and is governed by Gompertz equation. Therefore it is denoted as Gompertz diffusion.Describing the aggregate sales as the sum of first, multiple and replacement purchase the product life cycle can be derived. Replacement purchase causes periodic variations of the sales determined by the finite lifetime of the good (Juglar cycles). The model suggests that both, Bass- and Gompertz diffusion may contribute to the product life cycle of a consumer durable.The theory contains the standard equilibrium view of a market as a special case. It depends on the time scale, whether an equilibrium or evolutionary description is more appropriate. The evolutionary framework is used to derive also the size, growth rate and price distribution of manufacturing business units. It predicts that the size distribution of the business units (products) is lognormal, while the growth rates exhibit a Laplace distribution. Large price deviations from the mean price are also governed by a Laplace distribution (fat tails). These results are in agreement with empirical findings. The explicit comparison of the time evolution of consumer durables with empirical investigations confirms the close relationship between price decline and Gompertz diffusion, while the product life cycle can be described qualitatively for a long time period.

Employee empowerment: extent of adoption and influential factors

PurposeThe purpose of the paper is to examine the extent of employee empowerment within Australian manufacturing business units using an adapted version of the Pardo del Val and Lloyd instrument. The paper also examines the influence of organizational (business unit size, training, and link to rewards) and cultural (innovation, team work, and outcome orientation) factors on the extent of adoption of employee empowerment.Design/methodology/approachData was collected by survey questionnaire distributed to one business unit within 250 manufacturing organizations.FindingsThe results reveal a moderate level of employee empowerment in Australian organizations, with the cultural factor, teamwork, and the organizational factors, training and link to rewards, found to have a significant impact on the overall level of adoption of employee empowerment. In addition, specific cultural and organizational factors were found to be associated with four different dimensions of employee empowerment (collaboration, formalization, directness, and degree of influence), and the empowerment of employees at three different stages of the decision making process.Practical implicationsThe Pardo del Val and Lloyd measure provides a means by which organizations can gain an improved insight into their current employee empowerment initiatives and assess the critical preconditions that are most effective in enhancing employee empowerment initiatives.Originality/valueThis study confirms the validity of a new measure of employee empowerment. Furthermore, the study provides the first empirical analysis of the association between organizational and cultural factors with the level of employee empowerment as assessed by this measure.

The Influence of Cost and Quality Priorities on the Propensity to Outsource Production*

ABSTRACTOutsourcing of production has escalated over the past decade due to unprecedented competition and worldwide access to low‐cost labor markets. This article examines how cost and quality priorities—two key attributes of manufacturing strategy—influence a manufacturer's propensity to outsource. By doing so, we bridge the existing gap between research on manufacturing strategy and firm boundaries. We develop a theory‐based model that links a manufacturer's cost and quality priorities to its plans to outsource production. Our empirical analyses, based on survey data obtained from 867 manufacturing business units, control for firm‐specific factors previously shown to impact outsourcing, including asset specificity, uncertainty, and current capabilities in cost and quality. We found that the competitive priority placed on cost played an integral role in sourcing decisions, while, surprisingly, conformance quality priorities did not. The cost result is consistent with our expectations and observations in practice. The significant effect of cost priority on outsourcing shows that any theory of firm boundaries that fails to consider competitive priorities is incomplete. The finding regarding quality, which was counter to our expectations, may partially explain why there is an emergence of so many nonconforming products associated with outsourcing. Taken together, our results provide theoretical insights for future research into how manufacturing managers can improve their decision making on outsourcing production.

Outsourcing congruence with competitive priorities: Impact on supply chain and firm performance

AbstractThe growth of outsourcing has led outsourcing strategies to become an increasingly important component of firm success (Gottfredson et al., 2005). While the purported goal of outsourcing in supply chains is to derive a competitive advantage, it is not clear whether the outsourcing decisions of firms are always strategically aligned with their overall competitive strategy. In this paper we evaluate the degree of congruence (fit or alignment) between a firm's outsourcing drivers and its competitive priorities and assess the impact of congruence on both supply chain performance and business performance, using empirical data collected from manufacturing business units operating in the United States. We find outsourcing congruence across all five competitive priorities to be positively and significantly related to supply chain performance. We also find the level of supply chain performance in a firm to be positively and significantly associated with the firm's business performance.

Antecedents and performance outcomes of global competence: An empirical investigation

We examine the role of commitment to supply chain management (CSCM) and information technology (IT) in the achievement of global competence (GC). Through an empirical examination of 667 manufacturing business units in the U.S., we confirm the importance of global competence using two objective measures of firm performance. We investigate the direct effects of CSCM and experience with IT on performance, in addition to their indirect effects through global competence. We show global competence to be linked directly to objective measures of sales, and indirectly to return on assets (ROA). Despite manufacturers' hefty investments in IT, we find that experience with IT does not drive ROA directly, but only indirectly through global competence and sales.

Translating Organizational Learning Orientation into Performance: The Role of Management Control Systems

There is considerable evidence that the best performing organizations are those where learning is deeply embedded in the culture of the firm. It is often argued that management control systems stifle learning and personal development by severely limiting the ability of employees to exert control or change the nature of their work activities (Winter, Sarros & Tanewski, 1997, p. 9). Others argue that it is the role of senior management to select controls that will encourage workers to learn and adapt to increasingly complex organizational and market environments. This study explores the relationship between organizational learning orientation and two control choices - input control and output control - and their subsequent relationship with firm performance. We argue that a firm committed to organizational learning as a strategic priority will rely on the use of input controls to ensure that the 'right' individuals are employed, trained and socialized to accept the values of the firm. We also expect that firms will supplement input controls with the use of output control. Our hypotheses are tested using data collected from 188 manufacturing business units with profit centre responsibility. The results support the thesis that the choice of controls will not only be influenced by a learning orientation but also will result in positive organizational outcomes.