Role Of Management Control Systems Research Articles

Role of Management Control Systems in Quality, Innovation and Organizational Performance in Portugal SMES Companies

The purpose of this research is to analyze the relationship between management control systems, total quality management (TQM) and innovation, and also the effects of management control systems in the organizational performance. The research was developed based on a conceptual model designed to analyze these dimensions. The data were obtained through an online questionnaire, sent to small and medium-sized Portuguese companies, having been conducted the study based on responses received from 287 valid questionnaires, and using a multivariate statistical analysis for the statistical development. The findings indicate that non-financial indicators provide innovation strategies of products and processes. However, the financial indicators only provide the innovation strategies of processes. It is also verified that only non-financial indicators provide equally the implementation of TQM practices. The results also show that financial indicators only provide an improvement in the financial results of the organization, while the non-financial indicators also improve its operational performance.

The influence of multinational enterprises on subsidiaries: context matters

PurposeThe purpose of this paper is to examine how differences in the institutional environments of a multinational enterprise (MNE) shape the role of management control systems (MCSs) and social capital in the headquarter (HQ)-subsidiary relationship of an emerging economy MNE.Design/methodology/approachA case study design was adopted in this research in order to understand how the differences in the institutional environments of an MNE shape the design and use of MCSs. Data were gathered by means of semi-structured interviews, document analysis and observations. Interviews were conducted at the Nigerian HQ and UK subsidiary of the Nigerian Service Multinational Enterprise (NSMNE).FindingsThe study found that the subsidiary operated autonomously, given its residence in a stronger institutional environment than the HQ. Instead of the HQ depending on MCSs means of coordination and control, it relied on social capital that existed between the HQ and subsidiary to coordinate and integrate the operation of the foreign subsidiary studied.Research limitations/implicationsThe evidence from this research indicates that social capital could be effective in the integration and coordination of multinational operations. However, where social capital becomes the main mechanism of coordination and integration of HQ-subsidiary operations, the focus may have to be, as in this case, on organisational social capital and the need to achieve group goals, rather than specifically designated target goals for the subsidiary. The implication of this is that it may limit the potential of the subsidiary to explore its environment and search for opportunities. These are important insights into the relationship between developed country-based subsidiaries and their less developed countries-based HQs.Practical implicationsA practical implication of this research is in the use of local or expatriate staff to manage the operation of the subsidiary. While previous studies on the MNE, from the conventional perspective of multinational operation, suggest that expatriates may be sent to the subsidiary to head key positions so as to enable the HQ to have control of the subsidiary operation, it is different in this case. The NSMNE has adopted a policy of using locals who have the expertise and understanding of the UK institutional environment to manage the subsidiary’s operation.Social implicationsThis research sheds some light on how development issues associated with a multinational institutional environment may shape the business activities and the relationship between the HQ and subsidiary. It gives some understanding of how policies and practices may have different impacts on employees as businesses attempt to adjust to pressures from their external environment(s).Originality/valueThe reliance on social capital as a means of coordination and control of the foreign subsidiary in this study is significant, given that previous studies have indicated that multinational HQs normally transfer controls and structure to foreign subsidiaries as a means of control. Also, while previous studies have suggested that MNEs HQ have better expertise that enables them to design and transfer MCSs to foreign subsidiaries, this study found that such expertise relates to the institutional environment from which the HQ is operating from. Through the lens of institutional sociology theory, these findings directly contribute to the literature on the transference of practices and control systems in international business discourse.

The Influence of Multinational Enterprises on Subsidiaries: Context Matters

Purpose – This paper examines how differences in the institutional environment of a multinational enterprise (MNE) shape the role of management control systems (MCSs) and social capital in the headquarters-subsidiary relationship of an emerging economy MNE. Design/methodology/approach – A case study design was adopted in this research. Data was gathered by means of semi-structured interviews, document analysis and observations. Interviews were conducted at the Nigerian headquarter (HQ) and United Kingdom (UK) subsidiary of the Nigerian multinational enterprise. Findings – The study found that the subsidiary operated autonomously, given its residence in a stronger institutional environment than the HQ. Instead of the HQ depending on MCSs as a means of coordination and control, it relied on social capital that existed between the HQ and the subsidiary to coordinate and integrate the operation of the foreign subsidiary studied. Originality/value – The reliance on social capital as a means of coordination and control of the foreign subsidiary in this study is significant, given that previous studies have indicated that multinational HQs normally employ MCSs as a means of control of foreign subsidiaries. Also, while previous studies have suggested that MNEs HQs have better expertise which enables them to design and transfer MCSs to foreign subsidiaries, this study found that such expertise relates to the institutional environment from which the HQ is operating from. Through the lens of institutional sociology theory and social capital theory, these findings directly contribute to the literature on the transference of practices and control systems in accounting and international business literatures.

Organisational efficacy and the role of management control system in construction industry

Management control system is putatively vital for management to resemble organisational performance.The objective of the study is to understand the role of management control system in organisational efficacy. Management control system has obtained growing attention within both academia and industry as part of OE. As works of literature grow, finding new directions by critically evaluating the research and identifying future trends has become central in advancing knowledge for the field. This paper will review some of the work done in this area of study. Applying management control system as a theoretical lens, we develop a research plan from current OE and management control system literature by offering propositions for future research where management control system may permeate contemporary OE topics. In doing so, we provide an initial foundation for organisational efficacy scholars to both incorporate the role of management control system effects into research and launch new research stream.

Strategic responses to institutional pressures for sustainability

PurposeThe purpose of this paper is to examine the role of management control systems (MCS) in strategically responding to institutional pressures for sustainability (IPS). Drawing on institutional theory (DiMaggio and Powell, 1983) and strategic responses to institutional pressures framework (Oliver, 1991), the study argues that organisations strategically respond to IPS using MCS.Design/methodology/approachData were collected by interviewing sustainability managers of a large-scale multinational apparel manufacturing organisation with its headquarters in Sri Lanka.FindingsThe study finds that organisations actively respond to IPS using acquiescence, compromise, avoidance, defiance, and manipulation strategies. The results not only reveal that formal MCS play a critical role in complying with IPS, but also in more active responses, including compromise, avoidance, defiance, and manipulation. The findings highlight that organisations use MCS as a medium to respond strategically to IPS, and in turn, the use of MCS has important implications for organisational change and improvement.Practical implicationsThe study has implications for Western organisations, finding that suppliers committed to sustainability in Asia strategically respond to IPS as a means of strengthening outsourcing contracts, instead of blindly accepting. Findings indicate that organisational changes and success seem to be a function of strategically responding to IPS rather than operating an organisation by neglecting sustainability challenges. The organisational ability to use MCS in strategically responding to IPS has the potential for long-term value creation.Originality/valueThis study provides novel insights into the MCS, strategy and sustainability literatures by exploring different uses of MCS tools in strategically responding to IPS. More specifically, it shows how the use of MCS tools varies in supporting strategic responses, and with respective IPS. In doing so, it enhances our understanding of the importance of the use of MCS in dynamics of institutional change and practical variances in strategically responding to IPS.

Top management team’s shared leadership and ambidexterity: The role of management control systems

The study explores how top management teams’ (TMT) shared leadership is related to organizational ambidexterity in public sector organizations. The study also develops the concepts of traditional and new public management control systems (TPMCS and NPMCS) and theorizes on their moderating role in the relationship between shared leadership and organizational ambidexterity. We based the study on a sample of 85 Swedish municipal housing corporations. We collected the data through surveys of top managers of these corporations and used multiple hierarchical regression analysis to test the relationships. The study found that TMTs’ shared leadership has a positive relationship with organizational ambidexterity in public sector organization and that the increasing use of NPMCS is positively moderating this relationship. We discuss how these finding inform the public sector, strategic management and leadership literature and suggest new areas for research based on our findings.

Management Control for Stimulating Different Types of Creativity: The Role of Budgets

ABSTRACTThe Cools et al. (2017; hereafter, CSV) study examines the role of budget for two different types of creativity: expected creativity (for open problems) and responsive creativity (for closed problems). Using a comparative case study involving four organizations engaged in creative activities, this study finds that budgets are used in a more interactive way in firms where creativity for open problems is more important and are used in a more diagnostic way in firms where creativity for closed problems is more important. In this brief discussion of the study, I first discuss the major strengths of CSV, then offer my comments on some aspects of the paper, and finally identify some potential extensions of this study for future research. In summary, CSV contribute to a growing management accounting literature that documents the positive role of management control systems in creative activities. By distinguishing between different types of creativity, CSV provide many promising opportunities for future research.

Sistem Pengukuran Kinerja dan Kinerja Pembiayaan bagi Hasil Perbankan Syariah di Indonesia

This study aims to examine the role of Management Control System (MCS),attitude to risk and organizational learning to improve the performance ofprofit and loss of sharing defrayal. MCS concept used in this study is diagnostic, interactive and dynamic performance measurement system (PMS). Performance of defrayal of profit and revenue sharing is operationalized into the quantity and quality of defrayal. This study uses a survey by branches of Islamic banks in Indonesia. A total of 99 questionnaires were returned. It is proven that interactive use of PMS has a positive effect on the attitude towards risk and learning organization. This study shows that the resource-based view further elucidate the role of the PMS improves performance compared with agency theory. Practically, this study demonstrates the role of PMS as a system to control the behavior of managers in improving the performance of Islamic banks profit and loss of sharing defrayal

Materializing Investments in Innovation Capabilities: The Role of Management Control Systems

In innovative settings companies face a control problem. On the one hand they need to keep employees in check by monitoring goal attainment and behavior, but on the other hand they also need to make sure that employees have enough leeway to search for innovative solutions and react to emerging opportunities. While early research on management control systems considered them to be harmful to innovation, more recent studies take a more positive perspective. Our paper follows the latter stream of research. We address the control problem in the context of innovation and investigate how management control systems can be used to help firms translate investments in innovation capabilities into innovation performance. Following insights from innovation and management literature, we deviate from prior management accounting research on innovation and shed light on the role of innovation capabilities. We hence provide a more thorough picture of the innovation process due to the fact that we focus on antecedents of innovation instead of innovation per se. Drawing on the Resource Based View of the firm we theorize that neither innovation capabilities nor management control systems on their own are sufficient to achieve innovation success. We suggest that objective performance evaluation hinders firms’ ability to transfer investments in innovation capabilities into innovation performance while cultural controls are useful in this context given their unobtrusive nature. In a next step we posit that the benefits of cultural controls are an increasing function of perceived environmental uncertainty. To test our hypotheses we draw on both survey and patent data. Our results corroborate our hypothesis that objective performance evaluation negatively influences firms’ abilities to translate investments in innovation capabilities into innovation performance while cultural controls help firms translate investments in innovation capabilities into innovation performance. We also find evidence that the beneficial effects of cultural controls increase as a function of perceived environmental uncertainty. Our study contributes to prior research by taking a more nuanced perspective on the innovation process. Furthermore, we also add to the understanding of the benefits of cultural controls. Finally, we also make a contribution to research on complementarity among organizational choices by broadening the set of choice variables firms have at their disposal.

Examining the Role of Management Control Systems in the Creation of an Innovative Culture

This paper examines the association between a differentiation strategy and the emergence of innovation using a package of management control systems (MCS) tools at the operational level. We empirically test theory developed by Simons [(2005). Levers of Organizational Design. Harvard Business School Press, Boston, MA (2010). Accountability and control as catalysts for strategic exploration and exploitation: Field study results. Harvard Working Paper 10-051.] and Chenhall et al. [(2011). Journal of Management Accounting Research, 23: 99–128.] to examine organic innovation culture, formal controls, and an entrepreneurial gap job design (EG), as a package of MCS tools at the operational level. There is evidence that all three MCS tools are both selected or are effective in enhancing innovation. However, internally, staff activities, and line activities show significant variation in their use of MCS tools. Formal controls and EG are effective for staff activities but not for line activities. For line activities organic culture is effective but formal controls are detrimental.

The Role of Management Control Systems and Top Teams in Implementing Environmental Sustainability Policies

This paper simultaneously examines how the design of management control systems and top management team composition help organizations to implement environmental sustainability policies successfully. It also analyzes the effect of those policies on both short-term and long-term performance. A questionnaire was sent to every member of top management teams in 231 public hospitals in Spain. It obtained 457 useful responses from TMT members, allowing us to collect data on 81 full top management teams (35.06%). The partial least squares statistical technique was used to test the causal research model. It was found that the implementation of environmental sustainability policies has a negative effect on short-term organizational performance and a positive effect on long-term performance. The results show that management control systems and top management team diversity have a complementary effect on implementing policies focused on environmental sustainability. A broad design of management control systems helps organizations adopt sustainability policies to achieve long-term performance. It was also found that top management team diversity mitigates the negative effect of adopting environmental sustainability policies on short-term organizational performance.

Cooperation and competition among employees: Experimental evidence on the role of management control systems

This article reviews experimental studies that investigate the influence of management control systems on competitive and cooperative interactions among employees. It begins by describing the role of experiments in improving theory specification, by improving construct definitions, documenting the causal processes that link management controls and performance, and identifying contextual factors that influence these processes. The article then analyzes experimental research on the role of management control systems in the social comparisons and tournament incentives that generate competition in organizations, and in the teamwork and reciprocity processes that support cooperation. A number of open questions and directions for future research, both experimental and non-experimental, are identified.

The role of management control systems in situations of institutional complexity

Purpose– This study investigates in depth how decision-making of different organisational members is shaped by various management control systems (MCSs) that reflect different institutional logics, how the entire organisation deals with the arising institutional complexity and which role different management controls as a system play in such situations.Design/methodology/approach– A case study was conducted on a German Mittelstand firm whose MCSs were shaped by three different logics over time: a family logic, a stakeholder logic and a shareholder logic.Findings– This paper shows how different actors of an organisation confronted with institutional complexity used selective coupling of different MCS components and compartmentalizing MCS components to deal with clashing institutional logics. Thereby, it was possible for the actors to balance different sub-communities within the firm that were shaped by conflicting but yet complementary logics that were required for organisational survival.Research limitations/implications– This study contributes to the understanding of how an MCS can be exploited for organisational structural responses to multiple logics. Due to this research design, the present study deals with challenges ofex postrationalization.Practical implications– The results show options for organisational leaders to deal with different kind of worldviews (i.e. logics) that shape employees’ behaviour. Particularly, this paper explains how leaders can restructure their MCSs to influence human behaviour in times of radical change.Originality/value– This paper contributes to the literature on MCSs by showing what role MCSs play in structural responses to institutional complexity.

A Review on Green Integration into Management Control System

Environmental crises have major negative impacts on social, environment and economy in many countries. With the concerns on environmental issues, people and organizations need to adopt sustainability practices. A question arises on the role of accounting in enhancing the effectiveness of environmental practices. Therefore, this paper reviews on the role of management control system (MCS) in managing environmental or green issues and the extent of green integration into MCS. The literature review indicates that MCS plays a very important role in managing green issues. There are various interpretations, dimensions and levels of extent of green integration into MCS.

The Mediating Role of Management Control System in the Relationship between Corporate Governance and the Performance of Bailed-out Banks in Nigeria

This paper proposes the mediating influence of management control systems using performance measurement as a proxy in the relationship between corporate governance and performance of banks in an era of post banking crisis that called for a bailout reform. Since the performance measurement information is used to influence the behaviour of organizational resources to implement organizational strategies, this study will test its ability to strengthen and facilitates boards’ functional effectiveness in ensuring sound banks’ performance after the bail-out reform using Otley 2009 performance measurement model.

Examining the Role of Management Control Systems in the Creation of an Innovative Culture

This paper examines the association between a differentiation strategy and the emergence of innovation using a package of management control systems (MCS) tools at the operational level. We empirically test theory developed by Simons (2005, 2010) and Chenhall (2011) to examine Organic Innovation Culture, Formal Controls, and an Entrepreneurial Gap job design (EG), as a package of MCS tools at the operational level. There is evidence that all three MCS tools are both selected or are effective in enhancing Innovation. However, internally, Staff activities and Line activities show significant variation in their use of MCS tools. Formal Controls and EG are effective for staff activities but not for line activities. For line activities Organic Culture is effective but Formal Controls are detrimental.

Do management control systems foster or hamper middle managers' entrepreneurial engagement?

Fostering entrepreneurial behaviour has become a key necessity for established firms today and is attracting increasingly scholarly attention. Surprisingly, the role of Management Control Systems (MCS) has, however, remained underexplored. Given their pervasiveness in practice, this seems unfortunate. This even more so as MCS have often been portrayed as at odds with creative or innovative activities. Relying on a sample of Denmark’s 500 largest firms, we test the impact of key MCS on middle managers’ engagement in entrepreneurial behaviour. Results support both a positive as well as a negative view on MCS’ role for entrepreneurship: Some MCS are positively related, while others are negatively related. Thus, the choice of appropriate MCS provides a lever by which top managers can influence the level of entrepreneurship in their firms.

Management Control Systems as Enabling Use in Professional Bureaucracy: Evidence from Management Reform of a Public Hospital

This study explores the role of management control systems in a professional bureaucracy through a case study of a public hospital in Japan. Given the rapid growth of health care expenditures in the developed countries, the implementation of management control systems in public hospitals has been seen as an effective way to restrain medical costs. While previous studies show the administrative control has little effects on physician efficiency in providing medical service, our findings indicate the critical role of management control systems in improving quality and efficiency of medical care. This study applies the concept of enabling (Adler and Borys, 1996) to our case. In our case, an enabling use of management control systems helped medical doctors to understand the financial impacts of their daily clinical decisions and to provide more productive service without sacrificing service quality. Our results offer new insights into management control in the process of management reform in professional bureaucracies.

The use of management control systems to manage CSR strategy: A levers of control perspective

Little is known about the role of management control systems (MCS) in managing the strategic processes that underpin Corporate Social Responsibility (CSR). To enhance our understanding of this phenomenon, this study employs Simons’ (1995) levers of control framework to explore how organizations leverage MCS in different ways in order to drive strategic renewal and trigger organizational change while simultaneously supporting society's broader sustainability agenda. Drawing on data gathered from France's largest listed companies – members of the CAC 40 – we provide insights into the structures and processes that companies employ to design, implement and monitor their CSR strategy. In doing so, we provide evidence of the way that organizations seek to attain their CSR objectives, and of the relationship between the management of CSR and other business processes. Of particular interest is the role of the levers of control in enabling managers to identify and manage threats and opportunities associated with CSR strategy, thus forming risk management processes that support organizations in their attainment of strategic objectives. Furthermore, the study provides evidence suggesting the use of MCS has the potential to contribute to society's broader sustainability agenda through processes that enable innovation, communication, reporting, and the identification of threats and opportunities.

Globalization discourses and performance measurement systems in a multinational firm

This paper examines the role of management control systems, in particular performance measurement systems (PMSs) such as the Balanced Scorecard and key performance indicators, in a multinational context. We begin by exploring how globalization discourses are engaged with, consumed, appropriated, re-produced, disseminated and promoted in a major multinational company. We link the adaptation and dissemination of global discourses of senior managers with Said’s (1975/1997) concepts of authority and molestation. We then examine how PMS are translated and customized within local manufacturing plants and sales units in the UK and China, the significance of benchmarking and the extent to which PMS render managerial discourses of globalization practical. We comment on the importance of discourse in understanding control systems in general and the way in which external discourses impact the internal practices of the organization. We also explore some of the sources that give rise to molestation (deviation of practice from global aspirations of senior managers). We conclude by stressing the potential for the globalizing effects of PMS through the interaction of the discourses of HQ and subunits, even in the absence of explicit statements about globalization.