Academic journal article International Journal of Entrepreneurship

Cultural Control, Creativity, Social Capital and Organizational Performance: Empirical Study of Small to Medium Sized Enterprises (SME) in Indonesia

Academic journal article International Journal of Entrepreneurship

Cultural Control, Creativity, Social Capital and Organizational Performance: Empirical Study of Small to Medium Sized Enterprises (SME) in Indonesia

Article excerpt

INTRODUCTION

In control system literature, the concept and operation of cultural control are still ambiguous. Prior studies on cultural control were still overlapped with other forms of control, such as informal control (Cravens, et al., 2004), clan control (Ouchi, 1980; Govindarajan & Fisher, 1990), group control (Abernethy & Brownell, 1997), professional control (Abernethy & Stoelwinder, 1995; Orlikowsky, 1991), personal control (Wiersma, 2009), ideological control (Collier, 2005; Ditillo, 2004) and social control (Merchant, 1985; Rockness & Shields, 1988). Merchant & Van der Stede (2007) stated that cultural control was not limited by element of formal and informal system domains which are made in written and unwritten form (such as, management philosophy, ideology and values).

In this paper, cultural control follows the recent literature. Cultural control is a part of written and unwritten values and organizational rule which shapes organizational control and employee behavior. This definition does not only cover the informal control but it also adds formal control (Malagueno & Bisbe, 2010). Basically, cultural control is a part of management control system (MCS). It is in line with the definition of MCS which says that MCS is a tool designed to help the manager in decision making process by using formal and informal control (Chenhall, 2003), to reach the desired organizational purpose, including organizational performance (Bhimani et al., 2008).

Studies about cultural control and performance still suffer from some problems. Previous research found that formal control and informal control which became the part of cultural control would directly facilitate the performance (Kallunki et al, 2010; Chapman and Kihn, 2009), yet other research found that cultural control would firstly facilitate organizational capability (Malagueno and Bisbe, 2010), and the capability would then improve organizational performance (Henri, 2006). Meanwhile, Batac & Carassus (2009) found that cultural control would halt the organizational capability. Prior studies ignored the cultural-based industry as an object of the study, although the control form used in the study was entirely based on culture. Almost all studies on cultural control and capability are performed in developed countries, and rarely performed in developing countries.

This paper investigates the relationship between cultural control and performance in batik industry, based in Indonesian culture as developing country. Cultural factors, adoption and control in developing countries will be different from the ones used in developed countries (Joshi, 2001). The study on the use of control in developing countries potentially results in a new vision. The purpose of this study is also to fill the research gap in previous literature by testing direct and indirect relationships between cultural control and performance with creativity and social capital as intervening variables. Meutia (2012) found that creativity and social capital were two core competencies in Indonesian culture-based batik industry. Results from current studies show creativity and social capital are part of capability and variables that mediate the relationships between cultural control and performance.

The remainder of the paper is organized as follows. Section two will describe Indonesian culture-based batik industry. Section three will explain hypotheses in this study. Section four will present research methods, section five will present the result from this study meanwhile section six elaborates the concluding remarks.

BATIK INDUSTRY IN INDONESIA

Batik industry in Indonesia develops rapidly after this traditional cloth was acknowledged by UNESCO in 2009 as a cultural heritage from Indonesia. The development of batik industry has reached 300 percent for the last 3.5 years, with the revenue reaches 100 billion rupiahs per year. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.