The Impact of Business Unit Strategy, Structure and Technical Innovativeness on Change in Management Accounting and Control Systems at the Business Unit Level: An Empirical Analysis

By Verbeeten, Frank H. M. | International Journal of Management, April 2010 | Go to article overview

The Impact of Business Unit Strategy, Structure and Technical Innovativeness on Change in Management Accounting and Control Systems at the Business Unit Level: An Empirical Analysis


Verbeeten, Frank H. M., International Journal of Management


This study tests the hypothesis that business unit strategy and business unit structure affect change in a business unit's Management Accounting & Control System (MACS). Business units are parts of a larger 'whole' organization, such as departments, teams, strategic groups or divisions. Change in MACS has been assessed by asking managers to estimate the number of changes that has taken place in their business unit's MACS over a two-year time period. Using data from a survey amongst 61 business unit managers in the Netherlands, the study suggests that the costing & transfer pricing and reward system are relatively 'resistant to change'. The results also indicate that the administrative capacity of a business unit is the main driver of change in MACS. Finally, business unit strategy and business unit structure affect change in specific components of MACS at the business unit level, apparently depending on whether the change in MACS facilitates or influences managerial decisions.

Introduction

Despite several recent studies (eg. Emsley, 2005; Bouwens & Abemethy, 2005), our collective knowledge on the factors that drive change in management accounting & control systems (MACS) at the business unit level is limited. This is rather surprising, considering the fact that business units tend to vary considerably with regard to the accounting changes that they adopt and implement (cf. Bouwens & Abemethy, 2005; Kasurinen, 2002). Several studies have empirically investigated the impact of contextual and structural variables at the firm level in different countries (cf. Williams & Seaman, 200 1 ; Libby & Waterhouse, 1 996); however, general management literature suggests that theoretical models on change may not be transferable to other organizational levels or social-economic environments (see Pettigrew et al, 2001 ; Armenakis & Bedeian, 1999). Other empirical studies on change in MACS at the business unit level have focused on the relation between structure and the adoption of specific MACS-inno varions (for example, Activity Based Costing, ABC; see Gosselin, 1997). However, structural arrangements may drive the adoption of a specific change in MACS yet may not drive change in MACS more generally (Emsley, 2005). In addition, studies that focus on the adoption of specific MACS-innovations may not provide insight in the factors that drive important changes in MACS; the importance of change in MACS is explicitly considered in this study.

The objective of this study is to investigate whether strategy and structure drive (major) change in MACS at the business unit level. The model that is developed in the theoretical section is subsequently tested using survey data from 61 business unit managers in the Netherlands. The results indicate that consistent with the results from studies at the corporate level (cf. Williams & Seaman, 2001 ; Libby & Waterhouse, 1 996), the planning, controlling and reporting components of the MACS are changed more frequently than the costing and reward system components of MACS. The administrative capacity of the business unit appears to be the main driver of change in MACS; in addition, strategy and structure drive change in specific components of MACS. Finally, industry and size indirectly affect change in MACS through their impact on the administrative capacity of the business unit Overall, change in MACS appears to be related to the function of the MACS-component; i.e., organic business units appear to initiate (major) change in the decision-making components of MACS while more mechanistic business units seem to initiate (major) change in the decision-influencing components of MACS.

The remainder of this paper is organized as follows. The next section provides a review of the literature on change in MACS. Next the research method and design are described, including the data collection methods and the sample selection. The fourth section provides the results of this study, as well as a discussion of the findings. …

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