2. An organizational framework for contingency-based MCS research

• Theorists such as Burns and Stalker (1961), Perrow (1970) and Galbraith (1973) focused on the impact of environment and technology on organizational structure

• Waterhouse and Tiessen (1978) and Otley (1980) were able to structure their commentaries by categorizing the early research into these key variables

• Most important new stream of literature has been that related to the role of strategy

  • Important links between strategy, the environment, technology, organizational structure and MCS (Langfield-Smith, 1997)

• Role of MCS with advanced manufacturing settings such as TQM, JIT and flexible manufacturing have been explored by Young & Selto (1991)

• Role of MCS within new structural arrangements such as teams reviewed in human resource management literature (Cohen (1993), Katzenbach & Smith (1993))

• National culture impact studied by Harrison & McKinnon, 1999)

3. The meaning of MCS

• The terms management accounting, management accounting systems, management control systems and organizational controls are sometimes used interchangeably

  • MA = A collection of practices such as budgeting or product costing

  • MAS = systemic use of MA to achieve some goal

  • MCS = Broader term that encompasses MAS and also includes other controls such as personal or clan controls

• MCS is conventionally perceived as passive tools providing information to assist managers

  • On the other hand, from a sociological orientation, MCS can be seen as more active

    • “furnishing individuals with power to achieve their own ends

  • However, contingency-based research follows the more conventional view

• Given that many dimensions of MCS and their contexts change, novel studies will always be required to address emerging issues (Atkinson, Balakrishnan, Booth, Cote, Groot, Malmi, Roberts, Uliana & Wu, 1997)

• A further criticism related to the nature of accounting controls within contingency-based research is that these form only part of broader control systems (Chapman, 1998; Merchant, 1985; Otley, 1980)

  • Clan and informal controls, or integrative mechanisms have had limited studies

  • There are different control cultures:

    • Organic or mechanistic

    • This influences the processes of implementation

    • Becomes particularly important when studying the adoption of innovative MCS such as ABC and BSC which are closely linked to the organization’s control culture (Anderson & Young 1999; Gosselin, 1997; Krumwiede, 1998; Shields, 1995)

4. Outcomes of MCS

• There has been little work relating MCS change to share prices

  • Gordon and Silvester (1999) found no significant association between the installation of ABC and significant stock market reaction

  • “With the numerous possible events effecting share prices, control problems can become acute”

• Managers may adopt MCS for institutional or political reasons that may be inconsistent with rational economic reasons

• Some argue that links between MCS, context and performance can be tenuous as they involve many factors concerning the quality of managing production processes (Birnberg et al, 1983; Kren & Liao, 1988)

5. Contextual variables and MCS

Chapman (1997) provides a discussion of the trade-offs between simplicity, accuracy and generalizability in variable definition

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