Management Control Systems Cooperation and Performance in

Management Accounting Research 17 (2006) 315339
Management control systems, cooperation and performance in strategic supply relationships: A survey in the mines
Habib Mahama
School of Accounting, University of New South Wales, Sydney 2052, Australia
Abstract This study investigates the relationships between two management control systems (performance measurement systems and socialisation processes) and cooperation and how that translates into relationship performance in strategic supply relationships. Drawing on the existing literature, we develop a theoretical model that shows the predicted relationships between our theoretical constructs. We test the theoretical model using partial least squares (PLS) on survey data collected from the Australian mining and resources sector. The results show direct relationships between performance measurement systems (PMS) and three dimensions of cooperation (information sharing, problem solving and willingness to adapt to changes) and an indirect relationship between PMS and restraint from use of power. Also, PMS is found to have a facilitating role in socialisation processes. The predicted association between socialisation processes and cooperation was partially supported. Also, three dimensions of cooperation (problem solving, willingness to adapt to changes and restraint from use of power) were found to be directly associated with relationship performance while information sharing had indirect relationship with performance. The results show a positive association between PMS and relationship performance. Finally, the results indicate that socialisation processes are indirectly related to performance. The results have important implications for both management control research and management control systems design. 2006 Elsevier Ltd. All rights reserved.
Keywords: Management control systems; Performance; Performance measurement systems; Socialisation processes; Strategic supply relationships
1. Background The importance of developing closer and longer-term relationships with key suppliers of goods and services has increasingly been recognised by practitioners and academics alike (Ring and Van de Ven,
Tel.: +61 2 9385 5843; fax: +61 2 9385 5925. E-mail address: h.mahama@unsw.edu.au.
1044-5005/$ see front matter 2006 Elsevier Ltd. All rights reserved. doi:10.1016/j.mar.2006.03.002
316
H. Mahama / Management Accounting Research 17 (2006) 315339
1992; Kelly, 1995; Domberger, 1996; Van der Meer-Kooistra and Vosselman, 2000; Langeld-Smith and Smith, 2003). Practically, there has been rapid growth in the number and signicance of these relationships as organisations streamline their operations and contract out many of their functions (Quinn et al., 1990; Ring and Van de Ven, 1992; Lacity and Hirschheim, 1993a,b). Generally referred to as alliances or interrm networks, the growing number of these relationships stems from a general perception that they enable organisations to secure valued resources and technology at potentially lower risk than corporate acquisitions (Ireland et al., 2002). Consequently, they have been accorded strategic importance in organisational decision making as such relationships now come into existence as part of the overall organisational strategy. Despite the potential to improve quality, exibility and cost through alliances, there is documented evidence of alliance failure (Spekman and Isabella, 2000; Ireland et al., 2002; Langeld-Smith and Smith, 2003). The failure of alliances is partly attributed to inadequate level of cooperation among alliance members (Smith et al., 1995). Many academic commentators consider cooperation to be crucial to the success of alliance relationships (Browning et al., 1995; McAllister, 1995; Chen et al., 1998). Cooperation, it is argued, maximises the mutual benets of exchange participants by bringing about effective co-ordination of activities, pooling of knowledge and complementary strength, real-time resolution of conicts and equitable distribution of benets (Browning et al., 1995; Smith et al., 1995; Faerman et al., 2001). Though alliances are often referred to as cooperative relationships, cooperation should not be assumed to exist in all alliances simply because two or more organisations are engaged in a collective activity (Das and Teng, 1998). For Browning et al. (1995) conditions for cooperation need to be mobilised and enacted for cooperation to emerge. Smith et al. (1995) argue that cooperation can emerge if adaptable arrangements are put in place to assure participants of continuity of the relationships, make clear the benets of cooperation and to make them recognise the need to reciprocate for any benets derived from the relationship. In his theory of organising and managerial processes, Barnard (1938, cited in Chen et al., 1998) argues that the inducement, facilitation and maintenance of cooperation constitute the essence of organising and managing. This suggests a role for management control systems (MCS) in fostering cooperation among exchange participants. A number of accounting researchers have long recognised the potential role of MCS in the management of alliance performance (Gietzmann, 1996; Hopwood, 1996; Tomkins, 2001) and some accounting research on alliances has started emerging (Frances and Garnsey, 1996; Van der Meer-Kooistra and Vosselman, 2000; Langeld-Smith and Smith, 2003; Dekker, 2004; Hakansson and Lind, 2004; Seal et al., 2004). Despite these efforts, our understanding of the link between MCS and cooperation remains underdeveloped. This paper aims to contribute to this emerging research by empirically examining the impact of MCS on cooperation among alliance participants. More specically, the paper focuses on how cooperation is mobilised and enacted in one particular type of alliancestrategic supply relationships (SSRs).1 The paper also examines the link between cooperation and SSRs performance. To investigate how MCS are implicated in cooperation and performance in SSRs, we conducted a survey of supply relationships in the Australian mining and resources sector. We predicted that two MCS (performance measurement systems (PMS) and socialisation processes) will be positively associated with cooperation and the results provide support for direct positive relationships between PMS and three dimensions of cooperation (information sharing, problem solving and willingness to adapt to changes) and an indirect relationship between PMS and restraint from use of power (through information sharing).
Strategic supply relationship is used loosely by practitioners to refer to longer-term buyersupplier relationships that involve large amount of spend and are critical to the market performance of the parties.
1
317
Partial support is provided for the association between socialisation processes and cooperation. Furthermore, the results provide support for direct positive relationships between three dimensions of cooperation (problem solving, willingness to adapt to changes and restraint from use of power) and relationship performance and an indirect positive relationship between information sharing and performance (through restraint from use of power). We also expected a positive association between PMS and relationship performance and the results conrmed this prediction. There was no signicant direct relationship between socialisation processes and performance; the relationship was indirect through information sharing and restraint from use of power. The paper makes a number of contributions to the literature. First, our results indicate that PMS are important to the mobilisation and enactment of cooperation in SSRs. The signicance of PMS is also demonstrated by its direct and indirect impact (through three dimensions of cooperation) on relationship performance. Second, the study highlights the intermediate role of information sharing in the successful management of interrm relationships. More so, the results foreground the importance of socialisation processes to information sharing and thus reinforce the view that control mixes may be useful in managing interrm relationships. Third, the paper highlights the importance of power relations in SSR. Finally, the results also demonstrate the need for partners in SSRs to cooperate, given that cooperation positively impacts on relationship performance. The remainder of the paper is structured as follows: the next section provides an introductory note on SSRs. We draw on extant literature to develop our theoretical model and testable hypothesis in Section 3. Section 4 presents the research methods and results of the study. The nal section concludes the study, discusses the limitations of the study and provides directions for future research.
2. A brief note on strategic supply relationship SSRs occur when separate legal entities, constituting themselves into buyers and suppliers, adopt a high level purposeful exchange to maintain inter-organisational relationships over an extended period of time, in which both parties may have the power to shape its nature and future direction (Spekman, 1988). These organisations are autonomous and retain independent decision making powers (Wood and Gray, 1991). Though buyersupplier relationships are not new, SSRs are beyond the normal market transaction. They involve the interpenetration of organisational boundaries with the relationships sometimes taking a network form. SSRs involve recurrent exchanges and are concerned with current and future actions that are expected to benet the exchange participants in the long run. As these are not discrete exchanges, transactions are not viewed in isolation but in relation to past and expected future transactions. They are also relational in nature in that they focus on the entire relations (social and economic) as it develops through time (MacNeil, 1978). This recognition of the social in addition to the economic relations makes the identity of the parties, their relational history, and the establishment of extensive networks of communication signicant features of SSRs. The uniqueness of SSRs, and contemporary interrm relationships in general, has attracted the attention of management control researchers, who examine the reasons for their emergence and their control over time. Management control researchers who seek to understand the reason for the emergence of SSRs and other interrm relationships advance different reasons for the proliferation of this mode of organising economic activities. The chief reason advanced is that of economic efciency (Robins, 1987; Heide
318
and John, 1990; Williamson, 1991; Burgers et al., 1993). The second reason is the need to minimise dependence and uncertainty in the face of resource insufciency (Gray and Wood, 1991; Heide, 1994; Song, 1995; Teng et al., 1995). Yet, institutional theorists explain the drive towards collaboration as being motivated by institutional isomorphism (Sharfman et al., 1991; Loh and Venkatraman, 1992b; Song, 1995). There is also an emerging literature on how alliances operate and the roles of management controls in the ongoing management of the relationships (Berry et al., 1985; Anderson and Weitz, 1992; Heide and Miner, 1992; Heide, 1994; Birnberg, 1998; Bensaou and Anderson, 1999). In the accounting literature, researchers have started examining how accounting intertwines with other management control systems in the processes of managing interrm relationships (Seal et al., 1999; Mahama, 2000; Van der MeerKooistra and Vosselman, 2000; Langeld-Smith and Smith, 2003; Cooper and Slagmulder, 2004; Dekker, 2004; Hakansson and Lind, 2004; Seal et al., 2004). In particular, accounting researchers have focused on the design of management control structures and the development of control mixes (formal and informal controls) within these structures. Van der Meer-Kooistra and Vosselman (2000), for instance, draw largely from transaction cost economics and the trust-based literature to propose three patterns of management control; the cost effective choice of which is said to depend on transaction characteristics, the transaction environment and the nature of the transacting parties. Building on Van der Meer-Kooistra and Vosselman model of management control, Langeld-Smith and Smith (2003) empirically investigate the choice of the three control patterns and the relative use of formal and informal (trust-based) controls within those structural patterns. The Langeld-Smith and Smith (2003) study, also highlight, inter alia, how control patterns gradually change over time. Dekker (2004) examines issues of control in interrm relationships and identies two control problems that require management attention: the management of appropriation concerns and the coordination of task. He argues that while designing and implementing formal and informal control may mitigate these problems, the processes of selecting a partner can prove to be a cost-effective way of preventing (or at least minimising) the problem. Though the studies reviewed above improve our knowledge of management control in interrm relationships, they do not explicitly consider the implications of management control systems and practices on cooperation within such relationships. How do these controls (formal and informal, structural or processual) foster cooperation among buyers and suppliers engaged in longer-term economic exchanges? This question is at the heart of the present paper.
3. Theoretical framing and hypothesis formulation 3.1. The concept of cooperation Cooperation as a social construct is widely used but variously dened. Some scholars dene it in terms of the process by which individuals, groups and organisations jointly undertake to interact for mutual benet (Smith et al., 1995). For example, we see the coming together of buyers and suppliers (also joint venture, etc.) to transact interactive longer-term exchanges being referred to as cooperative relationships. Here cooperation is conceptualised as a structural (collective) form of organising transactions. While cooperation requires a collective endeavour, other scholars argue the existence of cooperation is not determined by the presence of a collective activity but by the dynamics of interactions within the
319
collective (Chen et al., 1998; Das and Teng, 1998). Although individuals or organisations may interact to achieve a collective benet, they may not necessarily share a common interest in paying the cost of attaining that benet (Earley, 1989). We believe with Chen et al. (1998) and Das and Teng (1998) that cooperation should not be assumed simply because there is a collective activity but that it is something that must be enacted and sustained within the interactions that constitute the collective activity. Cooperation exists in a relationship not only because the participants goals are related but also because they work together in a co-ordinated way to achieve these goals. Thus, what distinguishes a cooperative activity from others is the goal directed effort (behaviour) of the participants. Focusing on how individual actions are joined and synthesised in the process of creating mutual benets, academic commentators identify different dimensions of behaviour that constitute cooperation to include information sharing (Tjosvold, 1988; Argyle, 1991; Heide and Miner, 1992); joint problem solving (Tjosvold, 1988; Heide and Miner, 1992); willingness to adapt to unanticipated changes (Heide and Miner, 1992) and restraint from the use of power to the disadvantage of other participants (Heide and Miner, 1992). In this paper, we focus on how these cooperative behaviours are mobilised and enacted in SSRs. Given that these four dimensions form the basis of our analysis of cooperation in SSRs, brief explanations of how they constitute cooperation are provided below. Information sharing relates to the willingness of participants to exchange important, possibly proprietary, information about their relationship among themselves. This may entail engaging each other in product design, open book arrangements, sharing of cost data and the discussion of future plans (Cannon and Perreault, 1999). Information sharing enhances cooperation by creating awareness of mutual expectations and capabilities of the parties (Cannon and Perreault, 1999) and developing shared meaning of actions. Joint problem solving has long been argued to be crucial to managerial efciency (Lang et al., 1978). Cannon and Perreault (1999) argue that cooperation does not imply parties acquiescence to each others needs but rather working harmoniously together for the mutual fullment of these needs. This requires treating problems as joint responsibilities and working collaboratively towards resolving those problems. A focus on working independently on problems is characteristic of situation of low cooperative behaviour. Willingness to adapt to changes in the exchange context is crucial to cooperation. Contracting theories recognise that longer-term exchange relationships have futures and that the futures are uncertain and complex to the extent that it may be difcult to reduce contractual arrangements into complete and precisely dened contracts (MacNeil, 1980; Goetz and Smith, 1981). Consequently, the preservation of an exchange relationship requires parties to adopt exible responses to unanticipated changes (Heide and Miner, 1992). Flexible responses to changing conditions imply that parties are able to (re)negotiate solutions when problems arise that are not completely and comprehensively covered by the original contractual agreement. Restraint from the use of power is considered as a strong indication of exchange participants predisposition to cooperate with each other. Power is always present and important in exchange relationships (MacNeil, 1980). Relational contract theory recognises that exchange inevitably creates dependence and that parties will exercise control over the resources in their possession in order to acquire power over those who depend on these resources. Power, according to MacNeil (1980), is the ability to impose ones will on others irrespective of or by manipulating their wish (p. 32). The dependence or interdependence of parties on their exchange partners creates power differences whenever the exchange is projected into the
320
future. Since SSRs involve the interdependence and the projection of exchange relations into the future, power becomes an important feature of the contractual relations. 3.2. Management control systems MCS is a broad concept consisting of many elements and used for varying purposes (Merchant, 1985; Langeld-Smith, 1997; Widener and Selto, 1999). Ansari (1977) denes management controls to include all those organisational arrangements and actions designed to facilitate the achievement of performance goals with the least unintended consequences. MCSs are generally conceptualised to have two dimensions; namely, performance evaluation and socialisation of organisational members (Ansari, 1977; Eisenhardt, 1985; Govindarajan and Fisher, 1990). The performance evaluation aspect focuses on the process of measuring, evaluating and rewarding performance (Eisenhardt, 1985; Govindarajan and Fisher, 1990). Central to the performance evaluation function of a MCS are performance measurement systems. PMS generate and use information that is capable of inuencing individuals who are pursuing their self-interest to also pursue collective interest by aligning their individual interests and periodically assessing how these aligned interests are met. The socialisation aspect, on the other hand, focuses on minimizing divergence of preferences (Eisenhardt, 1985; Govindarajan and Fisher, 1990). Siegel et al. (1991) dene socialisation as the acquisition of values, attitudes, skills and knowledge that promote goal congruence among organisational members (Siegel et al., 1991).2 For Wooldridge and Minsky (2002), socialisation is the way an individual is taught and learns what behaviour is desirable and customary. Thus, it entails social interaction processes that focus on getting individuals to accept collective norms, values and goals as their own, thus ensuring that they work towards achieving these goals (Ahuja and Galvin, 2003). Ansari (1977) argues that MCS research should consider both the PMS and socialisation processes. He reasons that the working of MCS will require both performance measures and socialisation process. In the present study, we conceptualise MCS to include both PMS and socialisation processes. 3.3. Management control systems and cooperation in SSRs Langeld-Smith (1997) contends that organisations may be able to use their MCS to gain cooperation from organisational members and to channel their efforts towards the collective. As yet, this link is not explicitly examined in the management control literature. We empirically examine the espoused connection between MCS and cooperation in SSRs. Consistent with the above literature, we conceptualise MCSs to include accounting PMS and socialisation processes. In the following subsections, we theorise the links between MCSs and cooperation and develop testable hypotheses therefrom. The hypothesised relationships are shown in Fig. 1. 3.3.1. Performance measurement systems and cooperation in SSRs One of the factors identied to be crucial to the development and stimulation of cooperation in a relationship is accountability structure (George, 1992; Wagner III, 1995). In group situations, some individuals will prefer to share in the benet without signicantly contributing to its production. Such
Though the term goal congruence is used loosely here, it was not explicitly measured or captured in the theoretical model. Future research may benet from explicitly measuring this variable.
2
321
Fig. 1. Theoretical model.
behaviours are variously referred to as free riding and/or social loang.3 The possibility for some exchange participants to engage in free riding and social loang creates an equally uncooperative phenomenon called the sucker effect; the tendency for an individual, surrounded by others who are likely to free ride, to engage in free riding in order to avoid the inequity of contributing more than others for the same share of a collective benet (Wagner III, 1995). Whatever, the form it takes, free riding or social loang lead to a reduction in individual effort and collective outcomes. In consonance with agency theory, Wagner III (1995) and George (1992) note that such uncooperative behaviour may arise because the participants behaviour cannot be observed or assessed. Accountability structures resolve this problem in two ways. First, they encourage information gathering and facilitate information sharing through feedforward and feedback loops. These information gathering and sharing loops enhance transparency (by making hitherto unobservable behaviour more visible), with the potential effect of eliminating or reducing the tendency for participants to engage in free riding and social loang (Jones, 1984; George, 1992). The elimination or reduction of free riding and social loang implies that participants will equally take responsibility for producing collective benets; hence, they will engage in joint problem solving, be more prepared to adapt to unanticipated changes and/or refrain from unnecessary use of power. Second, accountability structures seek to align the efforts of relationship participants by articulating their mutual promises and ensuring that mechanisms exist to assess and enforce how they deliver on those promises. This alignment enhances participants faith in not being cheated; thereby attenuating conditions that breed the sucker effect (Wagner III, 1995) and encouraging participants to share information, take responsibility for joint problem solving, adapt to changes and restraint from the use of power. PMS are comprehensive accountability systems designed to measure and evaluate both the nancial and non-nancial implications of activity performance and results (Abernethy and Lillis, 2001). They serve as information systems and medium for performance accountability (Abernethy and Lillis, 2001).
Earley (1989, p. 565) denes social loang as the reduced performance of individuals who act as part of a group rather than alone.
3
322
The centrality of PMS to accountability stems from the visibility and transparency that it provides about individual, group and/or organisational behaviour and results. PMS enable organisations to set standards that reect desirable performance outcomes and then measure and assess actual outcomes against these standards. The processes of collecting these measures and the feedback loops established facilitate the sharing of vital information among exchange participants and thereby foster cooperation between them (Malina and Selto, 2001). Also, PMS provide knowledge repositories that can be drawn upon for problem identication and joint problem solving. The measures create awareness of the problems, develop shared meanings of these problems and provide supporting information and computational resources for problem solving (Lang et al., 1978). Through goal setting and feedback, PMS also communicate the need to adapt to changes by signalling the impact of these changes on the mutual benets of exchange participants. The information processing and computational capacity of PMS enables participants to establish causeeffect relationships and to evaluate the cost and benets of alternative causes of action when adaptability becomes imperative. Furthermore, agency theorists argue that information asymmetry is a source of power in a relationship (Eisenhardt, 1989; Baiman, 1990). The information gathering function of PMS may attenuate this asymmetry and hence; restraint participants from the use of power. In SSRs, it is expected that PMS will encourage participants to develop cooperative attitude to collective interests. We therefore hypothesis that: Hypothesis 1. There is a positive association between the use of PMS and all four dimensions of cooperation. 3.3.2. PMS and socialisation processes in SSRs Ansari (1977) contends that performance measures inuence individuals perception of and reaction to others in organisations. He argues that performance measures, in part, offers structural arrangements and discursive spaces for social interactions. Following Ansari (1977), we argue that the goals and the feedback loops incorporated into PMS can inuence socialisation process. Performance reports produced through PMS may constitute templates for discussions in interactional settings such as periodic performance review meetings and joint training. Also, through performance measures, individuals come to construct perceptions of fairness and trustworthiness of others they deal with (Luft, 1997) and with signicant consequences on the way they interact with others. We therefore expect PMS to have a direct positive association with socialisation processes. Thus: Hypothesis 2. There is a positive association between the use of PMS and socialisation processes. 3.3.3. Socialisation processes and cooperation in SSRs Feeling of attachment to a group is held as one of the important factors that can foster cooperation among exchange participants (Korsgaard et al., 1995; Chen et al., 1998). Korsgaard et al. (1995) dene attachment as the extent to which participants feel themselves to be part, or identies with the goals, of a collective. Participants who feel attached are more likely to cooperate than those who feel alienated. They argue that alienation (or the absence of attachment) may impede participants willingness to share information relevant for future decision making and may also create a tendency for participants to engage in the pursuit of self-interest rather than mutual interests. Attachment is argued to be a conduit for information sharing (Gulati and Westphal, 1999; Luo, 2001) as it enhances participants condence and willingness to transfer knowledge among themselves. Attachment also creates a sense of common identity, which then
323
stimulates the acceptance of joint responsibility for problems. More so, the information shared among the participants can enhance problem identication and also provide a template for joint problem solving. It also enables parties to (re)negotiate solutions, when change occurs, without resort to legal stipulation (Heide and John, 1988; Luo, 2001). Furthermore, attachment is argued to have a strong inuence on the use of power, as the exercise of power can lead to the loss of an individuals social face, with the potential of loss of future opportunities (Cook and Emerson, 1978; Luo, 2001). Thus, attachment stimulates positive attitude towards the group including the willingness to share information, to engage in joint problem solving, adapt to unanticipated changes and restraint from the use of power. Socialisation processes facilitate attachment by demonstrating the primacy of the collective interests over those of individuals4 (Forgaty, 1992). Socialisation involves verbal and interpersonal interactions through which individuals negotiate roles and identities and by which individuals associate meaning and signicance to events, practices and procedures (Reichers, 1987). The interactions that lead to socialisation may include training, meetings, seminars and personal consultations. These interactional settings are arenas for information sharing. Henderson and Nutt (1978) argue that interaction accounts for a major proportion of information sharing while Mintzberg (1973) reports that managers depend heavily on verbal interaction to exchange vital information among themselves. Thus, the interactions that characterise socialisation processes can enhance cooperation through information sharing. Such interactional settings also provide opportunities for discovering, learning and resolving problems in a collaborative fashion (Adkins, 1995), serve as a platform for (re)negotiating changes to existing contractual arrangements (Luo, 2001) and suppress exchange participants desire to exercise power to the disadvantage of others. We expect the interpersonal relationships that develop from the socialisation processes to promote attachment among participants in SSRs and thereby stimulate them to share information, to constructively discuss problems and conicts, support and encourage each other. Consequently, we hypothesise that: Hypothesis 3. There is a positive association between socialisation processes and all four dimensions of cooperation. 3.3.4. Information sharing and other dimensions of cooperation Information sharing has been argued to have a signicant inuence on problem solving (Laughlin and Hollinshead, 1995; Gruenfeld et al., 1996), adaptability to changes (Heide and John, 1988) and the ability to exercise power (Eisenhardt, 1989; Baiman, 1990; Usdiken, 1990; Fisher et al., 2002). Following this, we expect information sharing in supply relationships to have positive impacts on problem solving, adaptability to unanticipated changes and restraint from the use of power. Hypothesis 4. There is a positive association between information sharing and the other three dimensions of cooperation. 3.4. Cooperation and relationship performance in SSRs Researchers have long argued that cooperation has a positive impact on performance (Browning et al., 1995; McAllister, 1995; Chen et al., 1998). They contend that cooperation increases individual effort,
A literature search on the possibility of socialisation processes being a dependent variable explained by cooperation was carried out and the search produced no theoretical basis to support that link.
4
324
which in turn leads to an increase in performance. Some of these researchers contend that the more information that is shared the better the performance will be since parties exchange knowledge that is crucial to the effective and efcient use of resources (Luo, 2001; Huang and Gangopadhyay, 2004). Others focus on problem solving as a key to joint optimal outcomes in a relationship (Clopton, 1984). Similarly, adaptability to changes is said to enable exchange participants to take advantage of opportunities in the exchange environment when they arise and to avoid costly threat to the continual delivery of mutual benets; thus enhancing overall performance (Heide and Miner, 1992). Finally, restraint from the use of power is argued to reduce opportunism, enhance trust and spurs the diffusion of valuable knowledge, which all contributes to successful performance. Thus, all four dimensions of cooperation are said to have benecial impact on relationship performance. Therefore: Hypothesis 5. There is a positive association between all four dimensions of cooperation and performance in SSRs. 3.5. PMS and relationship performance in SSRs Accounting researchers have long argued that there are performance benets associated with PMS (Kaplan and Norton, 1996; Chenhall and Langeld-Smith, 1998). PMS are held to clarify expectations, promote goal directed behaviour, reduce ambiguity, and enhance feedback and learning, which individually and/or collectively contribute to optimal performance. Empirical investigations provide evidence of the link between PMS and performance, especially in situations where goals exist and there is relevant and timely feedback (Chenhall and Langeld-Smith, 1998; Mooraj et al., 1999; Hoque and James, 2000). While these studies improve our understanding of the PMS-performance link, they focus mainly on performance in hierarchical organisations, where direct control and supervision is possible. Longer-term supply relationships operate through different control and authority regimes, where exchange participants are autonomous and retain independent decision making powers (Wood and Gray, 1991); hence, PMS may have implications on performance beyond what is established in the existing management control literature. As yet, there is little empirical research that clearly examines the PMS-performance link in longer-term supply relationships; hence there is limited understanding of the impact of PMS on the performative character of such relationships. We examine the direct effects of PMS on performance by hypothesising that: Hypothesis 6. There is a positive association between the use of PMS and performance in SSRs. 3.6. Socialisation and relationship performance in SSRs Ansari (1977) argues that the interactions that accompany socialisation processes are vital for goal accomplishment. Similarly, Feldman (1976) contends that socialisation processes affect the general satisfaction of participants and the feeling of autonomy and personal inuence over work. He argues that the mutual inuences of participants in a socialisation process may increase the number and quality of creative suggestions made by participants and thus lead to enhanced performance. Following this line of reasoning, we expect socialisation processes to be positively associated with relationships performance in SSR; hence: Hypothesis 7. There is a positive association between socialisation processes and performance in SSRs.
325
4. Methods 4.1. Sample selection The unit of analysis for this study is a specic supply relationship. Conceptually, data on supply relationships can be gathered from the buyers perspective, suppliers perspective or both but consistent with other supply relationship studies (see, for example, Cannon and Perreault, 1999), we decided to collect data from the buyers perspective. Cannon and Perreault (1999, p. 445) argue for this approach on the grounds that it is usually the customer [buyer] that ultimately makes the decision of whether to purchase from a supplier. Thus, even if the supplier and customer have different views regarding relationships, it is the customers view that is likely to be determinant. Data for this study were collected from a sample of buying rms drawn from the mining and resources sector in Australia. Ittner et al. (2003), argue that restricting survey sample to a single industry has an important advantage of implicitly controlling for the myriad of confounding factors that impact on results derived from cross-sectional surveys and also improves the internal validity of the study. Consistent with Ittner et al. (2003), we limited our survey to a single industry. The mining and resources sector was chosen for at least two reasons. First, the mining and resources sector is a major contributor to Australias economic performance, with signicant impact on the Australian manufacturing, construction, banking and nancial, property and transport sectors (ACA, 2005; MCA, 2005; MineBox, 2005). According to the Mineral Council of Australia (MCA, 2005), the mining and resources sector contributes about 35% of Australias total annual merchandise exports and employs about 321,000 Australians. Given the increasing use of supply relationships within this sector, a well managed relationships the mining and resources companies and their suppliers is vital not only the sector but to the other sectors of the Australian economy. Second, the mining and resources companies are actively involved in collaborative arrangement with suppliers, who provide products/services in areas ranging from drilling, exploration, transportation, consultancy, equipment supply, information systems, health services and material supply among others (ACA, 2005; MCA, 2005; MineBox, 2005). According to Australian Mining (AM), mining and resources companies seek to reduce costs and increase operating efciency through supply arrangements (MineBox, 2005). Yet little is known about such arrangements in the academic literature. Academic researchers are preoccupied with supply relationships between the public and private sectors, in the manufacturing sector and/or in the service sector. We therefore consider that the choice of the mining and resource sector appropriate for the present study. An initial list of 459 mining companies was prepared from the websites of the Mineral Council of Australia, Mining and Exploration Australia and New Guinea, and the directory of Australian Mining and Petroleum companies. Four hundred and seven out of the 452 had correct mailing addresses/phone numbers and were thus contacted by phone to determine their willingness to participate in the survey. Unfortunately, 35 declined to participate (citing various reasons including work pressures, start-up company, etc.), leaving us with a target sample of 372. A self-administered questionnaire (including reply paid envelops) was mailed directly to the managers responsible for managing supply relationships in the target sample. Respondents were asked to nominate only one SSR that they were currently managing and to respond to the questionnaire based on their understanding of the nominated SSR. They were also encouraged to complete and return the questionnaire within one week after receiving it. Four weeks after mailing the questionnaire, reminder letters were sent
326
Table 1 Cross-tabulation of core area of business and contract type Contract type Core area of business Coal mining Drilling Materials supply Equipment supply Transport Exploration IST Consultancy Excavation Other Total 2 4 4 3 2 Metal ore 4 1 3 1 1 2 3 1 3 19 Minerals exploration 3 1 1 Minerals mining 2 4 1 5 4 1 1 5 18 Oil and gas 5 1 3 2 1 1 13 3 2 Other 1 Total 16 12 11 10 7 4 7 1 5 73
15
to all managers (and follow up phone calls were made to some of them), entreating those who had not yet responded to do so and thanking those who had responded. A PDF version of the questionnaire was posted on a website so that those who had misplaced the original hardcopy could download that. Of the 372 questionnaires sent to the target sample, 85 (22.8%) were returned. Out of this 73 (19.6%) questionnaires were useable because 12 had missing data. The 73 respondents had a mean of 6.5 years (S.D. = 6.9) of employment with this company and a mean of 2.8 years (S.D. = 2.8) working with the specic supply relationship covered in the questionnaire. Descriptive statistics of the companies and the specic relationships surveyed are summarised in Table 1. Of those target respondents who were reminded by phone to complete the questionnaire, some declared their intention not to respond. Some of the major reasons cited by these non-respondents included (a) do not have contracts of the type referred to in the questionnaire, (b) declined to participate due to corporate policy, (c) company is going through restructuring, (d) start-up nature of the company and (e) operations of the company are now overseas so unable to provide useful information from the small administration ofce in Australia. As a proxy for statistically evaluating non-response bias we compared the means of the rst 10 responses to those of the last 10 and no signicant differences were identied; indicating the absence of non-response bias. 4.2. Measurement of variables The latent variables (constructs) in this study were measured using multi-item manifest variables (measures)see Appendix A for the measures used for each construct. For most constructs, the measures were generated from previous research and modied to t the current research context. Each measure was anchored on a 7-point scale. The wording and direction of the measures were reviewed by two management accounting academics and this resulted in renement of some of the measures. Discussion of the measure of each construct follows: Performance measurement systems: The PMS construct was measured as a second order construct of two rst order constructs; namely, nancial measures and non-nancial measures. In designing questions for the nancial and non-nancial measures, we conducted content analysis of eight SSRs performance
327
reports, which resulted in six scale-items. The nancial measure construct was a three-item scale measuring the extent to which cost/nancial targets were used and the degree to which the buyers were measuring the extent to which suppliers were meeting those targets (alpha = 0.796). The non-nancial measure construct was also a three-item scale measuring the degree to which the suppliers were performing with respect to quality, time and according to buyers specication (alpha = 0.869). We then measured the PMS construct using the method of repeated manifest variables suggested in Chin and Gopal (1995). We modelled the PMS construct as a second order molar using partial least squares algorithms. The reliability of this second order construct is evaluated using the relative path weights of the rst order constructs (nancial = 0.551 and non-nancial = 0.761). The path weights were all signicant at the 0.001 level (one-tailed), indicating that the PMS construct has been reliably measured. The higher relative weight of the non-nancial measure (supported by a relatively higher correlation between non-nancial measures and PMS; see Table 3) in the PMS construct suggests that non-nancial measures may be more closely linked to the drivers of performance management in SSR than nancial measures.5 This supports the literature that advocates for more non-nancial measures to be incorporated into performance measurement systems (Kaplan and Norton, 1992, 1996; Ittner et al., 2003). Socialisation: Following Chalos and OConnor (2004) and theoretical discussions in the management control and related literature, socialisation was measured as a two-item scale that examined the extent to which respondents relied on meeting and personal consultations to manage their relationships. The correlation between the two items was signicant at the 0.01 level. Cooperation: Hulland (1999) suggests that when a construct is more properly conceptualised as multidimensional, it is appropriate to separately represent each of these dimensions in a statistical model. Following this suggestion, cooperation was measured and included in the analysis as a multidimensional construct comprising the four dimensions identied in the theory section of this paper. Each dimension (information sharing, joint problem solving, adaptability to change and restraint from the use of power) was measured by two-items adapted from Heide and Miner (1992), with reported alphas ranging from 0.6 to 0.88. The correlations between the scale-items for each dimension of cooperation were all signicant at the 0.01 level. Performance: Relationship performance was a four-item scale derived from Gainey and Klaas (2003) and modied to suit the present research context. The scale measured how suppliers were performing relative to the buyers expectations on quality, cost, time and improved decision making (alpha = 0.822). 4.3. Statistical analysis and results The partial least squares (PLS) approach to structural equation modelling (using PLS graph version 3) was used in this study. PLS is a component-based modelling technique that simultaneously examines theory (structural model) and measures (measurement model). The advantages in using PLS are (a) its ability to handle multiple exogenous and endogenous constructs at the same time, (b) its ability to handle multicollinearity among endogenous constructs and (c) its ability to create latent construct scores directly on the basis of cross products involving multi-item measures. For Limayem et al. (2001), the ability to include multiple measures for each construct provide more accurate estimates of paths between constructs.
5 In a PLS model, weights are assigned to variables constituting a construct based on the overall relationship in the nomological model (Chin, 1998). The higher weight for non-nancial measure thus imply that it helps explain the effects of the PMS construct on other constructs more than the nancial measure.
328
More importantly, PLS has no distributional assumptions and is more useful in handling studies involving small sample sizes. Given the sample size of the present study and the advantages listed earlier, we found PLS more appropriate for analysing the data collected. The sample size of 73 is consistent with the sample size requirements for PLS6 (for details, see Chin and Newsted, 1999). Since the distributional properties of estimates are unknown in PLS, the traditional parametric-based technique for signicance testing is not appropriate (Chin, 1998). Instead, bootstrapping resampling (500 sample) procedures were used in this study to estimate the signicance of factor loadings and path coefcients in the model. Also, because PLS is distribution free, overall model t statistics such as those associated with covariance-based structural equation modelling are not appropriate (Chin and Newsted, 1999; Hulland, 1999). Consequently, the R2 is used to assess the stability of the model. Although, PLS simultaneously estimates parameters for the measurement and structural models, the two models are analysed and interpreted separately (Hulland, 1999); hence, the applications of the two models to the present study are separately discussed below. 4.4. Discussion of the measurement model The measurement model evaluates the relationship between measures and constructs by assessing the reliability and validity of the scale measures. We assessed individual item reliability by examining the loadings of the items to their respective constructs (see Table 2). All measures are above the 0.70 loading level (except one performance measure which has a loading of 0.69), indicating that the measures share more variance with their respective constructs than with error variance. All loadings are statistically signicant at the 0.001 level (one-tailed). The composite reliability for the constructs range from 0.814 to 0.964 (all higher than the 0.70 level suggested by Nunnally (1978)). Convergent validity is assessed using the average variance extracted (AVE). AVE measures of 0.5 or more are considered to demonstrate adequate convergent validity (Chin, 1998). As shown in Table 2, the AVEs of all the constructs are more than 0.65, providing evidence of adequate convergent validity. We evaluated the constructs for discriminant validity by comparing the square roots of AVEs to the correlation between constructs; providing an assessment of the extent to which a construct shares more variance with its measures than with other constructs. This is demonstrated in the correlation matrix in Table 3, which includes correlation among constructs in the off-diagonal and the square root of AVE in the diagonal. The diagonal elements are all greater than their respective off-diagonal elements, indicating adequate discriminant validity. The above analysis demonstrates that the measurement model is reliable and valid. 4.5. Discussion of the structural model The structural model was used in testing the hypothesised relationships between our theoretical constructs as depicted in Fig. 1. A summary of the path coefcients (and their associated t-values) and the R2 s of the endogenous constructs are presented in Table 4. Panel A (Table 4) shows the
6 Chin and Newsted (1999) suggest that to determine the adequacy of a sample for PLS, researchers should nd the largest of two possibilities: (a) the construct with the largest number of formative measures or (b) the endogenous construct with the largest number of exogenous construct impacting on it. The sample size should be equal to or more than 10 times either (a) or (b), whichever is greater. For the present study, this will be 60 or more. The sample size of 73 is therefore adequate for PLS.
H. Mahama / Management Accounting Research 17 (2006) 315339 Table 2 Reliability and convergent validity (AVE) Latent variable Financial measures (composite reliability = 0.882; AVE = 0.714) Fin1 Fin2 Fin3 Non-nancial measures (composite reliability = 0.921; AVE = 0.795) Nonn1 Nonn2 Nonn3 Socialisation (composite reliability = 0.814; AVE = 0.686) Soc1 Soc2 Information sharing (composite reliability = 0.964; AVE = 0.930) Inform1 Inform2 Problem solving (composite reliability = 0.865; AVE = 0.763) Solve1 Solve2 Adaptability to changes (composite reliability = 0.926; AVE = 0.863) Adapt1 Adapt2 Use of power (composite reliability = 0.897; AVE = 0.813) Power1 Power2 Performance (composite reliability = 0.887; AVE = 0.664) Perf1 Perf2 Perf3 Perf4 All item loadings are statistically signicant (p < 0.001, one-tailed). Table 3 Discriminant validity Financial Financial Non-nancial PMS Social Inform Solve Adapt Power Perform 0.845 0.139 0.657 0.332 0.304 0.472 0.209 0.167 0.398 Non-nancial 0.892 0.838 0.253 0.510 0.304 0.323 0.464 0.432 PMS Social Inform Solve Adapt Power Mean 5.110 5.223 5.192 6.315 6.260 6.222 4.795 5.671 6.192 6.205 5.370 5.671 5.438 5.726 6.110 5.986 5.712 5.014 5.726 5.342 S.D. 1.603 1.574 1.533 0.970 0.928 0.898 1.716 1.191 1.036 1.013 1.612 1.425 1.333 1.216 1.021 1.219 1.160 1.338 1.017 1.157
329
Loading 0.8460 0.9300 0.7500 0.8705 0.8766 0.9270 0.8005 0.8554 0.9604 0.9688 0.7923 0.9476 0.9354 0.9222 0.9000 0.9033 0.8870 0.6951 0.8123 0.8514
Perform
0.658 0.377 0.556 0.488 0.361 0.449 0.548
0.828 0.563 0.234 0.152 0.265 0.159
0.964 0.467 0.278 0.605 0.429
0.873 0.626 0.399 0.601
0.929 0.454 0.589
0.902 0.559
0.815
Diagonal elements: square root of AVE; off-diagonal elements: correlations between constructs.
330
Table 4 PLS results Panel A: path coefcient, t-statistics and R2 Latent variable Path to Sociala PMS Social Informb Solve Adapt Power Perform 0.377 (3.4492)*** Inform 0.401 (3.2879)*** 0.412 (4.2561)*** Solve 0.343 (2.2970)** 0.073 (0.5498) 0.317 (1.7992)** Adapt 0.301 (2.3784)** 0.034 (0.2268) 0.129 (0.8674) Power 0.168 (1.2385) 0.126 (0.9406) 0.583 (5.3212)*** Perform 0.267 (2.3414)** 0.105 (0.9200) 0.003 (0.0217) 0.238 (1.4292)* 0.240 (2.3801)** 0.262 (2.0235)** 0.14 0.46 0.30 0.14 0.39 0.56 H. Mahama / Management Accounting Research 17 (2006) 315339 R2
Panel B: indirect effects and t-statistics (Sobels testc ) Latent variable Linkages Path to Solve Inform PMS Social Solve Power Inform Inform Inform/solve Inform/power 0.131 (1.6974)** 0.053 (0.8734) 0.234 (2.8334)*** 0.240 (3.3601)*** 0.031 (1.2246) 0.063 (1.7927)** Adapt Power Perform 0.075 (1.2429) 0.153 (1.9212)**
n = 73. a We tested whether socialisation processes could have an inuence on PMS and the PLS provided a very highly insignicant relationship, with the path co-efcient approaching zero. b To test whether information sharing was the result of poor performance, we grouped the data into two clusters reecting high performance and low performance and the results between the two were not statistically different. c Sobels test is used in testing the statistical signicance of indirect relationship between an independent construct and a dependent construct through a mediator (Preacher and Leonardelli, 2001). The test generates t-statistics and p-values for the indirect path. * p < 0.10 (one-tailed). ** p < 0.05 (one-tailed). *** p < 0.01 (one-tailed).
331
direct path relationships between constructs in the theoretical model and Panel B shows indirect path relationships. Hypothesis 1 predicted a positive relationship between PMS and all four dimensions of cooperation. The structural path coefcient between PMS and all the dimensions of cooperation are statistically signicant and in the hypothesised direction (except for restraint from use of power), thus providing partial support for Hypothesis 1. We examined whether PMS will have an indirect effect on power through information sharing and the results indicate a statistically signicant indirect effect of PMS on restraint from use of power through information sharing. Consistent with existing research, the results indicate that PMS ensures that information is fairly distributed among relationship participants (Baiman, 1983; Eisenhardt, 1989); enables knowledge to be acquired, interpreted and shared for future learning and problem solving (Lang et al., 1978); and aligns the interest of exchange participants (George, 1992; Wagner III, 1995) so that they will be willing to adapt to changes when necessary and also avoid the exercise of power. In Hypothesis 2, PMS was predicted to be positively related to socialisation processes. The structural model provides statistically signicant results that conrm this hypothesis. This provides empirical validation of Ansaris (1977) argument that performance measure inuence interactions that characterise socialisation processes. Socialisation was also hypothesised (Hypothesis 3) to be positively related to all four dimensions of cooperation. This hypothesis was partially supported. The path between socialisation and information sharing is signicant and in the predicted direction. This provides further support for prior research ndings that managers gather more of the information they need through social interactions then from any other source (Mintzberg, 1973; Henderson and Nutt, 1978; Gulati and Westphal, 1999; Luo, 2001). However, the paths leading from socialisation to problem solving, adaptability to changes and restraint from use of power are not statistically signicant. Though this suggests that there is no direct association between socialisation processes and these three dimensions of cooperation, we explored the possibility of an indirect relationship and found that socialisation processes have statistically signicant indirect effects on problem solving and restraint from use of power through the information shared among participants (see Panel B, Table 4). Hypothesis 4 predicted a relationship between information sharing and the other three dimensions of cooperation and this was supported except the path between information sharing and adaptability to unanticipated changes. The signicant relationships found between information sharing and problem solving, on one hand, and information sharing and restraint from use of power, on the other, are consistent with Gruenfeld et al. (1996) and Laughlin and Hollinshead (1995) argument that information sharing facilitates problem solving and also supports research that argues that information sharing reduces the likelihood of power being exercised (Usdiken, 1990; Fisher et al., 2002). The insignicant relationship between information sharing and adaptability implies that information sharing does not play a signicant role in decision related to ill-structured and unanticipated problematic situation. Kelly and Karau (1999) argue that in such ad hoc situations, individuals are more likely to rely on their initial preferences and unshared information in arriving at a solution. In Hypothesis 5, we predicted that all four dimensions of cooperation would be positively associated with performance. The structural paths of three dimensions of cooperation (problem solving, adaptability to changes and restraint from the use of power) are statistically signicant and in the hypothesised direction. These results provide support for research that calls for the enactment of cooperation in interrm relationship (Browning et al., 1995; McAllister, 1995; Smith et al., 1995; Bensaou, 1997; Faerman et al., 2001). Surprisingly, the path from information sharing to performance, though in the predicted direction, is not signicant. We found the results on the association between the information sharing dimension of
332
cooperation and performance to be inconsistent with existing research (Ellram, 1995; Luo, 2001; Huang and Gangopadhyay, 2004). There may be at least three possible explanations for this. First, Cannon and Perreault (1999) and John (1984) argue that though information sharing can potentially improve performance, it also opens up avenues for opportunistic behaviour that can have negative consequences on performance. Second, Maher et al. (1979) indicate that it is not the amount of information shared per se that results in adequate performance but also the quality and relevance of the information shared. While our study was designed to capture information sharing as practiced, we did not explicitly examine the quality of the information shared. Future research may be required to explore this further. Third, we reasoned that though there is no direct association between information sharing and performance, there could be an indirect relationship through what the shared information is used to achieve (such as problem solving, renegotiation of changes and reduction in power asymmetry). We explored the possibility of indirect relationship through the other three dimension of cooperation and found support for a statistically signicant indirect relationship through restraint from the use of power. The signicant indirect relationship between information sharing and performance (through restraint from use of power) lends some support to the literature that calls for more information sharing in the face of uneven distribution of power (Stasser et al., 1989). Information asymmetry has long been argued to be one of the sources of power (Gaski and Nevin, 1985; Ross et al., 1997) and that power negatively impact on outcomes (Bacharach and Lawler, 1980; Gaski and Nevin, 1985; Conger and Kanungo, 1988; Reve and Stern, 1989; Ross et al., 1997). Thus, information sharing reduces information asymmetries and the likelihood of the exercise of power, which then signicantly improves performance. The path from PMS to performance is also signicant and in the direction predicted, providing support for Hypothesis 6. The results are consistent with transaction cost-based studies that argue that accounting
Fig. 2. PLS structural model with path coefcients. *** p < 0.01 (one-tailed), ** p < 0.05 (one-tailed) and * p < 0.10 (one-tailed).
333
performance measures contribute to performance improvement (Dekker, 2003; Langeld-Smith and Smith, 2003; Seal et al., 2004). This nding is particularly important to practitioners as it rejects the notion of business on a handshake (for details, see Shapiro et al., 1992) and reinforces the importance of performance measurement in the everyday management of interrm relationships.7 The results are also consistent with the management control research that reports signicant correlations between PMS and performance (Hoque and James, 2000; Ittner et al., 2003) and studies in psychology that suggest that performance measures enhance performance through goals and feedback (Locke et al., 1981; Bruns and McKinnon, 1992). Finally, Hypothesis 7 predicted a positive relationship between socialisation processes and performance and the results did not support a direct relationship. However, we found statistically signicant indirect relationships through the indirect path of information sharing and restraint from use of power. Fig. 2 presents the PLS structural model and the associated path coefcients.
5. Conclusion The empirical aim of this study was to investigate the impact of management control systems on cooperation in strategic supply relationships. Existing accounting research on such relationships has tended to focus on the management control patterns that are (or ought to be) adopted for specic relationships or the control combinations that operate within these structural patterns (Frances and Garnsey, 1996; Van der Meer-Kooistra and Vosselman, 2000; Langeld-Smith and Smith, 2003; Dekker, 2004; Hakansson and Lind, 2004; Seal et al., 2004). The present study contributes to this growing body of knowledge by empirically exploring how cooperation may be mobilised and enacted through MCS. Specically, we focused on the link between two management control types (PMS and socialisation processes) and cooperation and how that translates into desired relationship performance. The focus on cooperation was motivated by the works of academic researchers who consider it to be crucial to successful performance in interrm relationships (Browning et al., 1995; McAllister, 1995; Smith et al., 1995; Chen et al., 1998; Faerman et al., 2001) and the paucity of empirical accounting research that examines the implications of MCS for cooperation in such relationships. The results of the study contribute to the literature by (a) demonstrating the importance of PMS in stimulating cooperation and enhancing performance, (b) foregrounding the signicance of socialisation processes to information sharing, (c) indicating the performance benets of cooperative behaviour and (d) the importance of information sharing on problem solving and the exercise of power. The results also highlight the importance of power asymmetry in SSRs. This is evidence by the direct effect of power on performance and the mediating role of power on the effects socialisation processes and information sharing on performance. More importantly, information sharing (though not directly associated with performance) plays a crucial intermediate role in the structural model. These results are relevant to practitioners who seek ways to improve their interrm relationship performance and to academics who are interested in understanding how MCS are implicated in such relationships.
Shapiro et al. (1992) argue that the establishment of social controls such as trust reduces the need for monitoring behaviour. Similar arguments are found in Powell (1990) and Kramer and Tyler (1996).
7
334
Though, this study provides useful insights into the implications of management controls for cooperation, the results need to be interpreted subject to the usual limitations of survey research. In particular, the focus on only supply relationships within the mining and resources sector (though improved the internal validity of the study) limits the extent to which the results may be generalised across other sectors. We did not also consider the differential impact of nancial and non-nancial measures nor did we model the impact of reward systems on cooperation and performance in SSRs. Also, unlike Ittner et al. (2003) who used both perceived and objective measures of performance, we were unable to obtain objective performance measures due to the sensitive nature of such data in SSR context. We therefore used only perceived measures of performance. Future research could expand the present model by taking these variables into account.
Acknowledgements This paper has beneted from the helpful comments of Osman Adam, Paul Andon, Peter Luckket, Alfred Yawson, seminar participants at the University of Canberra, and two anonymous reviewers. Financial support from the Faculty of Commerce and Economics (University of New South Wales) is gratefully acknowledged.
Appendix A. Measures A.1. Management control systems A.1.1. Financial measure The response scale for the following items ranged from 1 (strongly disagree) to 7 (strongly agree): 1. We establish cost targets for this supplier. 2. We measure the extent to which this supplier meets nancial targets. 3. We evaluate the amount of cost that could be saved by this supplier. A.1.2. Non-nancial measure The response scale for the following items ranged from 1 (strongly disagree) to 7 (strongly agree): 1. We measure the extent to which this supplier delivers products/services on time. 2. We measure the extent to which this supplier delivers products/services according to our specication. 3. We measure the extent to which this supplier meets acceptable quality levels for the products/services supplied. A.1.3. Socialisation processes 1. How frequently do you hold review meetings with this supplier? (Scale ranged from 1 (weekly) to 7 (not at all)) reverse coded. 2. To what extent do you rely on personal consultation to manage your relationship with this supplier? (Scale ranged from 1 (not at all), to 7 (greater extent)).
335
A.2. Cooperation The response scale for the following items ranged from 1 (strongly disagree) to 7 (strongly agree): A.2.1. Information sharing 1. In this relationship, any information that might help the other party will be provided to them. 2. We keep each other informed about events or changes that may affect the other party. A.2.2. Problem solving 1. In most aspects of this relationship we are jointly responsible for getting things done. 2. We treat problems that arise in the course of this relationship as a joint rather than individual responsibility. A.2.3. Willingness to adapt to changes 1. When some unexpected situation arises, we would rather work out a new deal than hold each other to the original terms of the contract. 2. It is expected that we will be open to modify our agreement if unexpected events occur. A.2.4. Restraint from use of power 1. We feel it is important not to use any proprietary information to the other partys disadvantage. 2. We expect that neither party will make demand that might be damaging to the other. A.3. Relationship performance The response scale for the following items ranged from 1 (strongly disagree) to 7 (strongly agree): Relative to our expectations, our relationship with this supplier has led to: 1. 2. 3. 4. improved service/product quality; cost savings; on time delivery; high quality decision making.
References
Abernethy, M.A., Lillis, A.M., 2001. Interdependencies in organization design: a test in hospitals. J. Manage. Acc. Res. 13, 107129. ACA, 2005. Relationship Contracting in the Australian Minerals Industry. Australian Constructors Association, http://www. constructors.com.au/relationship-contracting/minerals.htm. Adkins, C.L., 1995. Previous work experience and organizational socialization: a longitudinal examination. Acad. Manage. J. 38, 839862. Ahuja, M.K., Galvin, J.E., 2003. Socialization in virtual groups. J. Manage. 29, 161185. Anderson, E., Weitz, B., 1992. The use of pledges to build and sustain commitment in distribution channels. J. Market. Res. 29, 1834.
336
Ansari, S.L., 1977. An integrated approach to control system design. Acc. Organ. Soc. 2, 101112. Argyle, M., 1991. Cooperation: The Basis of Sociability. Routledge, New York. Bacharach, S.B., Lawler, E.J., 1980. Power and Politics in Organizations. Jossey-Bass, San Francisco. Baiman, S., 1983. Agency research in managerial accounting: a survey. In: Bell, J. (Ed.), Accounting Control Systems: A Behavioral and Technical Integration. Markus Wiener. Baiman, S., 1990. Agency research in management accounting: a second look. Acc. Organ. Soc. 15, 341371. Barnard, C., 1938. The functions of the Executive. Harvard University Press, Cambridge, MA. Bensaou, M., 1997. Interorganizational cooperation: the role of information technology an empirical comparison of US and Japanese supplier relations. Inf. Syst. Res. 8, 107124. Bensaou, M., Anderson, E., 1999. Buyersupplier relations in industrial markets: when do buyers risk making idiosyncratic investments? Organ. Sci. 10, 460481. Berry, A.J., Capps, T., Cooper, D., Ferguson, P., Hopper, T., Lowe, E.A., 1985. Management accounting in an area of the NCB: rationales of accounting practices in a public enterprise. Acc. Organ. Soc. 10, 328. Birnberg, J.G., 1998. Control in interrm co-operation relationships. J. Manage. Stud. 35, 421428. Browning, L.D., Beyer, J.M., Shetler, J.C., 1995. Building cooperation in a competitive industry: Sematech and the semiconductor industry. Acad. Manage. Rev. 38, 113151. Bruns, W.J., McKinnon, S.M., 1992. Performance evaluation and managers description of task and activities. In: Bruns, W.J. (Ed.), Performance Measurement, Evaluation and Incentive. Harvard Business School Press, Cambridge. Burgers, W.P., Hill, C.W.L., Kim, W.C., 1993. The theory of global strategic alliances: the case of the global auto industry. Strategic Manage. J. 14, 419432. Cannon, J.P., Perreault, W.D., 1999. Buyerseller relationships in business markets. J. Market. 36, 439460. Chalos, P., OConnor, N.G., 2004. Determinants of the use of various control mechanisms in USChinese joint ventures. Acc. Organ. Soc. 29, 591608. Chen, C.C., Chen, X., Meindl, J.R., 1998. How can cooperation be fostered?: the cultural effects if individualismcollectivism. Acad. Manage. Rev. 23, 285304. Chenhall, R.H., Langeld-Smith, K., 1998. The relationship between strategic priorities, management techniques and management accounting: an empirical investigation using a systems approach. Acc. Organ. Soc. 23, 243264. Chin, W.W., 1998. The partial least squares approach to structural equation modeling. In: Marcoulides, G.A. (Ed.), Modern Methods for Business Research. Lawrence Erlbaum Associates, NJ. Chin, W.W., Gopal, A., 1995. Adoption intention in GSS: relative importance of beliefs. Data Base Adv. 26, 4263. Chin, W.W., Newsted, P.R., 1999. Structural equation modelling analysis with small samples using partial least squares. In: Hoyle, R.H. (Ed.), Statistical Strategies for Small Sample Research. Sage Publications, Thousand Oak. Clopton, S.W., 1984. Seller and buying rm factors affecting industrial buyers negotiation behavior and outcomes. J. Market. Res. 21, 3953. Conger, J.A., Kanungo, R.N., 1988. The empowerment process: integrating theory and practice. Acad. Manage. Rev. 13, 471482. Cook, K.S., Emerson, R.M., 1978. Power, equity and commitment in exchange networks. Am. Sociol. Rev. 43, 721739. Cooper, R., Slagmulder, R., 2004. Interorganizational cost management and relational context. Acc. Organ. Soc. 29, 126. Das, T.K., Teng, B., 1998. Between trust and control: developing condence in partner cooperation in alliances. Acad. Manage. Rev. 23, 491512. Dekker, H.C., 2003. Value chain analysis in interrm relationships: a eld study. Manage. Acc. Res. 14, 123. Dekker, H.C., 2004. Control of inter-organizational relationships: evidence on appropriation concerns and coordination requirements. Acc. Organ. Soc. 29, 2749. Domberger, S., 1996. Contracting out: a phenomenon in search of a theory. In: Industrial Economics Conference, Australian National University, Canberra. Earley, P.C., 1989. Social loang and collectivism: a comparison of the United States and the Peoples Republic of China. Adm. Sci. Q. 34, 565581. Eisenhardt, K.M., 1985. Control: organizational and economic approaches. Manage. Sci. 31, 134149. Eisenhardt, K.M., 1989. Agency theory: an assessment and review. Acad. Manage. Rev. 14, 5774. Ellram, L., 1995. Partnering pitfalls and success factors. Int. J. Purchasing Mater. Manage. 31, 3644. Faerman, S.R., McCaffrey, D.P., Van Slyke, D.M., 2001. Understanding interorganizational cooperation: publicprivate collaboration in regulating nancial market innovation. Organ. Sci. 12, 372388. Feldman, D.C., 1976. A contingency theory of socialization. Adm. Sci. Q. 21, 433452.
337
Fisher, J., Frederickson, J.R., Peffer, S.A., 2002. The effect of information asymmetry on negotiated budgets: an empirical investigation. Acc. Organ. Soc. 27, 2743. Forgaty, T.J., 1992. Organizational socialization in accounting rms: a theoretical framework and agenda for future research. Acc. Organ. Soc. 17, 129149. Frances, J., Garnsey, E., 1996. Supermarkets and suppliers in The United Kingdom: system integration, information and control. Acc. Organ. Soc. 21, 591610. Gainey, T.W., Klaas, B.S., 2003. The outsourcing of training and development: factors impacting client satisfaction. J. Manage. 29, 139280. Gaski, J.F., Nevin, J.R., 1985. The differential effects of exercised and unexercised power sources in a marketing channel. J. Market. Res. 22, 130142. George, J.M., 1992. Extrinsic and intrinsic origins of perceived social loang in organizations. Acad. Manage. J. 35, 191202. Gietzmann, M.B., 1996. Incomplete contracts and the make or buy decision: governance design and attainable exibility. Acc. Organ. Soc. 21, 611626. Goetz, C.J., Smith, D., 1981. Principles of relational contracts. V. Law Rev. 67, 10891150. Govindarajan, V., Fisher, J., 1990. Strategy, control systems, and resource sharing: effects on business-unit performance. Acad. Manage. J. 33, 259265. Gray, B., Wood, D.J., 1991. Collaborative alliances: moving from practice to theory. J. Appl. Behav. Sci. 27, 322. Gruenfeld, D.H., Mannix, E.A., Williams, K.Y., Neale, M.A., 1996. Group composition and decision-making: how member familiarity and information distribution affects process and performance. Organ. Behav. Hum. Decis. Process. 67, 115. Gulati, R., Westphal, J.D., 1999. Cooperative or controlling? The effects of CEOboard relations and the content of interlocks on the formation of joint ventures. Adm. Sci. Q. 44, 473506. Hakansson, H., Lind, J., 2004. Accounting and network coordination. Acc. Organ. Soc. 29, 5172. Heide, J.B., 1994. Interorganizational governance in marketing channels. J. Market. 58, 7185. Heide, J.B., John, G., 1988. The role of dependence balancing in safeguarding transaction-specic assets in conventional channels. J. Market. 52, 2035. Heide, J.B., John, G., 1990. Alliances in industrial purchasing: the determinants of joint action in buyersupplier relationships. J. Market. Res. 27, 2436. Heide, J.B., Miner, A.S., 1992. The shadow of the future: effects of anticipated interaction and frequency of contact on buyerseller cooperation. Acad. Manage. J. 35, 265291. Henderson, J.C., Nutt, P.C., 1978. On the design of planning information systems. Acad. Manage. Rev., 774785. Hopwood, A.G., 1996. Looking across rather than up and down: on the need to explore the lateral processing of information. Acc. Organ. Soc. 21, 589590. Hoque, Z., James, W., 2000. Linking balanced scorecard measures to size and market factors: impact on organizational performance. J. Manage. Acc. Res. 12, 117. Huang, Z., Gangopadhyay, A., 2004. A simulation of supply chain management to measure the impact of information sharing. Inf. Resour. Manage. J. 17, 2031. Hulland, J., 1999. Use of partial least squares (PLS) in strategic management research: a review of four recent studies. Strategic Manage. J. 20, 195204. Ireland, R.D., Hitt, M.A., Vaidyanath, D., 2002. Alliance management as a source of competitive advantage. J. Manage. 28, 413446. Ittner, C.D., Larcker, D.F., Randall, T., 2003. Performance implications of strategic performance measurement in nancial service rms. Acc. Organ. Soc. 28, 715741. John, G., 1984. An empirical investigation of some antecedents of opportunism in a marketing channel. J. Market. Res. 21, 278289. Jones, G.R., 1984. Task visibility, free riding, and shirking: explaining the effects of structure and technology on employee behavior. Acad. Manage. J. 9, 684695. Kaplan, R., Norton, D., 1992. The balanced scorecard: measures that drive performance. Harvard Business Rev. 70, 7179. Kaplan, R., Norton, D., 1996. Translating Strategies into Action: The Balanced Scorecard. Harvard Business School Press, Boston. Kelly, B., 1995. Outsourcing marches on. J. Business Strategy 16, 3842. Kelly, J.R., Karau, S.J., 1999. Group decision making: the effects of initial preferences and time pressure. Pers. Soc. Psychol. Bull. 25, 13421354.
338
Korsgaard, M.A., Schweiger, D.M., Sapienza, H.J., 1995. Building commitment, attachment, and trust in strategic decisionmaking teams: the role of procedural justice. Acad. Manage. J. 38, 6084. Kramer, R.M., Tyler, T.R., 1996. Whither trust? In: Kramer, R.M., Tyler, T.R. (Eds.), Trust in Organizations: Frontiers of Theory and Research. Sage Publications, Thousand Oaks. Lacity, M.C., Hirschheim, R., 1993a. Information Systems Outsourcing: Myths, Metaphors and Realities. John Wiley, Chichester. Lacity, M.C., Hirschheim, R., 1993b. The information systems outsourcing bandwagon. Sloan Manage. Rev. 35, 7386. Lang, J.R., Dittrich, J.E., White, S.E., 1978. Managerial problem solving models: a review and a proposal. Acad. Manage. Rev., 854866. Langeld-Smith, K., 1997. Management control systems and strategy: a critical review. Acc. Organ. Soc. 22, 207232. Langeld-Smith, K., Smith, D., 2003. Management control systems and trust in outsourcing relationships. Manage. Acc. Res. 14, 281307. Laughlin, P.R., Hollinshead, A.B., 1995. A theory of collective induction. Org. Behav. Hum. Decis. Process. 61, 94107. Limayem, M., Hirt, S.G., Chin, W.W., 2001. Intention does not always matter: the contingent role of habit on IT usage behavior. In: The 9th European Conference on Information Systems, Bled, Slovenia. Locke, E.A., Shaw, K.N., Saari, L.M., Latham, G.P., 1981. Goal setting and task performance. Psychol. Bull. 90, 125152. Loh, L., Venkatraman, N., 1992b. Diffusion of information technology outsourcing: inuence sources and the Kodak effect. Inf. Syst. Res. 3, 334358. Luft, J.L., 1997. Fairness, ethics and the effects of management accounting on transaction costs. J. Manage. Acc. Res. 9, 199216. Luo, Y., 2001. Antecedents and consequences of personal attachment in cross-cultural cooperative ventures. Adm. Sci. Q. 46, 177201. MacNeil, I.R., 1978. Contract: adjustment of long-term economic relations under classical, neoclassical and relational contract law. Northwestern Univ. Law Rev. 72, 854905. MacNeil, I.R., 1980. The New Social Contract: An Inquiry into Modern Contractual Relations. Yale University Press, New Haven, CT. Mahama, H., 2000. The role of nancial and non-nancial information in the constitution and stabilisation of collaborative supply relationships. Ph.D. Thesis. School of Accounting, University of New South Wales. Maher, M.W., Ramanathan, K.V., Peterson, R.B., 1979. Preference congruence, information accuracy, and employee performance. J. Acc. Res. 17, 476503. Malina, M.A., Selto, F.H., 2001. Communicating and controlling strategy: an empirical study of the effectiveness of the balanced scorecard. J. Manage. Acc. Res. 13, 4790. MCA, 2005. Corporate. Minerals Council of Australia, http://www.minerals.org.au/corporate. McAllister, D.J., 1995. Affect- and cognition-based trust as foundation for interorganizational cooperation in organizations. Acad. Manage. J. 38, 2459. Merchant, K., 1985. Control in Business Organizations. Pitman, Marsheld, MA. MineBox, 2005. Greater Balance Required in Contract Mining. Australian Mining, http://www.minebox.com/story.asp? articleId=6030. Mintzberg, H., 1973. The Nature of Managerial Work. Harper and Row, New York. Mooraj, S., Oyon, D., Hostettler, D., 1999. The balanced scorecard: a necessary good or an unnecessary evil? Eur. Manage. J. 17, 481491. Nunnally, J.C., 1978. Psychometric Theory. McGraw-Hill, New York. Powell, W.W., 1990. Neither market or hierarchy: network forms of organizations. Res. Organ. Behav. 12, 295336. Preacher, K.J., Leonardelli, G.J., 2001. Calculation for the Sobel Test: An Interactive Calculation Tool for Mediation Tests (Computer Software), http://www.unc.edu/preacher/sobel/sobel.htm. Quinn, J.B., Doorley, T.L., Parquette, P.C., 1990. Beyond products: services-based strategy. Harvard Business Rev. 68, 5869. Reichers, A.E., 1987. An interactionist perspective on newcomer socialization rates. Acad. Manage. Rev. 12, 278287. Reve, T., Stern, L.W., 1989. The relationship between interorganizational form, transaction climate, and economic performance in vertical interrm dyads. In: Pellegrini, L., Reddy, S.K. (Eds.), Marketing Channels: Relationship and Performance. Lexington Books, Lexington, MA. Ring, P.S., Van de Ven, A.H., 1992. Structuring co-operative relationships between organizations. Strategic Manage. J. 13, 483498. Robins, J.A., 1987. Organizational economics: notes on the use of transaction cost theory in the study of organizations. Adm. Sci. Q. 32, 6886.
339
Ross, W.T., Anderson, E., Weitz, B., 1997. Performance in principal-agent dyads: the causes and consequences of perceived asymmetry of commitment to the relationship. Manage. Sci. 43, 680700. Seal, W., Berry, A., Cullen, J., 2004. Disembedding the supply chain: institutionalized reexivity and inter-rm accounting. Acc. Organ. Soc. 29, 7392. Seal, W., Culen, J., Dunlop, A., Berry, T., Ahmed, M., 1999. Enacting a European supply chain: a case study on the role of management accounting. Manage. Acc. Res. 10, 303322. Shapiro, D.L., Sheppard, B.H., Cheraskin, L., 1992. Business on a handshake. Negotiation J. 8, 365377. Sharfman, M.P., Gray, B., Yan, A., 1991. The context of interorganizational collaboration in the garment industry: an institutional perspective. J. Appl. Behav. Sci. 27, 181208. Siegel, P.H., Blank, M.M., Rigsby, J.T., 1991. Socialisation of the accounting professional: evidence of the effects of educational structure on subsequent auditor retention and advancement. Acc. Audit. Acc. J. 4, 5870. Smith, K.G., Carroll, S.J., Ashford, S.J., 1995. Intra- and interorganizational cooperation: toward a research agenda. Acad. Manage. J. 38, 723. Song, Y., 1995. Strategic alliances in the hospital industry: a fusion of institutional and resource dependence views. Acad. Manage. J. (Best Paper Proceedings 1995), 271275. Spekman, R.E., 1988. Strategic supplier selection: understanding long-term buyer relationships. Business Horizons 31, 7581. Spekman, R.E., Isabella, L.A., 2000. Alliance Competence: Maximizing the Value of Your Partnerships. John Wiley & Sons, New York. Stasser, G., Taylor, L.A., Hanna, C., 1989. Information sampling in structured and unstructured discussions of three- and six person groups. J. Pers. Soc. Psychol. 57, 6778. Teng, J.T.C., Cheon, M.J., Grover, V., 1995. Decisions to outsource information systems functions: testing a strategy-theoretic discrepancy model. Decis. Sci. 26, 75103. Tjosvold, D., 1988. Cooperation and competitive interdependence. Group Organ. Stud. 13, 274289. Tomkins, C., 2001. Interdependencies, trust and information in relationships, alliances and networks. Acc. Organ. Soc. 26, 161191. Usdiken, B., 1990. Reciprocity, asymmetry and information sharing in manufacturerdealer networks. Strategic Manage. J. 6, 309321. Van der Meer-Kooistra, J., Vosselman, E.G.J., 2000. Management control of interrm transactional relationships: the case study of industrial renovation and maintenance. Acc. Organ. Soc. 25, 5177. Wagner III, J.A., 1995. Studies of individualismcollectivism: effects on cooperation in groups. Acad. Manage. J. 38, 152172. Widener, S.K., Selto, F.H., 1999. Management control systems and boundaries of the rm: why do rms outsource internal audit activities? J. Manage. Acc. Res. 11, 4573. Williamson, O.E., 1991. Comparative economic organization: the analysis of discrete structural alternatives. Adm. Sci. Q. 36, 269296. Wood, D.J., Gray, B., 1991. Towards a comprehensive theory of collaboration. J. Appl. Behav. Sci. 27, 139162. Wooldridge, B.R., Minsky, B.D., 2002. The role of climate and socialization in developing interfunctional coordination. Learn. Organ. 9, 2938.

Management Control Systems Cooperation and Performance in

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Management Control Systems Cooperation and Performance in

Hochgeladen von

Copyright:

Verfügbare Formate

Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

Fig. 1. Theoretical model.

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

0.658 0.377 0.556 0.488 0.361 0.449 0.548

0.828 0.563 0.234 0.152 0.265 0.159

0.964 0.467 0.278 0.605 0.429

0.873 0.626 0.399 0.601

0.929 0.454 0.589

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

H. Mahama / Management Accounting Research 17 (2006) 315339

Das könnte Ihnen auch gefallen