Management Accounting Practice and Strategic Behavior (eBook)

Dr. Oliver Gediehn completed his doctoral thesis at the Chair of Management Accounting and Control at the European Business School, Oestrich-Winkel. He works as a consultant in Berlin.

Foreword 5
Preface 7
Contents 9
Tables 13
Figures 14
A Introduction 15
1. Research Issue and Objectives 15
2. Plan of the Study 18
B Structuration Theory and Management Accounting Research 20
1. Structuration Theory as an Ontological Frame of Reference 20
1.1. Structuration Theory as Socio-Scientific Meta-Theory 20
1.2. Post-Positivist Approach to Science 21
1.3. Ontological Synthesis 22
1.4. Duality of Structure 23
1.5. Research Informed by Structuration Theory 25
1.6. Critical Review on the Application of Structuration Theory 32
2. Structuration Theory in Management Accounting Research 35
2.1. Previous Accounting Research Informed by Structuration Theory 35
2.2. Structurationist Research Perspective on Management Accounting 41
2.2.1. Management Accounting as a Social Practice 41
2.2.2. Management Accounting within the Social Context 43
2.2.3. Social Dimensions of Management Accounting Practices 44
2.2.4. Empirical Research in Management Accounting Informed by ST 47
2.3. Value of ST in Management Accounting Research 52
C Management Accounting and Managerial Long-Term Orientation 55
1. Debate on 'Economic Short-Termism' 56
2. RAPM Research 59
2.1. Definition of RAPM 59
2.2. Overview of the RAPM Research Stream 61
2.3. RAPM and Managerial Long-Term Orientation 62
2.4. Organizational Role Theory and RAPM Research 64
2.4.1. Basic Concepts of Role Theory 64
2.4.2. Application of Organizational Role Theory in RAPM Research 66
2.5. Social Dimensions of RAPM 69
3. Research Gap and Research Questions 71
3.1. Research Gap 71
3.1.1. Persistence of Accounting-Based Performance Measures 71
3.1.2. Increasing Relevance at the Middle Management Level 73
3.2. Research Scope 75
3.2.1. Long-Term Growth Orientation as Part of Long-Term Orientation 75
3.2.2. The Relevant Organizational Context 79
3.3. Research Questions 80
D Research Design 81
1. Research Approach 81
1.1. Case Study Approach 81
1.2. Two-Staged Design 82
1.3. Crucial Case Setup 83
1.4. Survey Design Parameters 84
2. Research Site 85
E Field Interviews 87
1. Purpose 87
2. Method 88
2.1. Selection of Informants 88
2.2. Semi-Structured Interviews 90
2.3. Group Discussion 91
3. Results 93
3.1. The Level of Managerial Long-Term Growth Orientation 93
3.2. The Role and Relevance of RAPM 95
3.2.1. Formal Incentive System 96
3.2.2. Extent of RAPM in Practice 96
3.2.3. Dysfunctional Consequences of the RAPM Practice 98
3.3. Other Relevant Factors of the Organizational Context 99
3.3.1. Corporate Entrepreneurship 99
3.3.2. Properties of the Strategy-Making Process 112
3.4. Propositions to Be Tested and Resulting Research Model 118
3.4.1. Dysfunctional Effect of RAPM 118
3.4.2. Impact of Corporate Entrepreneurship 118
3.4.3. Impact of Strategy-Making 121
3.4.4. Resulting Research Model 122
F Questionnaire Survey 124
1. Sample and Procedure 124
2. Measures 128
2.1. Measure Development 128
2.2. Measure Validation 132
3. Results 136
3.1. Dysfunctional Effect of RAPM 137
3.2. Impact of Corporate Entrepreneurship 138
3.2.1. Impact of Entrepreneurial Orientation on LGO 138
3.2.2. Impact of the Entrepreneurial Environment 139
3.2.3. Impact of the Individual Proclivity for Entrepreneurship 141
3.3. Impact of Strategy-Making 143
3.4. Relative Impact of RAPM and the Other Relevant Factors 144
G Discussion and Outlook 149
1. Theoretical Implications 149
1.1. On the Dysfunctional Effect of RAPM 149
1.2. On the Other Relevant Organizational Factors 151
1.3. On RAPM Research Informed by Structuration Theory 155
1.4. On Management Accounting Practice and Strategic Behavior 160
2. Managerial Implications 163
2.1. RAPM 163
2.2. Corporate Entrepreneurship 164
2.3. Strategy-Making 166
3. Limitations and Outlook 168
Appendix 170
References 180

A Introduction (p. 1)

"Without continual growth and progress, such words as improvement, achievement, and success have no meaning." Benjamin Franklin

1. Research Issue and Objectives

Achieving sustainable sales growth has recently been among the most important topics for business managers in large corporations. Practitioner journals portrait companies in a "do-or-die struggle" for sustained and profitable growth and explore the sources, drivers, and processes of growth.

The attempt to achieve a favorable long-term sales growth trajectory complements the continuous strive for profitability and operational excellence – and creates a latent conflict between short-term efforts for profitability and long-term concerns for growth. Academic research mirrors this conflict and its implications in the stream of literature devoted to the balancing of short-term goal achievement and the encouragement of strategic management behavior or, more generally, managerial long-term orientation.

While short-term goal achievement relates mostly to the attainment of budgetary targets8 or financial planning targets, in general, the operationalization of strategic behavior and long-term orientation is manifold.

It includes the strive for strategic renewal, innovation and adaptation, the concern for long-term positioning and growth, as well as the pursuit of entrepreneurial initiatives. A prominent topic of this stream of research is the role and relevance of management accounting.

To the most part, researchers see current management accounting systems and practices as functional with respect to short-term goal achievement but as dysfunctional or at least problematic with respect to the encouragement of strategic management behavior.

The literature on `economic short-termism` for example proposes the short-term focus on "flawed" management (accounting) practices as one potential root cause for myopic management behavior. Similarly, the Reliance on Accounting Performance Measures (RAPM) research stream assigns an excessive short-term focus as dysfunctional effect to the traditional (accounting-based) management control system.

A common characteristic of these two streams of research is the narrow quantitative empirical base. The impact of the allegedly flawed management practices on economic short-termism builds largely on theoretical arguments while the scarce empirical evidence is only circumstantial or anecdotal in nature.

The various dysfunctional consequences of RAPM including motivational aspects of job satisfaction or jobrelated tension as well as behavioral aspects such as tactical gaming or data manipulation are subjects of extensive empirical research. Yet, only few studies deal with the particular issue of managerial long-term orientation and those that do, fail to deliver conclusive results due to conceptual and methodological limitations.

In summary, the existing management accounting literature "is still inconclusive" to answer as to whether current management accounting practices and in particular the dominant RAPM practice have a dysfunctional effect on managerial long-term orientation. Consequently, the study responds to Van der Stede`s (2000, p. 120) call for future research on this topic and aims to render a more definite answer on the existence of the dysfunctional effect ideally reconciling the previous anecdotal and quantitative empirical evidence.

Reflecting the currently prevailing concern for growth in practice, the study explicitly addresses long-term growth orientation as an element of strategic management behavior and the more inclusive notion of managerial longterm orientation. This approach results in the following first research question guiding the study:

• Does RAPM have a dysfunctional effect on managerial long-term growth orientation?

The study is conducted in the tradition of Hopwood`s call to study management accounting "in the context in which it operates".