International Journal of Advanced and Applied Sciences
Int. j. adv. appl. sci.
EISSN: 2313-3724
Print ISSN: 2313-626X
Volume 3, Issue 10 (October 2016), Pages: 79-88
Title: Management control system, organizational learning, and firm’s performance: An empirical study from developing economy
Author(s): Rabee Shurafa *, Rapiah Bt Mohamed
Affiliation(s):
School of Accountancy, College of Business UUM, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia
https://doi.org/10.21833/ijaas.2016.10.013
Abstract:
Even though it is widely accepted that effective design of management control system (MCS) has the ability to stimulate organizational learning, which ultimately will enhance the organizational performance, empirical research analysis on such relationship in the context of the developing economy, in comparison to the existing literature of the developed economy, is still scarce. In particular, the influence of each of levers of control (LOC) components (belief, boundary, diagnostic, and interactive control) on the organizational learning still lacking with conflicting results. Based on a survey of 129 top managers of the Palestinian listed firms, we examine how different MCS have different influence on organizational learning and how organizational learning ultimately influences the organizational performance. The evidence suggests that neither beliefs system, nor the boundary system facilitates learning. In addition, an interactive control system also has no significant influence on organizational learning, which unlike the case of the developed economy. By contrast, diagnostic control system is the only control system that has significance influence on organizational learning. In addition, the result indicates that organizational learning has a positive influence on firm’s performance. This paper contributes to stream of literature from the perspective of the developing economy and provide suggestions for potential directions of future MCS research in the context of the devolving economy.
© 2016 The Authors. Published by IASE.
This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Keywords: Management control system, Levers of control, Organizational learning and organizational performance, Developing economy, Palestine
Article History: Received 14 June 2016, Received in revised form, 10 October 2016, Accepted 21 October 2016
Digital Object Identifier: https://doi.org/10.21833/ijaas.2016.10.013
Citation:
Shurafa R and Mohamed RB (2016). Management control system, organizational learning, and firm’s performance: An empirical study from developing economy. International Journal of Advanced and Applied Sciences, 3(10): 79-88
http://www.science-gate.com/IJAAS/V3I10/Shurafa.html
References:
| Abernethy MA and Brownell P (1999). The role of budgets in organizations facing strategic change: an exploratory study. Accounting, Organizations and Society, 24(3): 189-204. https://doi.org/10.1016/S0361-3682(98)00059-2 |
||||
| Abernethy MA and Lillis AM (1995). The impact of manufacturing flexibility on management control system design. Accounting, Organizations and Society, 20(4): 241-258. https://doi.org/10.1016/0361-3682(94)E0014-L |
||||
| Anthony R and Govindarajan V (2007). Management Control Systems. McGraw-Hill, Boston, USA. | ||||
| Argyris C (1977). Organizational learning and management information systems. Accounting, Organizations and Society, 2(2): 113-123. https://doi.org/10.1016/0361-3682(77)90028-9 |
||||
| Armstrong JS and Overton TS (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14(8): 396-402. https://doi.org/10.2307/3150783 |
||||
| Baker WE and Sinkula JM (1999). The synergistic effect of market orientation and learning orientation on organizational performance. Journal of the Academy of Marketing Science, 27(4): 411-427. https://doi.org/10.1177/0092070399274002 |
||||
| Bisbe J and Otley D (2004). The effects of the interactive use of management control systems on product innovation. Accounting, Organizations and Society, 29(8): 709-737. https://doi.org/10.1016/j.aos.2003.10.010 |
||||
| Bontis N, Crossan MM and Hulland J (2002). Managing an organizational learning system by aligning stocks and flows. Journal of Management Studies, 39(4): 437-469. https://doi.org/10.1111/1467-6486.t01-1-00299 |
||||
| Calantone RJ, Cavusgil ST and Zhao Y (2002). Learning orientation, firm innovation capability, and firm performance. Industrial Marketing Management, 31(6): 515-524. https://doi.org/10.1016/S0019-8501(01)00203-6 |
||||
| Chenhall RH (2005). Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: an exploratory study. Accounting, Organizations and Society, 30(5): 395-422. https://doi.org/10.1016/j.aos.2004.08.001 |
||||
| Day GS (1994). The capabilities of market-driven organizations. The Journal of Marketing, 58(4): 37-52. https://doi.org/10.2307/1251915 |
||||
| De Geus AP (1988). Planning as learning. Harvard Business Review, 66(2): 70-74. | ||||
| Dent JF (1990). Strategy, organization and control: some possibilities for accounting research. Accounting, Organizations and Society, 15(1): 3-25. https://doi.org/10.1016/0361-3682(90)90010-R |
||||
| Dickson PR (1992). Toward a general theory of competitive rationality. The Journal of Marketing, 56(1): 69-83. https://doi.org/10.2307/1252133 |
||||
| Fornell C and Bookstein FL (1982). Two structural equation models: LISREL and PLS applied to consumer exit-voice theory. Journal of Marketing Research, 19(4): 440-452. https://doi.org/10.2307/3151718 |
||||
| Fraj E, Matute J and Melero I (2015). Environmental strategies and organizational competitiveness in the hotel industry: The role of learning and innovation as determinants of environmental success. Tourism Management, 46: 30-42. https://doi.org/10.1016/j.tourman.2014.05.009 |
||||
| Galer G and Van Der Heijden K (1992). The learning organization: how planners create organizational learning. Marketing Intelligence and Planning, 10(6): 5-12. https://doi.org/10.1108/02634509210018702 |
||||
| García-Morales VJ, Jiménez-Barrionuevo MM and Gutiérrez-Gutiérrez L (2012). Transformational leadership influence on organizational performance through organizational learning and innovation. Journal of Business Research, 65(7): 1040-1050. https://doi.org/10.1016/j.jbusres.2011.03.005 |
||||
| Govindarajan V (1984). Appropriateness of accounting data in performance evaluation: an empirical examination of environmental uncertainty as an intervening variable. Accounting, Organizations and Society, 9(2): 125-135. https://doi.org/10.1016/0361-3682(84)90002-3 |
||||
| Hair JF, Black WC, Babin BJ and Anderson RE (2009). Multivariate data analysis. 7th Edition, Pearson Prentice Hall, New Jersey, USA. PMCid:PMC2791323 |
||||
| Henri JF (2006). Management control systems and strategy: a resource-based perspective. Accounting, Organizations and Society, 31(6): 529-558. https://doi.org/10.1016/j.aos.2005.07.001 |
||||
| Hofstede G and Bond M (1988). The Confucius connection: From cultural roots to economic growth. Organizational Dynamics, 16(4): 5-21. https://doi.org/10.1016/0090-2616(88)90009-5 |
||||
| Hofstede G and Hofstede GJ (2004). Cultures and organizations: Software for the mind. 2nd Edition, McGraw-Hill, London, UK. PMCid:PMC1356511 |
||||
| Hofstede G, Hofstede GJ and Minkov M (2010). Cultures and Organizations: Software of the Mind. 3rd Edition, McGraw-Hill Education, London, UK. | ||||
| Hoque Z and James W (2000). Linking balanced scorecard measures to size and market factors: Impact on organizational performance. Journal of Management Accounting Research, 12(1): 1-17. https://doi.org/10.2308/jmar.2000.12.1.1 |
||||
| Hult T and Tomas M (1998). Managing the international strategic sourcing process as a market‐driven organizational learning system. Decision Sciences, 29(1): 193-216. https://doi.org/10.1111/j.1540-5915.1998.tb01349.x |
||||
| Hussein N, Mohamad A, Noordin F and Ishak NA (2014). Learning organization and its effect on organizational performance and organizational innovativeness: A proposed framework for Malaysian Public Institutions of Higher Education. Procedia-Social and Behavioral Sciences, 130: 299-304. https://doi.org/10.1016/j.sbspro.2014.04.035 |
||||
| Jain AK and Moreno A (2015). Organizational learning, knowledge management practices and firm's performance: an empirical study of a heavy engineering firm in India. The Learning Organization, 22(1): 14-39. https://doi.org/10.1108/TLO-05-2013-0024 |
||||
| Jiménez-Jiménez D and Sanz-Valle R (2011). Innovation, organizational learning, and performance. Journal of Business Research, 64(4): 408-417. https://doi.org/10.1016/j.jbusres.2010.09.010 |
||||
| Kaplan R and Norton D (2005). The balanced scorecard: measures that drive performance. Harvard Business Review, 83(7): 172-180. | ||||
| Kaplan RS and Norton DP (1996). The balanced scorecard: Translating strategy into action. 1st Edition, Harvard Business Review Press, Brighton, USA. | ||||
| Keskin H (2006). Market orientation, learning orientation, and innovation capabilities in SMEs: An extended model. European Journal of Innovation Management, 9(4): 396-417. https://doi.org/10.1108/14601060610707849 |
||||
| Kloot L (1997). Organizational learning and management control systems: Responding to environmental change. Management Accounting Research, 8(1): 47-73. https://doi.org/10.1006/mare.1996.0033 |
||||
| Levitt B and March JG (1988). Organizational learning. Annual Review of Sociology, 14: 319-340. https://doi.org/10.1146/annurev.so.14.080188.001535 |
||||
| Lonial SC and Carter RE (2015). The impact of organizational orientations on medium and small firm performance: A resource‐based perspective. Journal of Small Business Management, 53(1): 94-113. https://doi.org/10.1111/jsbm.12054 |
||||
| Lord M (2014). University endowment committees: how a learning orientation and knowledge factors contribute to portfolio diversification and performance. The European Journal of Finance, 22(8-9): 1-25. | ||||
| Marginson DE (2002). Management control systems and their effects on strategy formation at middle‐management levels: evidence from a UK organization. Strategic Management Journal, 23(11): 1019-1031. https://doi.org/10.1002/smj.271 |
||||
| McKee D (1992). An organizational learning approach to product innovation. Journal of Product Innovation Management, 9(3): 232-245. https://doi.org/10.1016/0737-6782(92)90033-9 |
||||
| Merchant KA (1984). Influences on departmental budgeting: an empirical examination of a contingency model. Accounting, Organizations and Society, 9(3): 291-307. https://doi.org/10.1016/0361-3682(84)90013-8 |
||||
| Merchant KA and Van der Stede WA (2011). Management control systems: performance measurement, evaluation and incentives. 3rd Edition, Pearson Prentice Hall, New Jersey, USA. | ||||
| Noruzy A, Dalfard VM, Azhdari B, Nazari-Shirkouhi S and Rezazadeh A (2013). Relations between transformational leadership, organizational learning, knowledge management, organizational innovation, and organizational performance: an empirical investigation of manufacturing firms. The International Journal of Advanced Manufacturing Technology, 64(5-8): 1073-1085. https://doi.org/10.1007/s00170-012-4038-y |
||||
| Otley D, Broadbent J and Berry A (1995). Research in management control: An overview of its development. British Journal of Management, 6(1): S31-S44. https://doi.org/10.1111/j.1467-8551.1995.tb00136.x |
||||
| Santos-Vijande ML, López-Sánchez JÁ and Trespalacios JA (2012). How organizational learning affects a firm's flexibility, competitive strategy, and performance. Journal of Business Research, 65(8): 1079-1089. https://doi.org/10.1016/j.jbusres.2011.09.002 |
||||
| Shurafa R and Mohamed R (2016). Management control system under the pressure of strategic uncertainty: The case of the Arab world. Australian Journal of Basic and Applied Sciences, 10(7): 130-134. | ||||
| Simons R (1990). The role of management control systems in creating competitive advantage: New perspectives. Accounting, Organizations and Society, 15(1): 127-143. https://doi.org/10.1016/0361-3682(90)90018-P |
||||
| Simons R (1991). Strategic orientation and top management attention to control systems. Strategic Management Journal, 12(1): 49-62. https://doi.org/10.1002/smj.4250120105 |
||||
| Simons R (1994). How new top managers use control systems as levers of strategic renewal. Strategic Management Journal, 15(3): 169-189. https://doi.org/10.1002/smj.4250150301 |
||||
| Simons R (1995). Levers of control–how managers use innovative control systems to drive strategic renewal. Harward Business School Press, Boston, USA. | ||||
| Simons R (2000). Performance measurement and control systems for implementing strategy. Pearson Prentice Hall, New Jersey, USA. | ||||
| Simons R (2013). Levers of control: How managers use innovative control systems to drive strategic renewal. Harvard Business Review Press, Brighton, USA. | ||||
| Sinkula JM (1994). Market information processing and organizational learning. The Journal of Marketing, 58 (1): 35-45. https://doi.org/10.2307/1252249 |
||||
| Slater SF and Narver JC (1995). Market orientation and the learning organization. Journal of Marketing, 59(3): 63-74. https://doi.org/10.2307/1252120 |
||||
| Tippins MJ and Sohi RS (2003). IT competency and firm performance: is organizational learning a missing link?. Strategic management journal, 24(8): 745-761. https://doi.org/10.1002/smj.337 |
||||
| Turner T and Pennington W (2015). Organizational networks and the process of corporate entrepreneurship: how the motivation, opportunity, and ability to act affect firm knowledge, learning, and innovation. Small Business Economics, 45(2): 447-463. https://doi.org/10.1007/s11187-015-9638-0 |
||||
| Widener SK (2007). An empirical analysis of the levers of control framework. Accounting, Organizations and Society, 32(7): 757-788. https://doi.org/10.1016/j.aos.2007.01.001 |
||||
| Zheng W, Yang B and McLean GN (2010). Linking organizational culture, structure, strategy, and organizational effectiveness: Mediating role of knowledge management. Journal of Business Research, 63(7): 763-771. https://doi.org/10.1016/j.jbusres.2009.06.005 |
||||