Organizational strategy, technology and management control systems : an empirical study of New Zealand firms

Abstract

How an organization can achieve its potential and develop competitive advantage to be successful in today's globally fierce and competitive environment are the major themes of this research.

Miles and Snow (1978) stated that an organization should have an articulated purpose and an established mechanism for achieving it. Strategy is the common key to the effective governance of organizations, large and small, and private and public. The proper design and use of management control systems is instrumental in successful strategy implementation, and consequently contributes to organization performance. (Merchant and Simons 1986; Govindarajan and Gupta 1985).

Conversely, some researchers suggested that there is a strong relationship between the organizational technology employed and the characteristics of the management control systems. Thus, differences in the type of organizational technology employed should explain some of the differences among management control systems (MCS) employed (Machintosh 1994; Daft 2000).

While considerable research has been done in examining strategy and management control systems, only limited work has considered the relationship between the organizational technology and management control systems. Additionally, there is a dearth of studies considering the effect of both variables on the management control systems. Thus the purpose of this research is to identify how well strategy and technology predict the style of MCS.

The research tests the two - way interaction between organizational technology, strategy and management control systems. The empirical analysis based on a sample of 95 manufacturing firms randomly selected from New Zealand provides support for the hypothesis developed.

The research results reveal that technology has more influence than strategy in predicting the use of management control systems; especially, in the use of input control systems.

While many previous researchers have found that strategy was the dominant factor in the design and use of management control systems, the contradictory results from the current study provide a challenge to these findings.