Differences in the Role of Job-Relevant Information in the Budget Participation-

Performance Relationship among U.S. and Mexican Managers:

A Question of Culture or Communication

(Maria A. Leach-Lopez, William W. Stammerjohan, Frances M. McNair)

Journal of Management Accounting Research, Vol. 19, 2007, pp. 105-136

presented by:

Wulandari Fitri Ekasari - 340465

Research Background

• U.S. companies continue to move operations into Mexico (Lindquist, 2001; The Economist, 2000) and maquila exports from Mexico growing at 20%/yr since NAFTA implementation

• U.S. multinationals export U.S.-based management control systems to manage their foreign operations (Harrison, 1992; Harrison & McKinnon, 1999)

What is “maquiladora”?

factories that import materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then re-exports the

assembled product

This study is important for several reasons . . .

• To answer the unanswered questions from findings of Frucot & Shearon (1991)

• Some refinements to the existing literature by concentrating on the management environment faced by U.S.-controlled maquiladoras

Research Questions

• Can parent companies expect budget participation to be associated with performance among their Mexican managers in U.S.- controlled maquiladoras? (H1 – H5)

• Are there significant cultural differences between Mexican managers currently employed by U.S.-controlled maquiladoras and their U.S. counterparts? (H6)

• Do these cultural, or other, differences lead to differences in the basic level of correlation between budget participation and performance and/or any differences in the causal mechanisms connecting budget participation to performance between U.S. managers working in the U.S. and Mexican managers working for U.S.-controlled maquiladoras? (H7 – H8)

Theoretical Backgrounds

Path Relationships

• Path A: PART PERF (Shields & Shields, 1998; Frucot & Shearon, 1991)

• Path B: PART SAT (Frucot & Shearon, 1991)

• Path C: SAT PERF

• Path D: PART JRI (Kren, 1992)

• Path E: JRI SAT (Lau & Tan, 2003)

• Path F: JRI PERF (Kren, 1992)

The Path Model

PART – PERF Hypotheses

• H1: Increased budget participation leads directly to increased performance. (A)

• H2: Increased budget participation leads directly to increased performance. (A)

• H3: Increased budget participation leads to increased job satisfaction and increased job satisfaction leads to increased performance. (B&C)

• H4: Increased budget participation leads to increased job-relevant information and increased job-relevant information leads to increased performance. (D&F)

• H5: Increased budget participation leads to increased job-relevant information, increased job-relevant information leads to increased job satisfaction, and increased job satisfaction leads to increased performance. (D, E, & C)

U.S. & Mexico Cultural Differences

• Hofstede:

- Power Distance

- Individualism vs. Colectivism

- Uncertainty Avoidance

- Masculinity vs. Femininity

• Measurement Instability (Fernandez et al., 1997)

• Selection Bias & Training

Cultural Differences & Effects Hypothesis

• H6: There are differences on Hofstede’s national-culture dimensions between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S.

• H7: There is a difference in the basic budget participation-performance relationship (as hypothesized in H1) between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S.

• H8: There are differences in the complex budget participation-performance relationships described in H2–H5 between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S.

Variables Operationalization and Measurement (1)

Variables Operationalization and Measurement (2)

Sample Design

• 143 mid-level managers from:

- 45 U.S. managers working in the U.S.

- 98 Mexican managers working for U.S.-

controlled maquiladoras in Mexico:

Border (Nuevo Laredo) 58 people

Interior (Puebla) 40 people• Survey instrument written in English/Spanish• For U.S. subjects were distributed by email, for

Mexican were hand-delivered

Path Coefficients Model

• To test H1:

• To test H7:

• To test H2 – H5:

Demographic Statistics

Path Variable Simple Correlations

Test of Cultural Differences (H6)

• H6 is supported for UAI & IDV

Hypoteses Testing Results

Conclusions from Hypotheses Testing

• H1 is supported, H7 is not supported

• H2 is supported for sample U.S.

• H3 and H5 is not supported for both sample

• H4 is supported for sample Mexico

• H6 is supported

• H8 is supported for path C, E, and F

Ex-Post Analyses:Culture vs. Communication

• Cultural difference explanation was rejected due to similarity for both regions

• 3 additional tests regarding communication:

- Bilingual vs. non-bilingual

- Bilingual ability

- Supervisor nationality

Communication Tests Result

• Path F, JRI PERF, sig. larger for non-bilingual Mexican managers

• Hypothesis 4, PART JRI PERF marginally supported for every level of bilingual ability other than “very well” (least physic distance)

• Hypothesis 4 is supported, however path F, sig. larger for Mexican supervised by U.S. nationals

Conclusions

• While there are strong associations between budget participation and performance for both U.S. managers working in the U.S. and Mexican managers working for U.S.-controlled maquiladoras in Mexico, the causal mechanisms connecting budget participation with performance are quite different

• The importance of the information-communication aspect in Mexico may be related to the psychic distance, the level of difficulty our Mexican managers face in communicating with their U.S. parent companies

• Management tools that provide additional job-relevant information to foreign managers may help improve performance

Limitations

• the lack of temporal precedence between the independent and dependent variables

• any limitations imbedded in the scales used to measure the variables

• the generalizability of the samples

~ End of Session ~