DOCUMENT DE TRAVAIL 2004-017 - FSA ULavalPublicación de la : Faculté des sciences de...
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DOCUMENT DE TRAVAIL 2004-017
STRATEGY AND ACTIVITY BASED COSTING :
A CROSS NATIONAL STUDY
Alnoor BHIMANI Maurice GOSSELIN
Version originale : Original manuscript : Version original :
ISBN – 2-89524-207-0
Série électronique mise à jour : On-line publication updated : Seria electrónica, puesta al dia
07-2004
STRATEGY AND ACTIVITY BASED COSTING:
A CROSS NATIONAL STUDY*
ALNOOR BHIMANI LONDON SCHOOL OF ECONOMICS
HOUGHTON STREET,LONDON WC2A E-mail: [email protected]
MAURICE GOSSELIN UNIVERSITÉ LAVAL
QUÉBEC CITY, CANADA G1K 7P4 E-mail: [email protected]
May 2004
* The authors of the study would like to thank the following for their valuable input to the study: Thomas Ahrens, Franck Bonzemba, Lawrence Habib, Armin Helic, Yutaka Kato, Kazbi Kothavala, Hiroshi Okano, Angelo Riccaboni and Holger Vieten.
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STRATEGY AND ACTIVITY BASED COSTING: A CROSS NATIONAL STUDY
ABSTRACT
This study assesses the association between the corporate strategy of organizations and
experiences with activity based costing. It considers strategy-based contingencies in relation
to the decision to implement activity based costing, as well as the extent, speed and perceived
success of activity based costing implementations. A questionnaire was developed to collect
information on corporate costing practices and strategic orientation in seven countries:
Canada, France, Germany, Italy, Japan, USA and UK. More than 400 questionnaires were
returned and analysed. The results of the study show that strategy and the perception of ABC
implementation success are associated. However, strategy orientation was not found to affect
the decision to implement activity based costing, nor the speed or stage of activity based
costing implementation within the firms investigated. The investigation is indicative of the
stability of ABC-corporate strategy relationships across different country contexts. The results
of the study signify also the outcome-based rather than the process-based dependency between
activity based costing and corporate strategy orientation across large organizations in the
countries investigated.
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STRATEGY AND ACTIVITY BASED COSTING: A CROSS NATIONAL STUDY
INTRODUCTION
A number of studies postulate relationships between the success of activity based costing
(ABC) implementation and a variety of variables (Shields 1995; Swenson, 1995; Foster and
Swenson, 1997; Al-Omiri and Drury, 2003). These studies consider that rather than technical
factors, it is behavioral and organizational variables which influence ABC implementation
success. Such variables could include organizational culture, top management support, links
between accounting system and performance evaluation, availability of resources, training,
consensus about and clarity of the objectives of the system, and linkages between the cost
system and corporate strategy (McGowan and Klammer, 1997; Shields and Young, 1989).
Researchers have also investigated the relationships between the stages of the diffusion,
adoption and implementation of ABC and several contextual factors such as organizational
structure, product diversity and strategy (Bjornenak, 1997; Gosselin, 1997; Malmi, 1999 (see
also Bjornenak and Mitchell, 2000)). The literature is indicative of strategy orientation as
significantly affecting the activity based costing and activity based management (ABCM)
experiences of enterprises.
The present study seeks to more extensively assess associations between activity based costing
(ABC) implementation issues and organizational strategy orientation. The motivation for
considering strategy-based contingencies stems from the prior accounting literature which
conceptually suggests the existence of strong links between strategic orientation and ABC
practices though there remains a relative dearth of empirical research specifically focusing on
strategy and ABC implementation experiences. Additionally, there is little research
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documenting the stability of relationships between dimensions of management accounting
system implementations and corporate strategic orientation across countries. The present
study addresses both concerns.
The paper is organized as follows. In the next section, the results of scholarly studies relating
to linkages between organizational variables and implementation experiences with activity
based costing and activity based management (ABCM) are reviewed. The section also
develops the hypotheses that are tested in the light of this prior research with particular
reference to corporate strategy orientation and ABCM. Section three focuses on the research
design including the questionnaire instrument used and the data collection process. Section
four provides a description of the analyses performed to test the hypotheses and a discussion
of the results. The last section discusses the contribution and the limitations of this study and
addresses opportunities for further research in this area.
LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT
Scholarly research on activity based costing has been carried out on the influence of
organizational size (Armitage and Nicholson, 1993, Gosselin, 1997, Innes et al., 2000), level
of automation (Drury and Tayles, M. 1994), complexity of production processes and product
diversity (Bjornenak, 1997), organizational culture elements (Friedman and Lyne 1999),
behavioral factors (Anderson, 1995; Anderson and Young, 1999; Argyris and Kaplan, 1994;
Bhimani and Pigott, 1992; Foster and Swenson, 1997; Krumwiede, 1998; McGowan and
Klammer, 1997; Shields, 1995), institutional forces (Armstrong, 2002; Colwyn Jones and
Dugdale, 2002; Malmi, 1999; Sisaye, 2003), and stock market and firm performance (Gordon
and Silvester, 1999; Kennedy and Affleck-Graves, 2001). A small number of studies have
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explored aspects of cross-national variations in the use of ABC systems (Aptel and Pourjalali,
2001; Groot, 1999). Gosselin (1997) has investigated a variety of organizational variables
including the links between corporate strategy type and the adoption of activity management
within a set of Canadian companies. Gosselin’s (1997) data related to a variety of
organizational determinants and business strategies argued in the past literature to find
linkages with costing practices. His study is the most conclusive to date regarding the
relationship between strategic posture and the adoption and implementation of activity
management approaches in that Gosselin (1997, p.114) concludes that “prospectors tend to
adopt activity analysis, activity cost analysis and activity based costing more frequently than
analysers and defenders”. The present study’s purpose is to extend Gosselin’s (1997) study in
terms of the diversity of ABC implementation issues considered and to assess the stability of
strategy and ABC linkages across different country contexts.
Whilst conjectures may be made concerning ABC–strategy linkages based on monocountry
data sets, one test of the stability of posited relationships is to determine how pervasive these
are across different country contexts. ABC as a costing approach provides an appropriate
frame of reference for a multi-country study because of the relatively fast pace through which
it has gained recognition internationally. The emergence of ABC, as a cost management
innovation, started in the USA with articles by Cooper (1987; 1988a; 1988b; 1989a; 1989b)
and Cooper and Kaplan (1988a; 1988b). The new approach was almost simultaneously
publicised in the UK and in Canada. The diffusion of ABCM in France started, a little later,
with the work of Evraert and Mévellec (1990) and Mévellec (1990). However, French
management accountants have often argued that a method similar to ABC has been used in
France since 1930 (Bescos and Mandoza, 1995; Lebas 1994; 1996). Even though, the
diffusion process for ABC has not been similar across the seven countries investigated here
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(Bhimani, 1996; Brierley et al., 1997; McGowan and Klammer, 1997; Sakurai, 1996; Shim
and Stagliano, 1997), it is held that the strategic posture of an organization will be associated
with costing system experiences in the same manner across different country contexts. This
follows in that organizational priorities can be notionally limited to strategic orientation and
broad managerial pursuits (Chenhall and Langfield-Smith, 2001; Palmer, 1992).
Consequently, corporate stance towards ABC is likely to be strategy dependent across
different country contexts. Shields’ (1998) observation that there is no evidence of country
specificity or lack of convergence in management accounting practices and that decisions
pertaining to management accounting systems tend to align across countries lends further
support to this argument.
ABCM has been regarded as a management accounting innovation that has rapidly diffused
and spread across many organiztions, industries and nations in a manner worthy of scholarly
inquiry (Bjornenak, 1997; Colwyn Jones and Dugdale, 2002, Malmi, 1999). Strategy has been
argued to play a key role in influencing management control practices and the diffusion
process for innovation (Simons, 1994; 1995; Langfield-Smith, 1997). The necessity to
innovate is driven by the type of strategy employed by a firm (Guilding et al., 2000).
Identifying conceptions of strategic types is essential in order to assess links to the diffusion of
ABC and implementation characteristics. Miles and Snow (1978, 1994) identified four
strategic types of organizations according to the rate at which they change their products and
markets: prospectors, defenders, analyzers and reactors. The fundamental difference among
these types is the rate of change in the organizational domain. Prospectors are characterized by
their dynamism in seeking market opportunities, their capability to develop and produce new
products to meet customers' needs, their large expenditures related to research and
development, and their dependence on teamwork. They are usually innovators that create
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change in their respective industries. Defenders have a strategy that is the polar opposite of
that of prospectors. They operate within a narrow product-market domain characterized by
high production volume and low product diversity. Defenders compete aggressively on price,
quality and customer service. They engage in little or no product or market development and
stress efficiency of operations. Defenders are likely to face a lower level of environmental
uncertainty than prospectors (Slocum et al., 1985, Govindarajan, 1986). Analyzers stand
between these two categories, sharing characteristics of both prospectors and defenders.
Reactors do not follow a conscious strategy. They are viewed as a dysfunctional organizational
type. The premise of the Miles and Snow typology is that prospector, defender and analyzer
strategies, if properly implemented, can lead to effective performance (see Chenhall, 2003).
The Miles and Snow typology is chosen in this study to explore the interactions between
organizational strategy orientation and ABC implementation within organizations. The
rationale for using the Miles and Snow typology as Gosselin (1997) has noted is that first, the
capacity of an organization to innovate is the key dimension of this typology. It is therefore
particularly appropriate for examining the issue of the decision by enterprises to adopt
innovation in management accounting systems and to study their post-implementation
experiences with the innovations. Second, this typology is consistent with Porter's (1980;
1985) well documented low-cost and differentiation generic types which have also been
adopted by researchers in management accounting (Dent, 1990; Palmer 1992; Roslender and
Hart, 2003). Hambrick (1983) suggested that prospectors pursue a particular type of
differentiation and defenders another type of differentiation or cost leadership strategy. Miller
(1987) associated prospectors with a differentiation strategy complex product innovation.
Govindarajan (1986) also suggested an alignment between a differentiation strategy and
prospectors and a low-cost strategy and defenders. Third, the Miles and Snow typology is
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academically well accepted and internally consistent having been tested in several studies not
focused on accounting innovations (Hambrick, 1981; 1983; Simons, 1987; Shortell and Zajac,
1990; Slocum et al., 1985; Snow and Hrebiniak, 1980). Gosselin’s (1997) study which was
concerned with the effect of strategic posture and organizational structure on the adoption and
implementation of activity management approaches lends strong validity for the Miles and
Snow typology.
If strategic orientation is sought to be linked to an organization’s cost management priorities,
one might point to the notion that defenders compete on price and stress efficiency of
production and volume output. Their focus on value render defenders likely to be receptive to
ABC. But this assumes generic acceptance that ABC is the approach of choice for contexts
where efficiency of production and price/value relevance are priorities. Yet, ABC in effect
remains an innovation. Several surveys have been conducted in different countries across
Europe and North America to assess the degree to which ABCM has been adopted by firms
(Innes and Mitchell, 1991; Bright et al., 1992; Nicholls, 1992; Institute of Management
Accountants, 1993; Armitage and Nicholson, 1993; Cobb et al, 1992; Drury and Tayles, 1994;
Innes and Mitchell, 1999; Lukka and Granlund, 1996; Bjornenak, 1997; Gosselin, 1997; Innes
et al., 2000). Innes and Mitchell (1991) carried out the first survey that included questions on
ABCM. They found that among their 187 UK company respondents, only 6% had begun to
implement an ABCM system while 52% had not considered implementing ABCM. During the
same period, Bright et al. (1992) surveyed manufacturing firms again in the UK. The
percentage of ABCM adopters, 32%, was much larger than in Innes and Mitchell (1991). The
authors questioned these results and suggested that the low response rate and the potential
non-response bias may explain this high level of ABCM diffusion. Another survey conducted
in the UK by Nicholls (1992) showed that 10% of the respondents had implemented ABC. A
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later UK investigation by Innes and Mitchell (1999) was again carried out. Innes et al (2000)
who compare the two surveys, report that in 1994, UK companies revealed a 19.5% rate of
ABC adoption with 27.1% of firms actively considering ABC. By 1999, the respective figures
were 17.5% and 20.3%. In Canada, Armitage and Nicholson (1993) surveyed the 740 largest
corporations. The results showed that 14% of the respondents had implemented ABC, 15%
were reflecting on implementing ABC with 67% had not considered implementing an ABC
system. In Germany, Italy, France and Japan, surveys indicate that ABC adoption is gaining
popularity but just as in North America and the UK, it remains innovatry (Boons et al, 1992;
Bestos and Canvin, 2000; Barbato et al. 1996; Cescon, 1998, Cinquini et al, 1999; Brunnetti
and Cescon, 2002; Sakurai, 1996).
Given that ABC is a cost management innovation rather than an established management
accounting technique, its appeal can be argued to be influenced by its innovatory quality.
Since prospectors search continually for market opportunities and have a broad product-
market domain, they will tend to adapt their cost management system innovations swiftly to
their needs and thus more readily implement activity-based costing than defenders (Chenhall,
2003; Langfield-Smith, 1997; Palmer, 1992).
The likelihood of ABC implementation is also influenced by corporate strategy orientation in
another regard. ABC has been reported to be particularly relevant to firms with high product
and customer variety (Cooper 1988b; 1989a; Cooper and Kaplan, 1988a; 1988b). It is a cost
management approach which lends greater transparency to the cost of variety by indicating
which products or customers contribute to profitability/losses. Since prospectors tend to stress
high variety relative to defenders, they can be expected to be highly prone to implement ABC.
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This and the fact that ABC is still an innovation undergoing different rates of diffusion in
different countries lead us to hypothesise that:
Hypothesis 1 (H1): Prospectors are more likely to implement ABC than defenders.
As argued above, prospectors are organizations that tend to adopt changes and innovations
more often than defenders (Chenhall, 2003; Guilding, 1999; Langfield-Smith, 1997). By
definition, they are typically first in the market and move swiftly. Their effectiveness as
prospectors is time sensitive. Thus, they can be expected to implement ABC within a shorter
period of time than defenders. We consequently hypothesise that:
Hypothesis 2 (H2): Among organizations that implement ABC, the speed of ABC implementation is likely to be higher for prospectors than for defenders.
The success of the implementation of ABC depends on several characteristics according to the
prior literature. Shields (1995) has shown that the success of an ABC implementation
depends on factors such as training, performance evaluation, competitive strategy adopted,
adequacy of resources, top management support, clarity of objectives and non-accounting
ownership. Studies by Anderson, 1995; Cobb et al, 1992; Krumwiede, 1998; McGowan and
Klammer, 1997; Malmi, 1997, Shim and Stagliano, 1997, confirm the relevance of these and
other related technical and organizational variables in affecting the success of ABCM
implementations. Forster and Swenson (1997) in their study of alternative measures of
ABCM success in models testing ABCM success determinants conclude that broad-based
measures (like how ABCM data is used in decisions) yield the highest explanatory power.
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If an ABC system is implemented effectively, it is likely that it will give rise to information
concerning costs which is more reflective of resource consumption and therefore of providing
cost information that is perceptively regarded as more accurate than the conventional system
being replaced. Defenders are typically viewed as organizations that emphasize the need for
more accurate cost information and which seek to enhance the effectiveness of cost allocation
(Palmer, 1992; Langfield-Smith, 1997). Therefore, the perception of the success of the ABC
implementation can be expected to be higher among defenders than among prospectors.
Whilst defenders may be less likely to adopt a management innovation as readily as
prospectors and once adopted, less swift in the actual implementation process as argued above,
their perception of ABC success once implemented is likely to be higher given their focus on
value provision, volume of production and efficiency of operations. Thus, we propose the
following hypothesis.
Hypothesis 3 (H3): Among organizations that implement ABC, the success of ABC implementation is higher for defenders than for prospectors.
Prospectors are organizations that are always searching for innovations. Once they embark on
change, they seek out subsequent avenues for effecting ongoing change. Therefore, in the
context of organizational experiences with ABC, there are two potential behaviors for
prospectors: they may either stop implementing ABC and move to other management
innovations or they may roll out ABC across the entire firm.
Therefore, we propose the following hypothesis:
Hypothesis 4 (H4): The proportion of organizations that abandon ABC or that use ABC across the majority of their business units is higher for prospectors than defenders.
12
QUESTIONNAIRE AND DATA COLLECTION PROCESS
To test the hypotheses discussed in the previous section, a mail survey was administered in
seven countries: Canada, France, Germany, Italy, Japan, USA and UK. The instrument
enabled the collection of information concerning strategy, speed, success and stages of ABC
implementation as well as firm specific information. The questionnaire included questions
pertaining to activity based costing practices, corporate strategic orientation and background
information. The English version of questions on ABC and strategy is shown in the
Appendix. This questionnaire was translated into French, German, Italian and Japanese by
academics from these countries. The questionnaires were translated back into English by
different academics. This resulted in some stylistic revisions for the non-English language
questionnaires.
The population surveyed in Canada included the 500 largest1 companies taken from the Blue
book of Canadian Business. In the United Kingdom, the survey was sent to the 500 largest
companies of the Times 1000 UK companies. The questionnaire in France was sent to the 500
largest companies of the database “L’expansion: Les 1000 - performance et classement des
plus grandes entreprises françaises”. In Germany, the survey was sent to the 500 largest
companies from a ranking compiled by Frannkfurter Allgemeine Zeitung Gmbh Information
Services. In Japan, the questionnaire was sent to the 500 largest companies listed by Nikkei
Shinbun. The Italian population consisted of the top 450 Italian companies from a listing
provided by the Italian Trade Center. Lastly, in the USA, the population was made up of the
1 Size was measured by the amount of revenues
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top 500 firms ranked under Moody’s Industrial manual. In all cases, the questionnaires were
addressed to the Chief Accountant, Controller or equivalent post in the sample population.
The Canadian companies were sent both the English and French versions of the
questionnaires.
RESULTS
The response rate for a survey across a multitude of countries can be expected to be non-
standard unlike mono-country studies. The absence of follow-up procedures is a common
limitation in cross-country studies. In this investigation, the response rates in Canada and Italy
are the lowest at a rate of 7% and highest in Japan with 19%. UK, Germany, USA and France
produced response rates of 17%, 15%, 11% and 8% respectively. These rates take into
account the fact that only questionnaires received during the first five weeks of the survey
period were included in the analysis. Before undertaking the statistical analysis, tests on the
non-response bias was performed to confirm that early respondents during that period were
not statistically different from the late respondents. Four hundred and sixteen questionnaires
were sent back to the researchers. The study’s concern with the specificity of strategy
orientation and ABC implementation experience rather than nation-based relationships
provided a final sample size with sufficient basis for statistical discrimination.
Table 1 shows the number of respondents in each country. The largest groups of respondents
relate to Japan (95) and the United Kingdom (85) while Italy (32) represents the smallest. This
gap may be explained by the fact that the respondent group from the UK have had the
opportunity to participate in several surveys over the last decade (Innes and Mitchell, 1991;
Bright et al., 1992; Nicholls, 1992; Drury and Tayles, 1994; Innes et al., 2000). This not the
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case for respondents from France and Italy where only a small number of surveys on
accounting systems have been conducted.
(Insert Table 1)
As noted, the literature suggests that strategy plays a key role in the design of management
accounting systems and more specifically in the decision to implement ABC. Respondents
were asked to classify their organization according to the Miles and Snow typology (Miles and
Snow 1978). This typology has been used widely in the management accounting literature
(Simons 1987, 1988, 1990; Gosselin 1997; Langfield-Smith 1997). The instrument developed
by Snow and Hrebiniak (1980) was employed. The self-typing process resulted in a fairly
identical proportion of analyzers, prospectors and defenders as shown in Table 2. This is
consistent with Miles and Snow (1978) who suggested that in an industry the number of each
strategy type should be relatively similar.
(Insert Table 2)
Strategy and ABC Implementation
It was suggested in hypothesis 1 that prospectors would be more likely to implement ABC
than defenders. To test this hypothesis, we used the following logistic model:
ABC = a + b1 PRO + e (1)
where ABC was set equal to 1 if the firm implemented ABC and equal to 0 if not. PRO is a
dummy variable for strategy. PRO was given a value of 1 if the respondent had classified his
organization as a prospector and a value of 0 if the organizations was an analyzer or a
defender. The results of the logistic regression are reported in Table 3. They do not support H1
15
at the 5% level. Strategy does not influence the decision to implement ABC. Although
acceptable at the 10% level, these results do not replicate the findings of Gosselin (1997)
which more conclusively indicated that prospectors were more frequent adopters of activity
management approaches than firms with other strategic orientation.
(Insert Table 3)
Strategy and Speed of ABC Implementation
Hypothesis 2 relates to the relationship between the speed of implementation and strategy. It
was suggested that the speed of implementation would be higher for prospectors than for
defenders. To test this hypothesis, we used the following model:
SPEED = a + b1 PRO + e (2)
where SPEED represents the ordinal measure of the perceived velocity of ABC
implementation which is measured on a five-point scale. PRO, the dummy variable for
strategy, was given a value of 1 if the respondent had classified the organization as a
prospector and a value of 0 if the organizations was an analyzer or a defender. The results
included in Table 4 show that strategy type does not affect the speed of implementation.
Prospectors do not implement ABC more quickly than defenders.
(Insert Table 4)
Strategy and Success of ABC Implementation
The success of ABC implementation depends on a variety of factors that have been identified
in several studies (Foster and Swenson 1997; Shields 1995; Swenson 1995; McGowan and
16
Klammer, 1997). In this paper, we hypothesise that the perceived success of ABC
implementation would be higher among defenders than among prospectors. The rationale for
this is that defenders are highly focused on cost containment and ABC is regarded as
enhancing the accuracy with which product costs are reported. To test this hypothesis, a
reduced regression model with strategy as the independent variable and perceived success of
ABC as the dependent variable was employed. Success was measured on a five-point scale
from unsuccessful to successful while strategy was represented by a dummy variable DEF.
The value of DEF was set to 1 if the organization was a defender and to 0 if it was an analyzer
or a prospector. The results of the test supports hypothesis 3 and are summarized in Table 5.
The independent variable DEF has a positive and significant coefficient at the 5% level. ABC
implementations are perceived as more successful among defenders than among prospectors
and analysers in the group of organizations investigated.
(Insert Table 5)
Strategy and Stages of ABC Implementation
Organizations may decide to implement ABC as a pilot, to use it across the units or in the
majority of units. They may also decide to abandon ABC. Hypothesis 4 suggests that
prospectors would be more likely to abandon ABC or to use it in the majority of units in
comparison to defenders who would prefer to conduct a pilot ABC or use ABC across units.
To test this hypothesis, a Chi-square analysis was performed. The results of the analysis do not
support hypothesis 4. The value of the chi-square is 8.17 and the p-value is 0.226 (see Table
6). Strategy does not affect the extent of deployment of ABC after system implementation.
(Insert Table 6)
17
DISCUSSION
The study is concerned with ABC implementation experiences across large firms in seven
countries in terms of associations between the decision, extent, speed and perceived success of
ABC implementations vis-à-vis corporate strategic orientation. The results show that the
respondents’ view of their organizations’ strategy is associated with the perception of
implementation success of ABC. However, strategy type does not seem to affect the decision
to implement ABC nor the extent or speed of implementation.
Cross-national studies of organizational practices which reveal variations can be indicative of
different explanatory reasons as to the underlying reported variations. There may be nation-
specific factors underlying country differences and cultural forces at play which may coincide
with national borders but transcend organizational specificities (Harrison and McKinnon,
1999). This study’s concern has been to identify associations between ABC implementation
characteristics and corporate strategy posture as relationships which overarch nation-specific
influences. The hypothesis test results are indicative of the stability of such linkages. This
investigation has not sought to assess national influences as causal factors of differences.
Such associations may potentially be identified and discernible from larger scale cross national
data. This would present an interesting avenue for further research focusing specifically on
strategy linked factors underpinning ABC implementations. Additionally, a larger scale study
which engages in more extensive data collection and second mailing of initial non-respondents
is likely to lead to higher response rates. This would further enhance the statistical
discrimination that could be achieved.
18
The hypothesis test results do not suggest statistically significant relationships between
strategic type and the ABC implementation decision, extent of deployment or speed of
implementation. These are factors relating to the process of cost management system changes.
Conversely, the perception of ABC success was higher among defenders than prospectors and
analysers. The product of cost management change was, therefore, seen to be associated with
corporate strategy type. The results presented here thus posit outcome-based rather than
process-based relationships between ABC implementation and corporate strategy. A possible
reason for this is that strategic posture is itself reflective of the outcome of managerial efforts,
rather than as conferring managerial particularity. This proposition offers an avenue of
research worthy of further inquiry.
A large number of contextual variables aside from strategic orientation have been considered
to affect management accounting and control systems (see Chapman, 1997; Chenhall, 2003).
Exploring the multitude of forces which shape accounting practices including experiences
with the adoption and implementation of ABC remains a task for researchers wishing to
contribute to our understanding of the wider contingencies affecting cost management
practices.
19
TABLE 1
NUMBER OF RESPONDENTS BY COUNTRY
Canada France Germany Japan Italy United
Kingdom United States
Total
Number of respondents
35 (8.4%)
39 (9.4%)
73 (17.6%)
95 (22.8%)
32 (7.7%)
85 (20.4%)
57 (13.7%)
416 (100.0%)
TABLE 2
THE STRATEGIC ORIENTATION OF ORGANIZATIONS SURVEYED
Type Number of firms Percentage
Analyzers 164 40.2%
Prospectors 120 29.4%
Defenders 124 30.4%
Total 408 100%
20
TABLE 3
ADOPTION OF ABC AND STRATEGY: LOGISTIC REGRESSION RESULTSa
Expected Sign
Coefficient (Std. Error)
Intercept - 0.3235 (0.1392)
PRO + 0.0916* (0.054)
Canada - 0.034 (0.2781)
France 0.335 (0.269)
UK -0.151 (0.264)
USA 0.168 (0.266)
Japan 0.356 (0.149)b
Germany 0.2286 (0.264)
Italy -0.109 (0.270)
Model X2 = 64.514, p = 0.0001
aThe model is ABC = a + b1 PRO + b2 Canada + b3 France + b4 UK + b5 USA + b6 Japan + b7 Germany + b8 Italy + e. Variables: ABC indicates whether the respondents implemented ABC (=1) or did not (=0); PRO was set to 1 for prospectors and 0 for analyzers or defenders. Significance levels are determined using two-tailed X2 tests.
21
TABLE 4
SPEED OF ABC IMPLEMENTATION AND STRATEGY: REGRESSION RESULTSa
Expected Sign
Coefficient (Std. Error)
Intercept - 2.80468 (0.1119)
PRO + 0.02344 (0.1940)
R-square = 0.0001
aThe model is SPEED = a + b1 PRO + e. Variables: SPEED represents the level of speed of the implementation; PRO was set to 1 if prospectors and 0 if analyzers or defenders.
TABLE 5
SUCCESS OF ABC IMPLEMENTATION AND STRATEGY: REGRESSION RESULTSa
Expected Sign
Coefficient (Std. Error)
Intercept - 2.10769 (0.0907)
DEF + 0.37507** (0.1633)
R-square = 0.0276
**p-value = 0.0228
aThe model is SUCCESS = a + b1 DEF + e. Variables: SUCCESS represents the level of success of the implementation; DEF was set to 1 if defenders and 0 if prospectors or analyzers.
22
TABLE 6
STAGES OF ABC BY STRATEGY
Abandoned Pilot ABC Use across units
Use in majority of units
Total
Analyzers 34 (51.5%) 20 (35.7%) 45 (46.4%) 24 (33.3%) 123 (42.3%)
Prospectors 12 (18.2%) 18 (32.2%) 28 (28.9%) 26 (36.1%) 84 (28.9%)
Defenders 20 (30.3%) 18 (32.1%) 24 (24.7%) 22 (30.6%) 84 (28.8%)
Total 66 56 97 72 291
The percentages represent the proportion of strategy types in each ABC stage.
Chi-square = 8.17, p-value = 0.226 with 6 degrees of freedom
23
APPENDIX
QUESTIONS FOR CROSS NATIONAL STUDY OF ACTIVITY BASED COSTING ...........................................................................................................……………………………… 1. Please indicate (by placing a checkmark on desired rating) the potential usefulness to
your company of assigning costs to products/services using volume and non-volume based cost drivers (ie. activity based costing):
Very important Unimportant 1 2 3 4 5 2. If an activity based costing system has been implemented in your organization:
(a) This implementation has been relatively: Quick Slow 1 2 3 4 5 (b) In terms of expected benefits, implementation has been relatively: Successful Unsuccessful 1 2 3 4 5 (c) Activity based costing is now (tick one only) : � � � � Abandoned Being tried In use across In use across on a pilot basis some business units the majority of business units
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3. Compared to other companies in your industry which of the following descriptions most closely matches your company (tick one only):
(a) We operate in two types of product-market domains, one relatively stable, the other changing. In the stable areas, we operate routinely and efficiently through use of formalised structures and processes. In more turbulent areas, top managers watch competitors closely for new ideas, and rapidly adopt those which appear to be the most promising. � OR (b) We continually search for market opportunities, and regularly experiment with potential responses to emerging environmental trends. We are often the creators of change and uncertainty to which our competitors must respond. However, because of our strong concern with being "first-in" in new product and market areas, we may not maintain market strength across all areas. � OR (c) We have a narrow product-market domain. Top managers are highly expert in the company's limited area of operation but do not tend to search outside of their domains for new opportunities. We seldom need to make major adjustments in technology, structure, or methods of operation. Instead we devote primary attention to improving the efficiency of existing operations and doing the best job possible in a limited area. �
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4. (a) What type of industry does your company operate in: ......................................................................
...................................................................... (b) The company's product range is relatively: diversified _ OR standard _ (c) Please indicate what percentage of the product range is: high volume % low volume % (d) Your company's latest sales volume is: ............... (e) The current number of employees is: ............... (f) Your position is: .......................………………............... 5. If you would like to comment on any of the above issues, please do so below: Your time and effort with this research project are very much appreciated. Please return this questionnaire in the envelope provided. If you would like to obtain the results of this study please put your name and address on the back of the envelope. Thank you.
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