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Journal of Management
Accounting Research
1999, Volume 11
Contents
The Effects of a Budget-Based Incentive Compensation Scheme on the Budgeting Behavior of Managers and Subordinates
Kenton B. Walker
University of Wyoming
Eric N. Johnson
Indiana University
Abstract: This paper reports the budgeting behavior of superior and subordinate members in a Fortune 250 consumer products company before and after the implementation of a budget-based incentive compensation plan for subordinates. The characteristics of the company's budgeting environment are identified and analyzed using Lukka's (1988) explanatory framework for budgetary biasing behavior. Empirical data and interviews of company employees at several hierarchical levels are used to investigate the budgeting process and relate the actions of budgetary participants to the social and political context of the organization.
The results indicate that subordinates exhibited slack-building behavior after the implementation of the incentive compensation plan, but budget estimates by middle managers were not significantly influenced by the plan. The actions of the various budgetary actors are discussed and analyzed in the context of Lukka's (1988) framework and the pluralistic, multirational view of the organization (Dermer and Lucas 1986; Dermer 1988).
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Waste Minimization at 3M Company: A Field Study in Nonfinancial Performance Measurement
William N. Lanen
University of Michigan
Abstract: Environmental issues are receiving increased attention in performance measurement plans of firms. However, there is little systematic empirical evidence on these programs. This paper describes an environmental performance program at 3M Company where there is considerable cross-sectional variation in results across plants. The analysis uses data from 55 plants reporting as part of the program to assess the impact of various plant characteristics on program results.
I consider four factors affecting improvements in performance: baseline (prior-year) level of performance; length of time since plan start (plan age); growth in output; and, the benefits to divisions from monitoring plants. I find that performance improvements are negatively related to baseline performance and plan age. They are positively related to growth in output. Using three proxies for monitoring benefits, I find no significant association between the proxies and gain in plan performance.
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Management Control Systems and Boundaries of the Firm: Why do Firms Outsource Internal Auditing Activities?
Sally K. Widener
Colorado State University
Frank H. Selto
University of Colorado at Boulder and University of Melbourne
Abstract: Internal auditing (IA) has been an important part of the internal management control system (MCS) of many firms. Nonetheless, growing numbers of firms have, in recent years, outsourced some or all of the internal audit function to third-party providers such as large public accounting firms. Articles in the professional literature suggest that these firms are focusing resources on core competencies and seeking to minimize noncore support costs. If that is generally the case, then one could question why any industrial firms retain IA functions since, as some observers argue, few would regard IA as creating competitive advantages.
This study uses organizational relations from transaction cost economics (TCE) to model, describe, and explain the level of outsourcing of the IA portion of the MCS. The study uses a survey questionnaire and archival sources to obtain qualitative and quantitative data from a random sample of 600 publicly traded firms (stratified by industry) from the Computstat industrial files (33 percent overall, 14 percent usable response rate). Quantitative data are analyzed using multiple regression analysis, and qualitative data are analyzed using qualitative database software (ATLAS.ti).
Composite measures of asset specificity and frequency and their interaction are significantly associated with outsourced IA as hypothesized in a regression model that explains 53 percent of the variation in outsourced IA. Other TCE variables, which measure uncertainty, do not significantly explain outsourced IA. Qualitative data reinforced the importance of asset specificity and indicated that other TCE variables may be associated with outsourcing IA, identifying opportunities for future research.
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The Effects of Alternative Types of Feedback on Product-Related Decision Performance: A Research Note
Michael L. Briers
University of New South Wales
Chee W. Chow
San Diego State University
Nen-Chen Richard Hwang
California State University, San Marcos
Peter F. Luckett
University of New South Wales
Abstract: This study corroborates and extends the work of Gupta and King (1997) by testing the effects of several types of feedback on decision performance in the presence of imperfect product cost data. The types of feedback relate to those frequently available to managers - outcome feedback in the form of financial performance reports, information about competitors' outcomes or benchmark feedback, and information relating to the process being managed or process-properties feedback. Subjects in a product-pricing experiment were given (biased) product cost data in conjunction with various combinations of feedback. While subjects receiving only conventional financial performance reports showed some improvements, as predicted, those receiving additional feedback information had superior performance. There were, however, no differences between those receiving benchmark or process-properties feedback with respect to decision performance.
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Mimicry, Director Interlocks, and the Interorganizational Diffusion of a Quality Strategy: A Note
Wai Fong Chua
University of New South Wales
Richard Petty
University of Hong Kong
Abstract: While practitioners and teachers of management accounting have long emphasized quality issues, it is only recently that systematic research on the topic has been conducted. In addition, while there has been some interest in investigating how and why particular management accounting technologies diffuse, this body of work is not large. The aim of this study is to contribute to both literatures by examining the influence of director interlocks on the interorganizational diffusion of ISO quality accreditation within a sample of Australian firms in the early 1990s. It finds that when size and industry effects are controlled for, director interlocks matter; that is, firms that are interlocked with previously accredited firms are more likely to achieve accreditation themselves. The results suggest that future research could usefully investigate whether the institutionalization and spread of other accounting practices is affected by the presence of diffusion mechanisms such as interlocking directorates.
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