Budgeting system style of use, organisational culture and competitive advantage in hypercompetitive environments
- Publication Type:
- Thesis
- Issue Date:
- 2009
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Hypercompetitive environments have become more pervasive. This thesis addresses a
gap in the literature by examining the effective use of budgeting systems and flexibility
traits of organizational culture in hypercompetitive environments. Interactive use of
budgeting systems has been positively linked to firm performance in 'high uncertainty'
environments, but not hypercompetitive environments, which have greater intensity
and unpredictability of change. Also, flexibility traits of organisational culture have
been linked to firm performance in hypercompetitive settings, and to interactive use of
management control systems in general.
Highly interactive budgeting systems have very frequent top management involvement
driving intensive strategy reformulation. To examine the effective style of use of
budgeting systems for hypercompetitive conditions, the frequency and intensity of
interactive use were hypothesised to be two formative sub-dimensions of budgeting
system style of use. Also, flexibility values of organisational culture were hypothesised
as antecedent to these two interactive control sub-dimensions. The hypotheses
predicted differing relationships between these constructs in hypercompetitive and
moderately competitive environments.
A cross-sectional mail and web-based survey yielded 331 usable responses (a 31.1%
response rate), with 32 firms in hypercompetitive environments, 259 firms in
moderately competitive environments and 40 firms in stable environments. PLS
structural equation modelling was used to test the theoretical model. Sub-group
modelling based on the three categories of market competition was the main approach
used to assess moderating effects.
Only partial support for the hypotheses was found. The predicted relationships between
the two interactive control sub-dimensions were not supported, affirming the latent
conceptualisation of interactive control in the extant literature. Market competition was
found to positively moderate the effect of interactive budgeting system use on firm
performance. It was also found that flexibility culture is an important antecedent of
interactive budgeting systems use, and market competition positively moderates the
effect of flexibility culture on interactive budgeting systems.
Dynamic capabilities theory was used to interpret the relationships, responding to
appeals for a more action-oriented view of management control systems, and also
providing a new perspective on management control systems and organisational
learning. From the theory of dynamic capabilities, a strategically appropriate flexibility
culture provides a valuable, rare, non-substitutable and inimitable resource-base,
underlying an effective budgeting system capability with an isolating mechanism that
confers competitive advantage. This study also contributes improved measurement
scales for interactive control, and contributes empirical and theoretical insights to the
under-researched organizational culture and management control systems contingency
literature.
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