Role of Interactive Control Systems and Foresight in Competitive Dynamics of Businesses

Abstract

This paper contributes to the earlier management accounting literature on the framework of Levers of Control by investigating the role of interactive control systems in competitive dynamics of businesses. More specifically, the study focuses on the interactive use of management control systems of competitive environment and its relationship with companies’ foresight activity towards the future business, organizational learning, innovation and performance. The aim is to examine: First, to what extent does the interactive use of management control systems - related to customers, competitors, markets and technology - associate with the extent companies are oriented to foresight activity and organizational learning? Second, to what extent do these factors contribute to the product innovations and organizational performance of the companies? The study is based on a survey of 112 Finnish SMEs operating in the industries of manufacturing and services. The main results of path-analytical modeling indicate that more interactive use of management control systems of competitive environment is related to more future-oriented foresight activities especially through organizational learning in the companies. These kinds of activities together also seem to enhance the competitive advantage of the companies in terms of increased product innovations. Furthermore, evidence was found regarding the positive effects of increased product innovation on organizational performance.

Keywords: Control Systems, Management Accounting, Levers of Control, Interactive Use, Foresight, Innovation

JEL Classification: D21, D83, E17, M1, M19, M40, M46, O31