The Interrelationship between Management Control Mechanisms and Strategy

Posted: 5 Jan 2007

See all articles by Ralph Kober

Ralph Kober

University of Auckland

Juliana Ng

Australian National University - School of Accounting & Business Information Systems

Byron Paul

The University of Western Australia

Abstract

This paper examines the interrelationship between management control system (MCS) mechanisms and strategy. The traditional view is that the MCS is shaped by organisational strategy. More contemporary viewpoints, however, suggest that there may be a two-way relationship between the two variables. That is, MCS shapes, and is shaped by, strategy.

We develop two research questions that describe the interrelationship between MCS and strategy, and test them using a public sector entity that experienced a strategic change. A retrospective longitudinal study, spanning five years and involving archival data, interviews and a questionnaire, was adopted. The analysis confirms the existence of a two-way relationship between MCS and strategy. We find that the interactive use of MCS mechanisms helps to facilitate a change in strategy, and that MCS mechanisms change to match a change in strategy.

Keywords: interactive controls, management control systems, strategy, strategic change

JEL Classification: M40, M46, M19

Suggested Citation

Kober, Ralph and Ng, Juliana and Paul, Byron, The Interrelationship between Management Control Mechanisms and Strategy. Management Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=954863

Ralph Kober (Contact Author)

University of Auckland ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand
+64 9 377 7599 ext 87174 (Phone)
+64 9 377 7406 (Fax)

Juliana Ng

Australian National University - School of Accounting & Business Information Systems ( email )

Canberra, 2600
Australia
+61 2 6125 7331 (Phone)

Byron Paul

The University of Western Australia

Department of Accounting & Finance
Nedlands WA 6907
Australia

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