J Manag Control
Assessing the impact of budgetary participation on budgetary outcomes: the role of information technology for enhanced communication and activity-based costing
Adam S. Maiga · Anders Nilsson · Fred A. Jacobs
Received: 30 January 2013 / Accepted: 22 August 2014 © Springer-Verlag Berlin Heidelberg 2014
Abstract This paper addresses the long-standing question of how budgetary participation (BP) affects budgetary outcomes. Information technology for enhanced communication (ITEC) and activity-based costing (ABC) are taken into consideration as moderators that might affect the relationship between BP and budgetary outcomes in manufacturing firms. Based on moderated and polynomial regression analyses, the study’s findings indicate that the main effects of BP, ITEC and ABC on budgetary outcomes are not significant, and that while ABC significantly moderates the relationship between budgetary participation and budgetary slack, ITEC does not moderate this relationship. Results also indicate that both ITEC and ABC significantly moderate the relationship between budgetary participation and managerial performance.
These findings suggest that the effect of budgetary participation on budgetary outcomes can be contingent on ITEC and ABC although their impact varies with the nature of budgetary outcomes.
Keywords Activity-based costing · Budgetary participation · Information technology · Moderation effects · Managerial performance · Slack
A. S. Maiga
Center for Commerce and Technology, Department of Accounting and Finance,
D. Abbott Turner College of Business, Columbus State University, Columbus, GA, USA
A. Nilsson (B)
Accounting and Control, Department of Business Administration, Technology and Social Sciences,
Luleå University of Technology, 97187 Luleå, Sweden e-mail: email@example.com
F. A. Jacobs
Centre for Research on Economic Relationships, Mid Sweden University, 85170 Sundsvall, Sweden 123
A. S. Maiga et al. 1 Introduction
Organizations allow employees to participate in the budget-setting process expecting to reduce budgetary slack or improve performance (Douglas and Wier 2000;
Covaleski et al. 2003; Marginson and Ogden 2005; Sheely and Brown 2007; Derfuss 2009). However, the results of prior studies examining the relationship between budgetary participation and managerial performance are inconsistent. For example, some studies outline a significant positive relationship between budget participation and managerial performance (Subramaniam and Ashkanasy 2001; Chong and
Chong 2002; Lau and Lim 2002; Chong and Leung 2003; Moll 2003; Latham 2004;
Indjejikian and Matejka 2006; Parker and Kyj 2006; Nouri and Kyj 2008; WongOn-Wing 2010). Interestingly, other studies (Otley and Pollanen 2000; Locke and
Latham 2002) suggest budgetary participation has no performance effect, while the findings of Gul et al. (1995) suggest that budgetary participation actually reduces performance.
Research attempting to link budget participation to budget slack also provides inconsistent results (Fisher et al. 2000; Hansen et al. 2003; Church et al. 2012). While these inconsistent findings do imply that budgetary participation independently is not a sufficient condition to impact budgetary outcomes (Chong and Chong 2002), previous attempts to examine the impact of different contingency variables (e.g., Shields and
Young 1993, Gul et al. 1995, Chong and Bateman 2000, Hartmann 2000, Chong and
Chong 2002, Lau and Lim 2002, Winata and Mia 2005, Agbejule and Saarikoski 2006;
Venkatesh and Blaskovich 2012) do not provide a satisfactory understanding of the mechanisms involved.1
One path towards the resolution of this question might be the possibility that the parameters that impact on the relationship between budgetary participation and budgetary outcomes differ between business sectors. A second potential starting point could be to examine the impact of factors related to the characteristics of the information exchange between organizational members during budgetary participation. The present paper builds on both these assumptions in attempting to contribute to knowledge about the relationship between budgetary participation and budgetary outcomes and its moderating influences. First, the authors focus on the manufacturing industry as a large and important business sector in many national economies, which also is the origin of participative management practices in relation to budgeting (Argyris 1952; Hopwood 1973). Second, the authors examine the impact of information technology for enhanced communication (ITEC) and activity-based costing (ABC) on the relationship between budgetary participation and budgetary outcomes. Arguably, ITEC and ABC represent two factors with potentially significant influence on the information exchange between plant managers and their superiors in manufacturing firms. Theorists indicate that traditional firms need to adapt to a digitized economic environment where the relationship between budgetary participation and budgetary outcomes is associated with the IT1 In general, prior empirical studies on the effect of budgetary participation and budgetary outcome have used one contextual factor at a time. 123
Assessing the impact of budgetary participation infrastructure and prevailing cost management practices (Bhimani and Bromwich 2009).
Although proponents of ITEC long have argued that computerized communication technologies may support participative decision-making (Bettis and Hitt 1995; Barua et al. 1995; Brynjolfsson and Hitt 1998; Ragowsky et al. 2000) there is surprisingly scant evidence when it comes to the possibility that ITEC may influence the effect of budgetary participation on budgetary outcomes in manufacturing firms. While Winata and Mia (2005) found managerial performance in hotels to be positively associated with the interrelation between use of information technology and budgetary participation, the importance of budgets in manufacturing (Chong and Chong 2002; Umapathy 1987), the many inconsistencies in previous research and the underdeveloped literature at the intersection between management control and information technology (Granlund and Mouritsen 2003) suggest that a study addressing this relationship is warranted.