Multinational headquarter control of wholly owned foreign subsidiaries

This paper examines how contingent factors, important for wholly owned foreign subsidiary operation, affect the management control system exercised by multinational corporation headquarters. We focus on two sets of contingent factors: first, strategic factors relating to corporate and competitive strategy; and second, factors related to integration internal and external to a multinational corporation. We apply a control archetype approach to more comprehensively consider the controls exercised, relative to extant literature. Our evidence is based on data from a cross-sectional survey completed by 159 Australian multinational corporation headquarters. Our findings indicate activity sharing corporate strategies, low cost competitive strategies, and higher internal integration, lead to greater degrees of control of wholly owned foreign subsidiaries. Differentiation based competitive strategies and external integration have less substantial and narrower implications on the degree of control exercised. These findings are robust to sensitivity tests and are consistent with our expectations that headquarters exercise a higher degree of control in contexts perceived as less problematic.     

A review of Australian management accounting research: 1980–2009

This paper reviews 231 papers published by 10 leading management accounting journals between the years 1980 and 2009. The review is structured according to research topics, research settings, research theories, research method and primary data analysis technique. Based on the results of this review, the paper provides reflections on the evolution of Australian management accounting research over the last 30 years and discusses opportunities for future research.     

Enterprise Resource Planning and a contest to limit the role of management accountants: A strong structuration perspective

The implementation and use of Enterprise Resource Planning (ERP) systems raise fundamental questions about the role of management accountants in an organisation. The case studied here, involving an attempt to establish an ERP system in an organisation funded by both the European Union (EU) and the Egyptian government, is an exploration of conflicting beliefs about the role of management accountants. Elements of strong structuration theory (a reinforced version of Giddens’ structuration theory) are used to analyse how the contest over the role of the management accountant in a new organisation was played out during the partially successful attempt to establish ERP in conjunction with a system that was felt to better support the requirements of the EU for performance-based budgeting. Despite the forward-looking dispositions of key actors within the organisation and from the EU, the role of the management accountant here became compressed to the traditional one of cost information collector and provider.     

The role of value systems in translating environmental planning into performance

This study identifies the nature and extent of interdependencies among environmental strategic planning (ESP), environmental value systems, and firms’ environmental and economic outcomes. Findings are reported based on survey data collected from a cross-sectional sample of Australian firms. The results suggest that while ESP is positively associated with improved environmental performance, the emphasis of environmental value systems may not directly influence environmental performance outcomes. Furthermore, though environmental performance is positively associated with economic performance, the indirect association between ESP and economic performance through environmental performance is not absolute. Rather, this indirect association is conditional on the emphasis placed on environmental value systems. Specifically, the indirect association between ESP and economic performance is stronger for firms that employ formal and informal systems to promote shared environmental values and beliefs throughout the organisation.     

The role of strategic enterprise risk management and organizational flexibility in easing new regulatory compliance

The impact of new regulatory requirements for internal control reporting on an organization's ability to maintain strategic flexibility has been debated in the popular press extensively. This paper tests theory from strategic management to examine the relationship between an organizations' pre-regulatory strength of strategic enterprise risk management (ERM) processes and their ability to react to new regulatory mandates. In the context of companies' adoption of SOX Section 404 internal control reporting requirements, we examine organizations' pre-SOX ERM processes, ERM supporting technologies, and organizational flexibility in order to better understand the antecedents to the difficulty encountered in meeting SOX 404 requirements. Using responses from 113 Chief Audit Executives (CAEs), we find that organizations with stronger strategic ERM processes and flexible organizational structures already in place incurred little difficulty in implementing SOX 404 mandates. On the other hand, organizations using weaker ERM processes, which focused on control compliance, experienced more difficulty. These findings provide key insights into the importance of strategic ERM in effectively complying with new regulatory controls in volatile environments.     

The interrelationship between management control mechanisms and strategy

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.     

Organisational design choices in response to public sector reforms: A case study of mandated hospital networks

In this study we investigate the design and control of public sector networks formed by government mandate. Specifically, we analyse how a range of antecedent factors influence the extent to which organisations within such networks effectively collaborate to unify their efforts. We examine the role of both formal and informal controls in promoting and co-ordinating activity and managing appropriation concerns among organisations of the network. We address these issues in the context of health sector reforms in Victoria, Australia, that resulted in the amalgamation of metropolitan hospitals into a number of hospital networks. While the reforms determined the particular aggregation of hospitals, management retained discretion as to the organisation and control of activity among hospitals of the network. We draw on Oliver's (1991) predictive model of strategic responses to institutional mandates to analyse how efficiency and legitimacy concerns, the influence of external constituents, and consistency between institutional and organisational goals influence resultant structural and control choices in three of these hospital networks. Specifically, we examine the extent to which structural and control attributes promote the integration of activity within networks by analysing the delegation and partitioning of decision rights, and the design and use of performance measurement systems, integrative liaison devices, and standard operating procedures. We also consider the implications of integration for network performance. In our empirical analysis of three hospital networks we observe tension in network design relating to the achievement of efficiency and legitimacy imperatives that underpin the mandate to form hospital networks. The networks differ in their potential to generate efficiency and legitimacy gains from collaboration, their commitment to the ideals underlying the institutional mandate, and their willingness to pursue effective collaboration in light of the influence of other external constituents. In turn they adopt structural and control system designs that reflect different levels of clinical activity integration, and different degrees of substantive acquiescence to the institutional mandate to collaborate.     

Enterprise risk management and firm performance: A contingency perspective

In recent years, a paradigm shift has occurred regarding the way organizations view risk management. Instead of looking at risk management from a silo-based perspective, the trend is to take a holistic view of risk management. This holistic approach toward managing an organization’s risk is commonly referred to as enterprise risk management (ERM). Indeed, there is growing support for the general argument that organizations will improve their performance by employing the ERM concept. The basic argument presented in this paper is that the relation between ERM and firm performance is contingent upon the appropriate match between ERM and the following five factors affecting a firm: environmental uncertainty, industry competition, firm size, firm complexity, and board of directors’ monitoring. Based on a sample of 112 US firms that disclose the implementation of their ERM activities within their 10Ks and 10Qs filed with the US Securities and Exchange Commission, empirical evidence confirms the above basic argument. The implication of these findings is that firms should consider the implementation of an ERM system in conjunction with contextual variables surrounding the firm.