The impact on organizational performance of contextual factors, strategy and management control systems

Date of Award


Degree Type


Degree Name

Doctor of Philosophy


Faculty of Business and Law


This dissertation examined antecedents of the use of contemporary management control systems (MCS) by testing the alignment of strategic and contextual variables with variables of contemporary systems of control in the organization. The study further explored the performance consequences of the implementation of these control systems, and the manner in which strategy can influence the organization’s control culture and management accounting practices. The impact of contextual factors, notably size and structural arrangements, such as decentralization and diversification, on management's choice of control systems were also examined. Hence, the study addressed the need for a better understanding of the association between variables across the four organizational areas of context, strategy, control and performance and attempted to bridge existing gaps in the body of knowledge in relation to the nature of the relationship between variables in these areas.

Contributions of this study to existing knowledge include the integration of different relationships, across the study variables, that were separately tested in previous research, the validation of a multi-dimensional model, suggested by Langfield-Smith (1997), to measure organizational strategic orientation, the use of several theories from different disciplines to predict the different relationships included in the study model and the investigation of relationships that have been little documented or not specifically explored.

Twenty seven research hypotheses were developed and tested: the first six hypotheses concerned predicted causal relationships between the organizational strategic orientation (i.e., entrepreneurial vs. conservative) and management control systems, notably, participative budgeting, activity based costing (ABC), total quality management (TQM), just in time (JIT), innovation, and the balanced scorecard (BSC). A further fifteen hypotheses explored the effect of the organizational contextual variables of size, decentralization, and diversification on the use of these control systems. Finally, the remaining six hypotheses tested the relationship between organizational performance and the adoption of the specified MCS in the organization.

The hypotheses were tested on a randomly selected sample of Australian manufacturing organizations through a questionnaire survey addressed to the senior management of each organization. A correlation matrix for the study constructs followed by a structural equation modeling approach was conducted to test the relationships between the variables of the study. The results of the study generated a number of highly significant correlations in support of the hypotheses. Participative budgeting and innovation proved to be more likely associated with entrepreneurial strategies, rather than conservative strategies; ABC was found to be positively associated with the size of the organization, TQM was found to be associated with decentralized structural arrangements, while BSC was positively associated with firm diversification. Both innovation and BSC were found to have significant positive effects on organizational performance.

The study is expected to benefit recent and future MCS implementers by directing their attention to appropriate use of these initiatives when certain contexts and strategic priorities are in place. The findings are also expected to advance the developed theory and add significantly to our knowledge of the inter-relationships between context, strategy, control systems and performance in manufacturing organizations.

LCSH Subject Headings

Management information systems.

Organizational effectiveness.

Organizational behavior.

Managerial accounting.

Industrial management.

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