An empirical study of the evidence for contingency theories of management accounting systems in conditions of rapid change

doi:10.1016/0361-3682(85)90022-4

Accounting, Organizations and Society

Volume 10, Issue 3, 1985, Pages 303-328

https://doi.org/10.1016/0361-3682(85)90022-4 Get rights and content

Abstract

This paper continues the theme of Jones (Accounting, Organizations & Society, 10, 177–200, 1985) which described the findings of an empirical study of the changes introduced into management accounting systems following acquisition. It adopts a contingency theory perspective of the findings; relates them to existing hypotheses; and introduces a test of the theory involving measurement of the control relationships established between acquisition partners. Theoretical expectations for the adaptation of effective post- acquisition MAS are developed and related to success/failure.

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Contingency theory is principally derived from organizational theory and was later implemented in Management Accounting. Contingency theory belongs to the group of theories called rational theories (Jones, 1985). In its fundamental form, contingency theory assumes that organizational structures depend on environmental factors (Gerdin and Greve, 2008).
This study examines the use of Management Control Systems (MCS) in travel and tourism start-ups. The study empirically examines 176 European tourism start-ups; data are collected via an online survey of start-up CEOs, and supplemented by financial statements of early-stage tourism firms. The results show that travel and tourism start-ups use formal systems for management control. We observe a relationship between the usage of these systems with specific internal and external environment characteristics. Finally, the results show that the historical financial performance of travel and tourism start-up firms affects MCS usage.
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This criterion was also meant to allow contrasts between the results obtained in this study and those of international studies, which would help identify both similarities and differences in the post-acquisition MCS changes in different contexts. Finally, the third and most important criterion had to do with access to information, deemed by Granlund (2003), Jones (1985a, 1985b) and Nilsson (2002) as one of the most striking difficulties in carrying out this type of research. Therefore, the case study was deliberately chosen considering both the possibility of access to the companies' information and the managerial model of the group, which in this case promotes acquisitions as a means of growth, expansion of portfolio, and increase in the scope of operations geographically.
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Contingency theory is based on the premise that there is no universally appropriate accounting or control system that fits all organisations in all circumstances (Otley, 1980; see Chenhall, 2003, for a review). Instead, according to contingency theorists, accounting and control systems are continuously adjusted to fit the contextual changes that occur in the organisation and its environment (Jones, 1985). The contingency approach thus implies that transfer pricing practices differ between organisations depending on the contextual circumstances.
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As stressed by Otley (1980), “the contingency approach to management accounting is based on the premise that there is no universally appropriate accounting system which applies equally to all organizations in all circumstances”. Similarly, Jones (1985) states that an organization needs to ensure that specific systems meet organizational goals and motives while being continuously adjusted according to the dynamic changes that take place in organizational and environmental factors. Contingency theory thus implies that different environments require different management practices (McAulay and Tomkins, 1992; Schweikart, 1985).
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An empirical study of the evidence for contingency theories of management accounting systems in conditions of rapid change

Abstract

Accounting, Organizations and Society

Accounting, Organizations and Society

Accounting, Organizations and Society

Planning Management Control Systems

Journal of Business Finance and Accounting

Merger Objectives and Organization Structure

Review of Economics and Business

Management Control Systems

The Formal Theory of Differentiation in Organizations

American Sociological Review

Organizational Structure, Environment and Performance—The Role of Strategic Choice

Sociology

Managerial and Organizational Factors Associated with Company Performance—Part II, A Contingency Analysis

The Journal of Management Studies

Leadership and Ambiguity: The American College President

Managerial Accounting Systems and Organizational Control: A Role Perspective

Accounting, Organizations and Society

The Corporate Report