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Use of Precedent and Antecedent Information in Strategic Cost Management

Posted: 20 Nov 2012 Last revised: 10 Jun 2013

Mark C. Anderson

University of Calgary - Haskayne School of Business

Ozer Asdemir

University of St. Thomas, MN

Arindam Tripathy

University of Washington, Tacoma

Date Written: May 2013

Abstract

Integral to strategic cost management is the choice of procuring flexible versus committed resources conditioned on demand uncertainty. Prior research shows that costs respond less to decreases than increases in sales activity when firms invest in committed resources. We analyze asymmetry in cost behavior to investigate how resource procurement decisions between flexible and committed resources are related to precedent and antecedent information about demand uncertainty. We find that the asymmetry of cost responsiveness increases with historical sales growth and with the firm's market-to-book ratio, and decreases with historical sales volatility. We find similar results for firm-specific deviations of sales growth, sales volatility and the market-to-book ratio from the industry averages. These results illustrate how managers might combine precedent and antecedent information in formulating a resource procurement plan as a means of strategic cost management.

Keywords: cost behavior, strategic cost management, sticky costs, resource procurement, flexible resources, committed resources

Suggested Citation

Anderson, Mark C. and Asdemir, Ozer and Tripathy, Arindam, Use of Precedent and Antecedent Information in Strategic Cost Management (May 2013). Journal of Business Research, Vol. 66, Issue 5, pp. 643-650, May 2013. Available at SSRN: https://ssrn.com/abstract=2178736

Mark C. Anderson

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403-220-3926 (Phone)

Ozer Asdemir (Contact Author)

University of St. Thomas, MN ( email )

2115 Summit Ave
St Paul, MN 55105
United States
6519625436 (Phone)

Arindam Tripathy

University of Washington, Tacoma ( email )

1900 Commerce Street
Tacoma, WA 98402-3100
United States

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