Introducing the First Management Control Systems: Evidence from the Retail Sector
Harvard Business School - Accounting and Control
Accounting Review, January 2007
Focusing on a sample of US retailers, I study the management control systems (MCS) that firms introduce when they first invest in controls, and identify four categories of initial MCS, which are defined in terms of the purposes these MCS fulfill. The first category, Basic MCS, is adopted to collect information for planning, setting standards, and establishing the basic operations of the firm. The other three categories are contingent on more specific purposes: Cost MCS focus on enhancing operating efficiencies and minimizing costs; Revenue MCS are introduced to foster growth and be responsive to customers; and Risk MCS focus on reducing risks and protecting asset integrity. I hypothesize and find that the choice among these categories reflects the firms' strategy, and that firms that choose initial MCS better suited to their strategy perform better than others.
Number of Pages in PDF File: 49
Keywords: management control systems, corporate strategy, entrepreneurial organizations, firm growth
JEL Classification: D92, L21, M13, M41, M46
Date posted: August 30, 2006 ; Last revised: November 24, 2009