Firms’ information system characteristics and management accounting adaptability

• Published date: 07 March 2016
• Date: 07 March 2016
• DOI: https://doi.org/10.1108/IJAIM-10-2014-0066
• Pages: 20-37
• Author: Ogan Yigitbasioglu
• Subject Matter: Accounting & Finance,Accounting/accountancy,Accounting methods/systems

Firms’ information system

characteristics and management

accounting adaptability

Ogan Yigitbasioglu

School of Accountancy, Queensland University of Technology,

Brisbane, Australia

Abstract

Purpose – This study aims to explore the relation between the qualities of the information system (IS),

management accounting adaptability (MAA) and its effectiveness.

Design/methodology/approach – This study involves the development and empirical testing of a

model where the qualities of the IS and management accounting effectiveness (MAE) are mediated by

MAA.

Findings – Information system exibility (ISF) and shared knowledge had a signicant and positive

relation to MAA, which in turn had a positive and signicant relation to MAE. There was also a

moderation effect of ISF on the relation between IS integration and MAA.

Research limitations/implications – IS integration in itself may not lead to management

accounting stability, but it is the lack of exibility of the system and lack of cooperation between the

stakeholders that might lead to its stagnation.

Practical implications – Organizations are advised to implement solutions that are relatively

exible and modular, as well as encourage cooperation between stakeholders to fully leverage and

improve the existing system.

Originality/value – The study extends the discourse on the interaction between management

accounting and ISs by exploring the role of a number of factors that drive MAA.

Keywords Enterprise resource planning, Management accounting change, Adaptability,

Integrated information systems

Paper type Research paper

Introduction

Management accounting provides management with much critical, useful and needed

information, but there is evidence that it can adversely affect the performance in the

absence of t (Melnyk et al., 2013). In line with this view, contingency theory suggests

that management accounting practices in organizations should evolve with changing

idiosyncratic circumstances that are internal and external to the rm (Brignall, 1997;

Burns and Stalker, 1961;Lawrence and Lorsch, 1986). For example, Hofstede (1967),an

early adopter of this theory, explains the functioning of the budgeting system through

economic, technological and sociological factors. Thus, management accounting change

is known to be associated with global competition, changes in manufacturing

technology (Innes and Mitchell, 1990), information technology (IT) (Waweru et al., 2004),

the performance gap (Jun Lin and Yu, 2002), organizational structure (Abernethy and

Bouwens, 2005;Cavalluzzo and Ittner, 2004), top management support (Cavalluzzo and

The current issue and full text archive of this journal is available on Emerald Insight at:

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IJAIM

24,1

20

Received 2 October 2014

Accepted 26 November 2014

InternationalJournal of

Accountingand Information

Management

Vol.24 No. 1, 2016

pp.20-37

©Emerald Group Publishing Limited

1834-7649

DOI 10.1108/IJAIM-10-2014-0066

Ittner, 2004), the inuence of government (Lapsley and Wright, 2004) and strategy

(Baines and Langeld-Smith, 2003;Fullerton et al., 2012).

As organizations are required to adapt to their environments (Boisot and Child, 1999,

p. 1), the ability of management accounting to change over time, which I refer to as

adaptability, is critical to sustain management accounting t. This may be challenging

as research found that, among others, the lack of adequate accounting skills, new

shareholders, fear of change and lack of communication between management and staff

hinder change (Burns and Scapens, 2000;Hopwood, 1990;Innes and Mitchell, 1990).

Furthermore, although computing resources are traditionally seen as facilitators of

change (Innes and Mitchell, 1990), it is suggested that integrated information systems

(IISs) lead to technological embeddedness (Volkoff et al., 2007) and management

accounting stability (Davenport, 1998;Granlund and Malmi, 2002;Rom and Rohde,

2007).

Evidence suggests that certain characteristics of information systems (ISs) are more

conducive to change. For example, Krumwiede (1998) suggests that organizations with

higher-quality ISs as in the case of IISs may be able to implement advanced

measurement systems such as activity-based costing more easily than organizations

with less sophisticated ISs because measurement costs are lower. Similarly, a number of

other studies report that data quality and availability impede the development of new

management accounting systems (Cavalluzzo and Ittner, 2004;Gates, 1999;Ittner and

Larcker, 1998;Shields, 1995). Thus, the literature argues that ISs seem to both support

and inhibit change. It is this particular issue that I focus on in this paper and that drives

the research question:

RQ1. What information system characteristics affect management accounting

adaptability?

The main purpose of this paper is to explore what factors pertaining to the IS of an

organization explain the degree to which management accounting is adaptable. I also

examine whether management accounting adaptability (MAA) is a predictor of

management accounting effectiveness (MAE).

This study makes a number of contributions to the management accounting change,

innovation and accounting ISs literatures. First, this study identies specic factors

relating to ISs that may act as facilitators of management accounting change (Innes and

Mitchell, 1990;Taipaleenmäki and Ikaheimo, 2011). Second, I conceptualize and focus on

MAA, which is a dynamic construct that measures the ability to make changes

to management accounting practices when required. Finally, I study the relation

between MAA and MAE.

IISs and management accounting

Support for management accounting is provided by solutions, such as enterprise

resource planning systems (ERPSs) and budgeting software (Granlund and Malmi,

2002;Rom and Rohde, 2007). ERPSs integrate organizational data and provide easy and

fast access to operational data, which in turn affect the ability of management

accounting to provide managerially relevant and usable information (Cooper and

Kaplan, 1998;Davenport, 1998). ERPSs are also known as IISs because the software

itself or when it is used in conjunction with other software (e.g. business intelligence

21

Information

system

characteristics