The effect of corporate diversification and business unit strategy on the presence of slack in business unit budgets

Accounting, Auditing & Accountability Journal

Volumn 14, Issue 1, 2001, Pages 30-52

  Van Der Stede, Wim A ^a  

^a UNIVERSITY OF SOUTHERN CALIFORNIA   (United States)

Author keywords

Budgeting; Corporate finance; Diversification; Incentives; Management accounting

Indexed keywords

EID: 73649140860     PISSN: 09513574     EISSN: None     Source Type: Journal    
DOI: 10.1108/09513570110381060     Document Type: Article

References (49)

1. Anthony, R. and Govindarajan, V. (1998), Management Control Systems, Irwin-McGraw-Hill.
2. Baber, W., Janakiraman, S. and Kang, S. (1996), “Investment opportunities and the structure of executive compensation”, Journal of Accounting and Economics, Vol. 21, pp. 297-318.
3. Baiman, S., Larcker, D. and Rajan, M. (1995), “Organizational design for business units”, Journal of Accounting Research, Vol. 33 No. 2, pp. 205-29.
4. Berg, N.A. (1969), “What's different about conglomerate management”, Harvard Business Review, Vol. 47 No. 6, pp. 112-20.
5. Bourgeois, L. (1981), “On the measurement of organizational slack”, Academy of Management Review, Vol. 6 No. 1, pp. 29-39.
6. Browne, M. and Cudeck, R. (1993), “Alternative ways of assessing model fit”, in Bollen K. and Long, J. (Eds), Testing Structural Equation Models, Sage Publications, Newbury Park, CA, pp. 136-62.
7. Bruns, W. and Waterhouse, J. (1975), “Budgetary control and organization structure”, Journal of Accounting Research, Vol. 13 No. 2, pp. 177-203.
8. Bushman, R., Indjejikian, R. and Smith, A. (1995), “Aggregate performance measures in business unit manager compensation: the role of intrafirm interdependencies”, Journal of Accounting Research, Vol. 33, supplement, pp. 101-27.
9. Campbell, A., Goold, M. and Alexander, M. (1995), “Corporate strategy: the quest for parenting advantage”, Harvard Business Review, March-April, pp. 120-32.
10. Clinch, G. (1991), “Employee compensation and firms’ research and development activity”, Journal of Accounting Research, Vol. 29 No. 1, pp. 59-78.
11. Cyert, R. and March, J. (1963), A Behavioral Theory of the Firm, Prentice-Hall, Englewood Cliffs, NJ.
12. De Ruyter, K. and Wetzels, M. (1999), “Commitment in auditor-client relationships: antecedents and consequences”, Accounting, Organizations and Society, Vol. 24 No. 1, pp. 57-75.
13. Dillman, D. (1978), Mail and Telephone Surveys: The Total Design Method, John Wiley & Sons, New York, NY.
14. Fisher, J. and Govindarajan, V. (1993), “Incentive compensation design, strategic business unit mission, and competitive strategy”, Journal of Management Accounting Research, Vol. 8, pp. 129-44.
15. Galbraith, J. (1973), Designing Complex Organizations, Addison-Wesley, Reading, MA.
16. Ghoshal, S. and Moran, P. (1996), “Bad for practice: critique of the transaction cost theory”, Academy of Management Review, Vol. 21 No. 1, pp. 13-47.
17. Govindarajan, V. (1986), “Decentralization, strategy, and effectiveness of strategic business units in multi-business organizations,” Academy of Management Review, Vol. 11, pp. 844-56.
18. Govindarajan, V. (1988), “A contingency approach to strategy implementation at the business unit level: integrating administrative mechanisms with strategy”, Academy of Management Journal, Vol. 31 No. 4, pp. 828-53.
19. Govindarajan, V. and Fisher, J. (1990), “Strategy, control systems, and resource sharing: effects on business unit performance”, Academy of Management Journal, Vol. 33 No. 2, pp. 259-85.
20. Gupta, A. and Govindarajan, V. (1986), “Resource sharing among SBUs: strategic antecedents and administrative implications”, Academy of Management Journal, Vol. 29 No. 4, pp. 695-714.
21. Hill, C. and Hoskisson, R. (1987), “Strategy and structure in the multi-product firm”, Academy of Management Review, Vol. 12 No. 2, pp. 331-41.
22. Holmstrom, B. and Milgrom, P. (1991), “Multi-task principal-agent analyses: incentive contracts, asset ownership, and job design”, Journal of Law, Economics, and Organization, Vol. 7, pp. 24-52.
23. Holthausen, R.W., Larcker, D.F. and Sloan, R.G. (1995), “Business unit innovation and the structure of executive compensation”, Journal of Accounting and Economics, Vol. 19, pp. 279-313.
24. Keating, A.S. (1997), “Determinants of divisional performance evaluation practices”, Journal of Accounting and Economics, Vol. 24 No. 3, pp. 243-73.
25. Langfield-Smith, K. (1997), “Management control systems and strategy: a critical review”, Accounting, Organizations and Society, Vol. 22, pp. 207-32.
26. Leibenstein, H. (1966), “Allocative efficiency v. X-efficiency”, American Economic Review, Vol. 56, pp. 392-415.
27. Lubatkin, M., Merchant, H. and Srinivasan, N. (1993), “Construct validity of some unweighted product-count diversification measures”, Strategic Management Journal, Vol. 14, pp. 433-49.
28. Lukka, K. (1988), “Budgetary biasing in organizations: theoretical framework and empirical evidence”, Accounting, Organizations and Society, Vol.13 No. 3, pp. 281-301.
29. March, J. G. (1988), Decisions and Organizations, Basil Blackwell, Oxford.
30. Markides, C. and Williamson, P. (1996), “Corporate diversification and organizational structure: a resource-based view”, Academy of Management Journal, Vol. 39 No. 2, pp. 340-67.
31. Merchant, K.A. (1981), “The design of the corporate budgeting system: influences on managerial behavior and performance”, The Accounting Review, Vol. 56 No. 4, pp. 813-29.
32. Merchant, K.A. (1985a), “Budgeting and the propensity to create budgetary slack”, Accounting, Organizations and Society, Vol. 10 No. 2, pp. 201-10.
33. Merchant, K.A. (1985b), “Organizational controls and discretionary program decision-making”, Accounting, Organizations and Society, Vol. 10 No. 1, pp. 67-85.
34. Merchant, K.A. (1998), Modern Management Control Systems, Prentice-Hall, Upper Saddle River, NJ.
35. Merchant, K.A. and Manzoni, J.F. (1989), “The achievability of budget targets in profit centers: a field study”, The Accounting Review, Vol. 64 No. 3, pp. 539-58.
36. Miles, E. and Snow, C. (1978), Organizational Strategy, Structure, and Process, McGraw-Hill, New York, NY.
37. Milgrom, P. and Roberts, J. (1992), Economics, Organization, and Management, Prentice-Hall, Englewood Cliffs, NJ.
38. Nunnally, J.D. (1978), Psychometric Theory, McGraw-Hill, New York, NY.
39. Onsi, M. (1973), “Factor analysis of behavioral variables affecting budgetary slack”, The Accounting Review, Vol. 48 No. 3, pp. 535-48.
40. Otley, D.T. (1978), “Budget use and managerial performance”, Journal of Accounting Research, Vol. 16 No. 1, pp. 122-49.
41. Pitts, R. and Hopkins, H. (1982), “Firm diversity: conceptualization and measurement”, Academy of Management Review, Vol. 7, pp. 620-9.
42. Porter, M.E. (1980), Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York, NY.
43. Salter, M.S. (1973), “Tailor incentive compensation to strategy”, Harvard Business Review,Vol. 51 No. 2, pp. 94-102.
44. Schiff, M. and Lewin, A. (1970), “The impact of people on budgets”, The Accounting Review, Vol. 45 No. 2, pp. 259-68.
45. Segev, E. (1989), “A systematic comparative analysis and synthesis of two business-level strategic typologies”, Strategic Management Journal, Vol. 10, pp. 487-506.
46. Simons, R. (1987), “The role of management control systems and business strategy: an empirical analysis”, Accounting, Organizations and Society, Vol. 12, pp. 357-74.
47. Simons, R. (1988), “Analysis of the organizational characteristics related to tight budget goals”, Contemporary Accounting Research, Vol. 5 No. 1, pp. 267-83.
48. Van der Stede, W.A. (2000), “The relationship between two consequences of budgetary controls: budgetary slack creation and managerial short-term orientation”, Accounting, Organizations and Society, Vol. 25 No. 6, pp. 609-622.
49. Williamson, O.E. (1964), The Economics of Discretionary Behavior: Managerial Objectives in a Theory of the Firm, Prentice-Hall, Englewood Cliffs, NJ.