A contingency model of strategy, performance measurement systems and management accounting practices: an empirical investigation in English local authorities. Volume 1 of 2

Abstract

Contingency based research has been used extensively within the area of accounting control (Chapman, 1997; Chenhall, 2003; Gerdin and Greeve, 2004), though there is a lacuna of contingency research within not-for-profit organisations (Chenhall, 2003), particularly in the UK. The study?s overall research question is how strategic typology, resource-based capabilities, contemporary performance measurement techniques (CPMTs) and contemporary management accounting practices (CMAPs) affect the performance outcome of English local authorities. Resource-based capabilities were taken to comprise market orientation, entrepreneurship, innovation and organisational learning, consistent with prior research (Henri, 2006b). To investigate the research question, a contingency model was developed, setting out expected relationships between the study's variables. An electronic questionnaire was designed to collect data for each of the research variables, with reliance placed on existing research instruments where possible. Supplementary performance data was obtained from published Audit Commission assessments.

A cross-sectional electronic survey of English local authorities was conducted with a response of 528 completed questionnaires obtained. The data was analysed using structural equation modelling (SEM) and AMOS 7.0 software. A model generating approach was adopted, where the initial contingency model was rejected and modified. Through this modification process a revised model, based on theoretical frameworks, was identified that fitted the empirical data well. Significant direct and indirect relationships between variables within the research contingency model were identified. The results provide empirical support that the performance outcome of English local authorities is contingent upon the emphasis placed on pursuing a differentiation strategy, use of CPMTs and CMAPs, strategic capabilities of market orientation, entrepreneurship and innovation, and performance-based training.

The study combines and tailors prior research on specific variables, building these into an original contingency model which is applied to English local authorities. Overall, this study contributes both to contingency research and to the knowledge and understanding of strategy, resource-based strategic capabilities, management accounting and PMTs in English local authorities. Some areas for future research are proposed, though the results from the study provide important information for management accounting researchers, local government practitioners and policy makers.

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