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Determinants and Effects of Diagnostic and Interactive Use of Budget in Iranian Companies

Received: 17 November 2015     Accepted: 16 December 2015     Published: 11 May 2016
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Abstract

Regarding the vital role of budget as a major feature of management control systems (MACS) in various fields like formulation of strategy, development of dynamic capabilities, competitive advantage; and additionally, due to the low volume of empirical research in this area, this paper investigates the application of budget in different Iranian companies. For this purpose, we first considered the diagnostic and interactive approaches toward MACS which are introduced by Simon (1990). We also focused on the model of Hofmann, Wald & Gleich (2012) to develop our research model and hypothesis. Finally, based on Hofmann, et al. (2012) study, we consider variables that may influence budget use such as environmental, organizational and individual factors. Findings show that leadership behavior, user attitude, competitive intensity and interactive use are determinants in diagnostic use. Besides, factors such as market dynamism, centralization, culture of trust, user attitude and leadership behavior influence the level of interactive use of budgets. Further, our research shows that both kinds of budget usage influence formulation and implementation of the strategy and diagnostic use of budgets has a significant and positive impact on financial performance.

Published in International Journal of Business and Economics Research (Volume 5, Issue 3)
DOI 10.11648/j.ijber.20160503.13
Page(s) 46-54
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Diagnostic Use, Interactive Use, Budget, Management Control System

References
[1] Armesh, H., Salarzehi, H., Kord, B. (2010). Management Accounting System, Interdisciplinary Journal of Contemporary Research in Business, 2 (6), 193-206.
[2] Chong, K. M., Mahama, H. (2013). The Impact of Interactive and Diagnostic Uses of Budgets on Team effectiveness, Management Accounting Research. 25 (3), 206-222.
[3] Hofmann, S., Wald, A., Gleich, R. (2012). Determinants and Effects of the Diagnostic and Interactive Use of Control Systems: an Empirical Analysis on the Use of Budgets, Journal of Management Control, 23 (3), 153-182.
[4] Simon, R., (1990). The Role of Management Control Systems in Creating Competitive Advantage: New Perspective, Accounting Organizations and Society, 5 (1/2), 127-143.
[5] Theriou, N., D. Maditinos and. Z. Sevic. (2009).Management Control Systems and Strategy: A Resource based Perspective. Evidence from Greece, 7th International Conference on Accounting and Finance in transition - ICAFT, 23-25 July 2009, Greenwich University, London, UK.
[6] Abernethy, M. A., Bouwens, J., & Van Lent, L. (2010). Leadership and control system design. Management Accounting Research, 21, 2–16.
[7] Bisbe, J., & Malagueño, R. (2009). The choice of interactive control systems under different innovation management modes. European Accounting Review, 18, 371–405.
[8] Mundy, J. (2010). Creating dynamic tensions through a balanced use of management control systems. Accounting, Organizations and Society, 35, 499–523.
[9] Antonakis, J., Bendham, S., Jacquart, P., & Lalive, R. (2010). On making causal claims: a review and recommendations. The Leadership Quarterly, 21, 1086–1120.
[10] Bhimani, A., & Langfield-Smith, K. (2007). Structure, formality and the importance of financial and non-financial information in strategy development and implementation. Management Accounting Research, 18, 3–31.
[11] Bisbe, J., & Otley, D. T. (2004). The effects of the interactive use of management control systems on product innovation. Accounting, Organizations and Society, 29, 709–737.
[12] Cadez, S., & Guilding, C. (2008). An exploratory investigation of an integrated contingency model of strategic management accounting. Accounting, Organizations and Society, 33, 836–863.
[13] Naranjo-Gil, D, & Hartmann, F. (2006). How top management teams use management accounting systems to implement strategy. Journal of Management Accounting Research, 18, 21–53.
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  • APA Style

    Farzane Jalali Ali Abadi, Alemeh Yazdanian, Elham Jamali. (2016). Determinants and Effects of Diagnostic and Interactive Use of Budget in Iranian Companies. International Journal of Business and Economics Research, 5(3), 46-54. https://doi.org/10.11648/j.ijber.20160503.13

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    ACS Style

    Farzane Jalali Ali Abadi; Alemeh Yazdanian; Elham Jamali. Determinants and Effects of Diagnostic and Interactive Use of Budget in Iranian Companies. Int. J. Bus. Econ. Res. 2016, 5(3), 46-54. doi: 10.11648/j.ijber.20160503.13

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    AMA Style

    Farzane Jalali Ali Abadi, Alemeh Yazdanian, Elham Jamali. Determinants and Effects of Diagnostic and Interactive Use of Budget in Iranian Companies. Int J Bus Econ Res. 2016;5(3):46-54. doi: 10.11648/j.ijber.20160503.13

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  • @article{10.11648/j.ijber.20160503.13,
      author = {Farzane Jalali Ali Abadi and Alemeh Yazdanian and Elham Jamali},
      title = {Determinants and Effects of Diagnostic and Interactive Use of Budget in Iranian Companies},
      journal = {International Journal of Business and Economics Research},
      volume = {5},
      number = {3},
      pages = {46-54},
      doi = {10.11648/j.ijber.20160503.13},
      url = {https://doi.org/10.11648/j.ijber.20160503.13},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20160503.13},
      abstract = {Regarding the vital role of budget as a major feature of management control systems (MACS) in various fields like formulation of strategy, development of dynamic capabilities, competitive advantage; and additionally, due to the low volume of empirical research in this area, this paper investigates the application of budget in different Iranian companies. For this purpose, we first considered the diagnostic and interactive approaches toward MACS which are introduced by Simon (1990). We also focused on the model of Hofmann, Wald & Gleich (2012) to develop our research model and hypothesis. Finally, based on Hofmann, et al. (2012) study, we consider variables that may influence budget use such as environmental, organizational and individual factors. Findings show that leadership behavior, user attitude, competitive intensity and interactive use are determinants in diagnostic use. Besides, factors such as market dynamism, centralization, culture of trust, user attitude and leadership behavior influence the level of interactive use of budgets. Further, our research shows that both kinds of budget usage influence formulation and implementation of the strategy and diagnostic use of budgets has a significant and positive impact on financial performance.},
     year = {2016}
    }
    

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  • TY  - JOUR
    T1  - Determinants and Effects of Diagnostic and Interactive Use of Budget in Iranian Companies
    AU  - Farzane Jalali Ali Abadi
    AU  - Alemeh Yazdanian
    AU  - Elham Jamali
    Y1  - 2016/05/11
    PY  - 2016
    N1  - https://doi.org/10.11648/j.ijber.20160503.13
    DO  - 10.11648/j.ijber.20160503.13
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
    SP  - 46
    EP  - 54
    PB  - Science Publishing Group
    SN  - 2328-756X
    UR  - https://doi.org/10.11648/j.ijber.20160503.13
    AB  - Regarding the vital role of budget as a major feature of management control systems (MACS) in various fields like formulation of strategy, development of dynamic capabilities, competitive advantage; and additionally, due to the low volume of empirical research in this area, this paper investigates the application of budget in different Iranian companies. For this purpose, we first considered the diagnostic and interactive approaches toward MACS which are introduced by Simon (1990). We also focused on the model of Hofmann, Wald & Gleich (2012) to develop our research model and hypothesis. Finally, based on Hofmann, et al. (2012) study, we consider variables that may influence budget use such as environmental, organizational and individual factors. Findings show that leadership behavior, user attitude, competitive intensity and interactive use are determinants in diagnostic use. Besides, factors such as market dynamism, centralization, culture of trust, user attitude and leadership behavior influence the level of interactive use of budgets. Further, our research shows that both kinds of budget usage influence formulation and implementation of the strategy and diagnostic use of budgets has a significant and positive impact on financial performance.
    VL  - 5
    IS  - 3
    ER  - 

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Author Information
  • Department of Management, University of Tehran, Tehran, Iran

  • Department of Management, University of Tehran, Tehran, Iran

  • Department of Management, University of Tehran, Tehran, Iran

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