Influence of Control Systems and Slack Time on Process Innovation

Abstract

<jats:p>ABSTRACT Purpose: This study analyzes the influence of the interactive and the diagnostic use of Management Control Systems (MCS) and slack time on process innovation in incubated companies. Originality/value: Organizational characteristics are associated with processes innovation in organizations with contemporary configuration. The study brings evidence to the contrasting findings of the MCS literature with slack time and process innovation. Design/methodology/approach: A survey was conducted with managers of companies listed on websites of incubators associated with the Associação Nacional de Entidades Promotoras de Empreendimentos Inovadores (National Association of Entities Promoting Innovative Enterprises), obtaining a sample of 106 valid responses. To analyze the data, the Structural Equation Modeling technique was applied to analyze the data. Findings: The results indicated that the interactive use of MCS promotes slack time at work, and the diagnostic use inhibits its creation. However, slack time was not significantly associated with processes innovation, which reveals a dysfunctional role of the slack. The interactive use of MCS had a significant influence on processes innovation. It is concluded that the interactive use prevails when the purpose is to promote processes innovation, as it favors contacts between different hierarchical levels and learning, while the diagnostic use highlights its relevance by inhibiting the creation of slack time, understood as a dysfunction for not leading to processes innovation. This denotes that the interactive and the diagnostic use of MCS are complementary in incubated companies.</jats:p>

Do enabling management control systems stimulate innovation?

“…The intensity of budgeting use also positively affects process innovation (H3a). These results are similar to those by Frezatti et al (2017) and Pazetto et al (2020), who identified a positive effect of MCS use on process innovation. This indicates that this financial control, by helping, coordinating and communicating management strategies provides managers with greater dedication to the business process management (Patrucco et al, 2020).…”

“…Thus a better understanding of how and why management control practices can provide information that supports innovation is still needed (Henri and Wouters, 2020). There is a concentration of evidence based on Simons' (1995) approach to the use of interactive and diagnostic control systems (Bisbe and Otley, 2004;Bedford, 2015;Chenhall and Moers, 2015;Frezatti et al, 2017;Beuren et al, 2021;Pazetto et al, 2020). Lopez-Valeiras et al (2016) remark that such an approach does not point out the types of innovation that can be promoted for management success.…”

Efeitos do uso dos orçamentos estático e flexível na inovação de processos e produtos

“…The hypothesis was accepted statistically (β=0.161, p<0.10) and reveals its importance (β=0.161) and performance (77.747). Thus, the studies of Pazetto et al (2020), which evidenced a relationship between interactive MCS use and process innovation, and Lopez-Valeiras et al (2016), which contemplated the budget from the interactive MCS perspective and found a positive association with process innovation, are corroborated. This finding indicates that greater MCS flexibility, in this case budget, promotes constant organizational re-adaptations, favorable to the companies (Davila et al, 2009), especially entrepreneurial organizations that focus on innovation (Chtioui & Dubuisson, 2020).…”

“…Bisbe and Otley (2004) observed that interactive control strengthens (through moderation) the relationship of (product) innovation towards performance, and that further research may contemplate the process innovation perspective. Similarly, Pazetto et al (2020) found that the interactive use of MCS is positively associated with process innovation.…”

“…Previous studies have already provided evidence of the traditional (static) annual budget being an antecedent of process (Dunk, 2011) and product innovation (Lopez-Valeiras, Gonzalez-Sanchez & Gomez-Conde, 2016). Evidence also indicates influence of the flexible budget on process (Bisbe & Otley, 2004;Lopez-Valeiras et al, 2016;Pazetto, Mannes, & Beuren, 2020) and product innovation (Dunk, 2011;Laitinen, Länsiluoto, & Salonen 2016).…”