Do enabling management control systems stimulate innovation?

Abstract

PurposeThe paper aims to analyze the influence of the enabling design of management control systems (MCS) on the intensity of use of management controls (budgeting and reengineering and improvement) in innovation (of processes and marketing).Design/methodology/approachA survey was conducted with mid-level managers of the companies that are considered the most innovative in Brazil. Structural equation modeling was applied to analyze the data.FindingsThe enabling MCS design positively and directly influences the intensity of use of management controls (budgeting and reengineering and improvements) and innovation (of processes and marketing). Indirect effects are also observed in the relationship between the enabling MCS design and innovation, through the intensity of use of reengineering and improvements. Environmental uncertainties reflect negatively on the intensity of use of management controls and innovation. These results broaden the discussions on the factors that can affect innovation actions and highlight the importance of considering them in the MCS design.Originality/valueThe value of the study lies in contributing to minimize inconsistencies in research results concerning the effects of MCS on innovation and of factors that may act as intervening factors in such a relationship. It discusses the influence of internal organizational factors, related to MCS design, and of external factors, environmental uncertainties, on the intensity of use of specific management controls and on the promotion of innovations in companies imbued with this mission.

Does environmental uncertainty drive the use of management control systems and innovation?

“…Mooi et al (2020) found a positive relationship between environmental uncertainty and process innovation in firms in various countries including Brazil. These findings converge on the understanding that product and process innovations are essential, especially in firms under strong environmental uncertainty and that have their strategy in innovation (Bernd and Beuren, 2022;Kafetzopoulos et al, 2020). Hence, it is postulated that: H2.…”

“…The evidence also points to there not being positive and significant reflections of environmental uncertainty on process innovation (β 5 À0.128; p > 0.05), which leads to the rejection of Hypothesis H2b, countering the results found by Mooi et al (2020). It is presumed that, for being associated with internal procedures (Gunday et al, 2011), such as cost reduction or production speed, process innovation is fostered by characteristics specific to each company and has a variety of predictors (Bernd and Beuren, 2022;Duygulu et al, 2015). The results of hypotheses H2a and H2b differ from the assumptions of the Contingency Theory (Kafetzopoulos et al, 2020) and signal that, in the surveyed firms, product and process innovation can aim to increasing organizational efficiency and performance, not being sensitive to stimuli external to management.…”

“…It is presumed that, for being associated with internal procedures (Gunday et al. , 2011), such as cost reduction or production speed, process innovation is fostered by characteristics specific to each company and has a variety of predictors (Bernd and Beuren, 2022; Duygulu et al. , 2015).…”

“…In this sense, upon finding empirical evidence pointing the effects of environmental uncertainty on MCS use (Rikhardsson et al, 2021); the effects of environmental uncertainty on product or process innovation (Bernd and Beuren, 2022;Mooi et al, 2020;Uzkut et al, 2016); the effects of internal and external knowledge in service innovation on knowledge intensive business services (Appolloni et al, 2013); the effects of MCS use on product or process innovation (Henri and Wouters, 2020;Santos et al, 2022); the mediator role of MCS use (Janka and Guenther, 2018;Languir et al, 2022;Mahama and Cheng, 2013); and theoretical frameworks that propose direct and indirect interactions among these constructs (Fried, 2017;Hall, 2016), it is postulated that the MCS use exercises a mediator role in the relationship between environmental uncertainty and product and process innovations. Hence, it is assumed that: H4.…”

“…This denotes the importance of identifying the antecedents of innovation, as the study by Duygulu et al (2015), who investigated aspects of corporate culture that can support the construction of an innovation culture. However, studies on the antecedent factors of these innovations are still necessary (Bernd and Beuren, 2022), given that they were analyzed in a dissociated manner in the literature (Guo et al, 2019), besides not demonstrating which factors may help explain their relationship with environmental uncertainty (Kim et al, 2021).…”