Top Manager Orientation, Management Accounting Systems and Strategy Implementation: Evidence from the Sri Lankan Manufacturing Sector

Abstract

This paper examines how technically oriented top managers use Management Accounting Systems (MASs) for organizational strategy implementation in the Sri Lankan manufacturing sector. Based on the Upper Echelon Theory (UET), the researchers argue that technically oriented top managers use MASs more interactively than diagnostically and prefer the use of innovative to traditional MAS information. Further, the researchers argue that technically oriented top managers support the implementation of prospector strategy as a result of their innovativeness. In order to achieve the objectives of the study a quantitative based approach was adopted. The hypotheses were developed and tested in a survey among the technically oriented top managers in the manufacturing sector in Sri Lanka. The researchers conducted a few in-depth interviews as well. The findings of the study confirmed that the technically oriented top managers prefer the interactive style in the use of MASs and also prefer to use innovative MAS information. The results also confirmed that technically oriented top managers prefer to adopt the prospector strategy. Further, the findings confirmed that the interactive style of using MASs and innovative MAS information strongly supports the adoption of prospector strategy. The findings confirmed the applicability of UET in the Sri Lankan manufacturing sector. The findings will also aid business organizations in preparing MAS information to complement prospector strategy implementation. The paper contributes to the existing literature on UET and the role of MASs in supporting strategy implementation particularly in a South Asian, Sri Lankan setting.

The impact of manager’s demographic characteristics on prospector strategy, use of management accounting systems and financial performance

“…In this study, some theoretical implications as follows: Firstly, the impact direct between demographic characteristics (age, education) of CEO and choices of prospector strategy (Hambrick & Mason, 1984;Song, 1982;Wijesinghe & Samudrage, 2016), MAS (e.g. Wijesinghe & Samudrage (2016);Naranjo-Gil et al (2009); Pavlatos (2012), financial performance (Hambrick & Mason, 1984;Hiebl, 2014) was examined. However, the impact of age on financial performance is not significant.…”

“…In contrary, managers with the propensity of technical orientated are positively related to use MASs with interactive style, positive use of innovative MASs (e.g. ABC, BSC, benchmarking) (Naranjo-Gil et al, 2009) and negative influence on using traditional MAS (Wijesinghe & Samudrage, 2016).…”

“…Although, the searching for better information and the assessing the accuracy of information is better. At the same time, higher age CEOs take more time to make decisions (Taylor, 1975) so they don't need accounting information timely, broad scope, integrated and aggregated because they need long time to carefully consider before making decision, and they are more suitable to style of interactive use of MAS (Wijesinghe & Samudrage, 2016). In the same view, decision-making, controlling and performance evaluation is significant negatively associated with CFO age (Pavlatos, 2012).…”

“…Demographic characteristics have an essential role not only in the results obtained from making managerial decisions but also for the level of success in implementing strategies (Jespersen & Bysted, 2016). Some researchers have studied how technically oriented education of top management impacts on their style of using interactive MAS (Wijesinghe & Samudrage, 2016). Others have studied how younger generation of managers with a different education is using innovative MAS in their strategy building (Naranjo-Gil et al, 2009;Wijesinghe & Samudrage, 2016).…”

“…Some researchers have studied how technically oriented education of top management impacts on their style of using interactive MAS (Wijesinghe & Samudrage, 2016). Others have studied how younger generation of managers with a different education is using innovative MAS in their strategy building (Naranjo-Gil et al, 2009;Wijesinghe & Samudrage, 2016). However, in an emerging market such as Viet Nam, with rational resources in many perspectives, the use of innovative MAS is not suitable but traditional Hambrick &Mason, 1984 andHeibl, 2014) However, the method of measuring values and perceptions is complex and inaccurate.…”