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A CROSS NATIONAL INVESTIGATION OF FACTORS INFLUENCING ACTIVITY-BASED COST MANAGEMENT IN SEVEN COUNTRIES
AL BHIMANI LONDON SCHOOL OF ECONOMICS
HOUGHTON STREET, LONDON WC2A 2AE, UK TEL: 0171 955 7329 FAX: 0171 955 7420
E-MAIL: A. [email protected]
MAURICE GOSSELIN UNIVERSITÉ LAVAL
QUÉBEC CITY, CANADA G1K 7P4 TEL: 418-656-5158 FAX: 418-656-2624
E-MAIL: [email protected]
DECEMBER 2002
2
A CROSS NATIONAL INVESTIGATION OF FACTORS INFLUENCING ACTIVITY-BASED COST MANAGEMENT IN SIX COUNTRIES
ABSTRACT
Organizations have been exhorted to adopt novel costing approaches over
the past decade. This study assesses the extent to which organizations have
altered their practices along these lines, the perception of their success and
their association with several contextual factors. A questionnaire was
developed to collect information on corporate costing practices, strategic
orientation, organisational culture and other information in seven countries:
Canada, France, Germany, Italy, Japan, USA and UK. More than 400
questionnaires were returned and analysed. The results of the study show
that strategy and national context are associated with the design of costing
systems. These factors also affect accountants’ perception of the usefulness
of these systems within their organizations.
Key words: Activity-based costing, innovation, strategy, organizational structure
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A CROSS NATIONAL INVESTIGATION OF FACTORS INFLUENCING ACTIVITY-BASED COSTING IN SEVEN COUNTRIES
1. Introduction
During the 1990s, organizations have been challenged to change their
costing practices and more specifically to adopt new cost management
innovations such as activity-based cost management (ABCM). The impact of
these pressures seems to have varied from one organization to another. The
literature on ABCM has already considered the influence of organizational
size (Armitage and Nicholson 1993; Gosselin 1997; Innes et al. 2000), level
of automation (Drury et al. 1994), complexity of production processes and
product diversity (Bjornenak 1997) on ABCM adoption and implementation.
Empirical studies have to some extent considered the influence of
organizational culture elements (Friedman and Lyne 1997, 1998), strategic
positioning and organizational structure (Gosselin 1997). All these empirical
ABCM studies have been conducted in one country at the time. The diffusion
process for ABCM has been different from one country to another. While
ABCM emerged during the end of the 1980s in the United States, it slowly
spread to the United Kingdom, Canada, continental Europe (France, Germany
and Italy) and Japan. The present study seeks to investigate the influence of
organizational, structural, cultural and strategic factors on ABCM
4
implementation across seven different countries. This cross-country
comparative investigation will provide some insights on the potential
influence of country-specificity to the adoption, the success and the speed of
ABCM implementation and the extent to which it interacts or is subsumed by
organizational factors.
This paper is organized as follows. In Section One, the results of surveys
conducted during the last ten years in several countries and pertaining to the
areas of activity-based costing (ABCM) are reviewed. Section Two includes a
discussion about the hypotheses that are tested in this research project.
Section Three focuses on the research design. In this Section, the
questionnaire used is described and the data collection process is indicated.
Section Four includes a description of the analyses performed to test the
hypotheses and a discussion of the results. Lastly, Section Five includes a
discussion of the contributions and the limitations of this study and of the
opportunities for future research in this area.
2. Surveys on activity-based cost management (ABCM)
Since the emergence of ABCM in 19871, several surveys have been
conducted in different countries from Europe and North America to evaluate
1 Some claim that ABCM was developed earlier.
5
the degree to which ABCM has been adopted by firms (Innes and Mitchell
1991; Ask and Ax 1992; Bright et al. 1992; Nicholls 1992; Institute of
Management Accountants 1993; Armitage and Nicholson 1993; Drury and
Tayles 1994; Innes and Mitchell 1995; Lukka and Grunland 1996; Do et al.
1996; Bjornenak 1997; Gosselin 1997, Innes et al. 2000).
(Insert Table 1)
These surveys can be classified into two categories: descriptive and
research-oriented. Descriptive surveys are aimed at collecting information on
cost management systems including ABCM. They provide a rich description of
the systems and their purposes. Research-oriented surveys attempt to
examine the relationship between several contextual factors and the
adoption, the implementation and the success of ABCM.
Innes and Mitchell (1991) carried out the first survey that included questions
on ABCM. They found that among their 187 respondents, only 6% had begun
to implement an ABCM system while 52% had not considered implementing
ABCM. During the same period, Bright et al. (1992) surveyed manufacturing
firms again in the UK. The percentage of ABCM adopters, 32%, was much
larger than in Innes and Mitchell (1991). The authors questioned these
results and suggested that the low response rate and the potential non-
response bias may explain this high level of ABCM diffusion. Ask and Ax
6
(1992, 1997) undertook a quite similar study in Sweden. Consistent with
Innes and Mitchell, they found that 7.2% of the respondents had started
implementing ABCM and that larger firms had a greater tendency to adopt
ABCM.
In Canada, Armitage and Nicholson (1993) surveyed the 740 largest
corporations. The results showed that 14% of the respondents had
implemented ABCM, 15% were reflecting on implementing ABCM and 67%
had not considered implementing an ABCM system. Innes and Mitchell
(1995) administered a second survey of UK firms companies in 1994. The
rate of adoption of ABCM had increased to almost 20%, showing that the
diffusion process for ABCM had evolved since 1991.
During the second part of the 1990s, a second generation of survey studies
has been conducted. Here, researchers have attempted to examine the
relationships between the success of ABCM implementation and various
variables (Shields 1995; Swenson 1995; Foster and Swenson 1997,
McGowan and Klammer 1997, Cagwin and Bouwman 2002), focusing only on
organizations that installed ABCM. Others examined the diffusion process for
ABCM from an innovation perspective. They examined the relationships
between the stages of the diffusion, adoption and implementation of ABCM
and several contextual factors such as strategy, organizational structure and
7
product diversity (Bjornenak 1997; Gosselin 1997, Malmi 1999).
The results of all the surveys mentioned in this Section show that despite the
massive attendance at ABCM seminars, the large number of articles in
professional journals recommending ABCM and the considerable amount of
consulting activity predicated on ABCM, few organizations adopted and
implemented ABCM. In the beginning of the 1990s, Miller et al. (1992) had
indicated that U.S. managers considered ABCM to be one of the latest
improvement initiatives with the lowest pay-off. This perception does not
seem to have change. Furthermore, even though most articles in the
professional literature provide descriptions of organizations which have
successfully installed ABCM, there is evidence that some firms which had
started to implement an ABCM system have decided to stop the
implementation process (Horngren 1990; Cobb et al. 1992; Nanni et al.
1992; Madison and Power 1993; Gosselin 1997, Innes and Mitchell 2000).
While several surveys have been conducted in the UK and the USA, only two
were conducted in Canada (Armitage and Nicholson 1993; Gosselin 1997,
Bescos et al. 2002), one in Italy (Cinquini et al. 1999), Germany (Scherrer
199n6) and France (Cauvin and Bescos 2000). Furthermore, no survey has
been administered in several countries at the same time and with the same
questionnaire. Therefore, it is very difficult to make a clear and complete
8
assessment of the diffusion of ABCM in North America and in Europe. One of
the major contributions of this paper to the ABCM literature consists of
examining the extent to which ABCM has been implemented in different
countries (Canada, France, Germany, Italy, Japan, UK and USA) and how
factors such as country, strategic orientation and organizational structure
influence the diffusion process for this innovation.
3. Hypotheses
3.1 Country
The emergence of ABCM, as a new cost management practice, started in the
USA with the articles from Cooper (1987) published in the Journal of Cost
Management. The new approach was almost simultaneously diffused in the
UK and in Canada. The diffusion of ABCM in France started, a little later, with
the work of Evraert and Mévellec (1990) and Mévellec (1990). However,
French management accountants have often argued that a method similar to
ABCM has been used in France since 1930 (Lebas 1994). Even though, the
diffusion process for ABCM has not been exactly similar in the six countries
(Bhimani 1996), it may be hypothesized that the proportion of organizations
that have experienced ABCM in each country is identical in the absence of
nation-specific influences. Shields (1998) suggested that he has not
witnessed any differences and that decisions pertaining to management
9
accounting systems tend to converge from one country to another.
Therefore, the following hypothesis is tested:
Hypothesis 1 (H1): The proportion of organisations that experienced the implementation of ABCM is similar from one country to another.
Some organizations that decided to pursue ABCM may, during the
implementation process, adapt the innovation and concentrate their efforts
on cost driver and activity analyses (Gosselin 1997) or may decide to
abandon the implementation (Innes and Mitchell 2000). Other organisations
will implement ABCM on a pilot basis or will use it across some business units
or the majority of business units. While the utilization of ABCM may vary
from one company to another, it should not vary from one country to
another. Therefore, the following hypothesis is tested.
Hypothesis 2 (H2): Among organizations that experienced ABCM, the proportion of organisations that abandoned ABCM after having experienced it, tried ABCM on a pilot basis, used it across some business units and used ABCM across the majority of their business units is similar from one country to another.
The speed of implementation may vary from one organization to another
depending on factors such as strategy, organizational structure, accounting
and non accounting ownership and links to quality initiatives. The country of
10
the organization should not affect the speed at which organizations
implement their ABCM system
Hypothesis 3 (H3): Among organizations that experienced ABCM, the speed of implementation of ABCM is similar from one country to another.
Shields (1995) has shown that the success of an ABCM implementation
depends on several factors: training, links to performance evaluation, links to
quality initiatives, adequacy of resources. These factors play a key role in
influencing the success of the implementation which exceeds any country-
based influence on the perceived level of success of the ABCM
implementation. Then, the following hypothesis is suggested:
Hypothesis 4 (H4): Among organizations that experienced ABCM, the success of ABCM implementation is similar from one country to another.
3.2 Strategy
Strategy plays a key role in the diffusion process for innovation. The
necessity to innovate is driven by the type of strategy employed by a firm.
Miles and Snow (1978, 1994) identified four strategic types of organizations
according to the rate at which they change their products and markets:
prospectors, defenders, analyzers and reactors. The fundamental difference
among these types is the rate of change in the organizational domain.
Prospectors are characterized by their dynamism in seeking market
11
opportunities, their capability to develop and produce new products to meet
customers' needs, their investment in large amounts of financial resources
related to research and development, and their enhancement of teamwork.
They are usually innovators that create change in their respective industries.
Defenders have a strategy that is the polar opposite from prospectors. They
operate within a narrow product-market domain characterized by high
production volume and low product diversity. Defenders compete
aggressively on price, quality and customer service. They engage in little or
no product/market development and stress efficiency of operations.
Defenders are likely to face a lower level of environmental uncertainty than
prospectors (Slocum et al. 1985, Govindarajan 1986). Analyzers stand
between these two categories, sharing characteristics of both prospectors
and defenders. Reactors do not follow a conscious strategy. They are viewed
as a dysfunctional organizational type. The premise of the Miles and Snow
typology is that prospector, defender and analyzer strategies, if properly
implemented, can lead to effective performance.
The Miles and Snow typology was chosen for this study for the three
following reasons. First, the capacity of an organization to innovate is the key
dimension of this typology. Therefore, this typology is more appropriate for
examining the issue of innovation in management accounting systems.
Second, this typology is consistent with Porter's (1980, 1985) low-cost and
12
differentiation generic types. Hambrick (1983) suggested that prospectors
are a particular type of differentiation and defenders another type of
differentiation or cost leadership. Miller (1987) associated prospectors with a
differentiation strategy; this strategy was labeled complex product
innovation. Govindarajan (1986) compared a differentiation strategy to
prospectors and a low-cost strategy to defenders. Third, the Miles and Snow
typology is academically well accepted and internally consistent. Additionally,
it has been tested in several studies such as Hambrick (1981), Snow and
Hrebiniak (1980), Hambrick (1983), Slocum et al. (1985), Simons (1987,
1988 and 1990) and Gosselin (1997).
Since prospectors search continually for market opportunities and have a
broad product-market domain, they will tend to adapt their cost management
systems to their needs and experience activity-based cost management.
Therefore we may hypothesize that:
Hypothesis 5 (H5): Prospectors are more likely to experience ABCM than defenders.
Prospectors are organizations that tend to adopt changes and innovations
more often than defenders. Thus, they should be able to implement ABCM in
a shorter period of time than defenders.
Hypothesis 6 (H6): Among organizations that experienced ABCM, the speed of ABCM implementation is more likely to be higher for
13
prospectors than for defenders.
The success of the implementation of ABCM depends on several factors that
have been identified in Shields (1995). Defenders are organizations that
emphasized the need for more accurate cost information. Therefore, the
perception of the success of the ABCM implementation would be higher
among defenders than among defenders. Thus, we propose the following
hypotheses.
Hypothesis 7 (H7): Among organizations that experienced ABCM, the success of ABCM implementation is higher for defenders than for prospectors.
Prospectors are organizations that are always searching for innovations.
Once they have started to make a change, they move to other avenues for
effecting change. Therefore, within an ABCM context, there are two potential
behaviors for prospectors: they may either stop implementing ABCM and
move to a more agile change such as reengineering or process analysis or
they may use ABCM across the entire firm.
Therefore, we draw the following hypotheses:
Hypothesis 8 (H8): The proportion of organizations that abandoned ABCM or that used ABCM across the majority of their business units is higher for prospectors than defenders.
14
3.3 Organizational structure
Organizational structure has been found to play an important role in the
implementation of activity-based costing but does not affect the decision to
adopt ABCM (Gosselin 1997; Krumwiede 1998). Thus, we may propose that
Hypothesis 9 (H9): Organisational structure does not influence the propensity of organizations to experience ABCM.
4. Questionnaire and data collection process
To test the hypotheses discussed in the previous Section, a mail survey was
administered in seven countries: Canada, France, Germany, Italy, Japan,
USA and UK. This instrument enabled the collection of information concerning
strategy, organizational structure, speed, success and stages of ABCM
implementation and capital budgeting practices. The questionnaire (Appendix
1) included three Sections. The first Section consisted of four questions
pertaining to cost management and investment appraisal practices. The
second part focused on information about management style and strategy
while the third part concentrated on background information.
The population surveyed in Canada included the 500 largest companies of
the Blue book of Canadian Business. Five questionnaires were returned
incomplete. In the United Kingdom, the survey was sent to the 500 largest
15
companies2 of the Times 1000 UK companies. The survey in France was sent
to the 500 largest companies of the database “L’expansion: Les 1000,
performance et classement des plus grandes entreprises françaises”. In
Germany, the survey was sent to the 500 largest companies. The list was
provided by Frannkfurter Allgemeine Zeitung Gmbh Information Services.
Nine questionnaires were returned incomplete. Again, we only included the
questionnaires received during the first five weeks of the survey period. The
Italian population consisted of the top 450 Italian companies and the list was
provided by the Italian Trade Center. Fifteen questionnaires were returned
incomplete. Lastly, in the USA, the population was made up of the top 500
firms in the Moody’s Industrial manual. Three questionnaires were returned
incomplete in that country.
The response rate for a survey in such a large number of countries cannot be
expected to be as high as in a standard study. The researchers could not
perform follow-up procedures because of the costs involved as well as the
language barriers. The absence of follow-up procedures is a common
limitation in this type of cross-country study. The response rates in Canada
and Italy are the lowest at a rate of 7% and the UK has the highest, 17%.
Germany and France and the USA have response rates of respectively
14.6%, 7.8% and 11.4%.
2 Size was measured by the amount of revenues
16
5. Results
5.1 Country
The survey was sent to controllers in seven different countries: Canada,
France, Germany, Italy, Japan, The United States and the United Kingdom.
Four hundred and sixteen questionnaires were sent back to the researchers.
Table 2 shows the number of respondents in each country. The largest
groups of respondents are from Japan (95) and the United Kingdom (85)
while Italy (32) represents the smallest. This gap may be partially explained
by the fact that controllers from the UK have had the opportunity to
participate in several surveys over the last decade (Innes and Mitchell 1991,
Bright et al. 1992, Nicholls 1992, Drury and Tayles 1994, Innes et al. 2000)
while it is not the case for controllers from France and Italy where only a
small number of surveys on cost accounting system have been conducted.
(Insert Table 2)
5.1.1 Organizations that experienced ABCM
The results in Table 3 show that there are significant differences in the
proportion of organizations that experienced ABCM. The highest percentage
is in France (94.9%) while the lowest is in Germany (43.8%). A Chi-square
analysis shows that the difference between the countries is significant (Chi-
square 65.22, p-value < 0.001 with 6 degrees of freedom). The rejection
17
of hypothesis 1 suggests that the diffusion process for ABCM has been
different from one country to another. There are several explanations for
these results. French organizations have been using a method quite similar
to ABC (méthode des sections homogènes) for several decades (Lebas
1994). Thus, French managers consider that their firms have experienced
ABCM for a long period. This explains the high rate in France.
The “adoption rate” in this survey is larger than in any other survey
conducted before on ABCM. The question in this survey did not refer to the
adoption or the implementation but to the extent to which firms have
experience ABC. As we will notice further, this rate includes firms that are
using ABC as well as those that have abandoned ABC. This explains the
difference between the results of this study and other surveys on ABCM.
(Insert Table 3)
5.1.2 Stages of ABCM implementation
The analysis of the stages of ABCM implementation by country is included in
Table 4. It shows that the proportion of organizations at each stage of
implementation and in each country is significantly different. The Japanese
and the Italian respondents abandoned ABCM in a greater proportion,
respectively 69.5% and 15.8%, than the respondents from the other
18
countries. The next largest rate of abandonment is 4.4% in the USA and the
mean is 4.3%. The proportion of organizations that implemented a pilot
ABCM is only 10.8% in France while it is 36.8% in Italy. The average rate of
pilot ABCM is 19.3%. In the USA, 54.4% of the organizations are using ABCM
across units while it is limited to 21.6% in France. French respondents are
using ABCM in the majority of their units, 64.9%. This rate is above the
average of 29.2%.
A Chi-square analysis shows that the stages differ significantly across the
countries (Chi-square = 191.37 with a p-value of 0.001)3. These results are
in opposition with hypothesis 2. Organizations are implementing ABCM in a
different manner depending on the country. More than 70% of the Canadian,
German, UK and USA respondents are engaging in implementing ABCM and
are using it across units. French organizations tend to implement ABCM in
the majority of the units. There are several potential explanations for these
differences. The size and the industry of the organizations surveyed may be
different from one country to another. The diffusion of ABCM in countries like
Canada, Germany and Italy may have been slower than in France, the UK
and in the USA. In France, organizations have already used a method similar
to ABCM for a long period of time while in the USA and in the UK, ABCM is
3 These results seem largely driven by the Japanese respondents. The chi-square test was performed without the Japanese data. The results were still significant with a chi-square of 43.91 and a p-value 0.001.
19
better known since it is in these countries that most of the articles pertaining
to ABCM have been published.
(Insert Table 4)
5.1.3 Speed of ABCM implementation
Ex ante, the speed of the implementation of ABCM can be expected to be
similar from one country to another. Responses to the question concerning
the speed of implementation are included in Table 5. They show that the
speed of implementation is significantly different from one country to
another. French and Japanese managers perceive their ABCM
implementations as being quicker while Canadian, Italian and US managers
think that they are slower. The Chi-square analysis shows that country is
significant since the Chi-square is 56.58, with a p-value of 0.002 with 24
degrees of freedom. Thus, hypothesis 3 is rejected. Speed of implementation
varies significantly from a country to another.
(Insert Table 5)
20
5.1.4 Success of ABCM implementation
Hypothesis 4 suggested that the perceived level of success for ABCM should
be similar from one country to another. The results show that success varies
significantly from one country to another since the Chi-square is 33.88 and
the p value 0.09. Hypothesis 4 is not confirmed.
The result show that French, German and Japanese managers seems to
perceive a much higher level the success relating to ABCM implementation
than managers from other countries. Canadians tend to perceive the success
of the ABCM implementation at a relatively lower level.
(Insert Table 6)
5.2 Strategy
It is suggested in several studies that strategy plays a key role in the design
of management accounting systems and more specifically in the
implementation of ABCM. Thus, respondents were asked to classify their
organization according to the Miles and Snow typology (Miles and Snow
1978). This typology has been used widely in the recent management
accounting literature (Simons 1987; 1988; 1990; Gosselin 1997; Langfield-
21
Smith 1997). The instrument developed by Snow and Hrebiniak (1980) was
employed. The self-typing process resulted in a fairly identical proportion of
analyzers, prospectors and defenders as it is shown in Table 7. This is
consistent with Miles and Snow (1978) who suggested that in an industry the
number if each strategy type should be relatively similar.
(Insert Table 7)
Before testing the hypotheses that pertain to the influence of strategy on
cost management, an analysis of the relationship between strategy, country
and organizational variables was performed. The results, included in Table 8,
show that in the sample the proportion of prospectors, defenders and
analyzers varies significantly from one country to the other. The Chi-square
is 35.87 with a p-value of 0.001 with 12 degrees of freedom. The percentage
of prospectors ranges from 18.3% in Japan to 41.1% in Germany and 22.6%
in Japan and 43.6% for defenders in France.
(Insert Table 8)
5.2.1 Strategy and organizations that experienced ABCM
It was suggested in hypothesis 5 that prospectors would tend to experience
ABCM more than defenders. To test this hypothesis, we used the following
22
logistic model:
ABCM = a + b1 PRO + e (1)
where ABCM was set equal to 1 if the firm experienced ABCM and equal to 0
otherwise. Of the 321 firms that responded to the survey, 190 had
experienced ABCM. PRO is a dummy variable for strategy. PRO was given a
value of 1 if the respondent had classified his organisation as a prospector
and a value of 0 if the organisation was an analyzer or a defender. The
results of the logistic regression are reported in Table 9. They support H5.
Strategy does influence the decision to experience ABCM. Prospectors are
more likely to have experienced ABCM after having controlled for the effects
of country. The results are similar to previous studies that have examined
the association between strategy and the adoption of ABCM (Gosselin 1997,
Malmi 1999).
(Insert Table 9)
5.2.2 Strategy and speed of ABCM implementation
Hypothesis 6 pertained to the relationship between the speed of
implementation and strategy. It was suggested that the speed of
implementation would be higher for prospectors than for defenders. To test
23
this hypothesis, we used the following model:
SPEED = a + b1 PRO + e (2)
where SPEED represents the ordinal measure of the perceived velocity of
ABCM implementation which is measured on a five-point scale. PRO, the
dummy variable for strategy, was given a value of 1 if the respondent had
classified his organisation as a prospector and a value of 0 if the organisation
was an analyzer or a defender. The results included in Table 10 show that
strategy type does not affect the speed of implementation. Prospectors do
not implement ABCM more quickly than defenders.
(Insert Table 10)
5.2.2 Strategy and success of ABCM implementation
The success of ABCM implementation depends on several factors that have
been identified in several studies (Shields 1995, Swenson 1995, Foster and
Swenson 1997). In this paper, we hypothesise that the perceived success of
the ABCM implementation would be higher among defenders than among
prospectors. To test this hypothesis a reduced regression model with
strategy as the independent variable and perceived success of ABCM as the
dependent variable was employed. Success was measured on a five-point
scale from unsuccessful to successful while strategy was represented by a
24
dummy variable DEF. The value of DEF was set to 1 if the organization was a
defender and to 0 if it was an analyzer or a prospector. The results of the
test supports hypothesis 7 and are summarized in Table 11. The independent
variable DEF has a positive and significant coefficient. ABCM implementations
are perceived as more successful among defenders than among prospectors
and analyzers.
(Insert Table 11)
5.2.2 Strategy and stages of ABCM implementation
Organizations may decide to implement ABCM as a pilot, to use it across the
units or in the majority of units. They may also decide to abandon ABCM.
Hypothesis 8 suggested that prospectors would be more likely to abandoned
ABCM or use it in all the majority of units in comparison to defenders who
would prefer to conduct a pilot ABCM or use ABCM across units. To test his
hypothesis, a chi-square analysis was done. The results of the analysis do
not support hypothesis 8. The value of the chi-square is 8.17 and the p-value
is 0.226. Strategy does not affect the outcome of the ABCM system after its
implementation.
(Insert Table 12)
25
5.3 Organisational structure
Organizational structure was measured with an instrument based on Gordon
and Narayanan (1984) that focused on three dimensions of the structure:
centralisation, formalisation and planning. To test this hypothesis a logistic
regression model with centralization (CENT), formalisation (FORM) and
planning (PLAN) as the independent variable and whether or not the
organization experienced ABCM was employed as the dependent variable was
run. The model employed was:
ABCM = a + b1 CENT + b2FORM + b3PLANN +e (3)
where ABCM was set equal to 1 if the firm experienced ABCM and equal to 0
otherwise.
(Insert Table 13)
The results of the test supports hypothesis 9 and are summarized in Table
13. Centralisation and planning have an influence on the extent which a firm
has experienced ABCM but the coefficient has a p-value just below 0.1. The
coefficient for formalization is not significant.
26
6. Conclusion
The purpose of this paper was to present the results of a cross national
survey on ABCM, conducted in six countries. The results show that there are
major differences in the diffusion process for ABCM and that strategy has
some influence on this process. Based on the results of this survey, French,
Japanese and US organisations tend to experience more extensive ABCM
implementations in comparison to Canadian, German, Italian and UK
organisations. The results also confirm that strategy and organizational
structure does not affect the extent to which firms have experienced ABCM.
The overall results show that the diffusion process for ABCM is quite different
in each country and that local adaptation may affect the role of many
determinants on the diffusion process. Research should be undertaken to
identify what are the attributes of the ABCM and how they vary from one
country to another.
This paper contributes to the management accounting literature since it is
the first and the only international survey study on one of the most important
management accounting innovation: ABCM. Of course, such study has
several limitations. First, the response rate in each country is not high.
Second, there are in each country adaptations and even re-inventions. This
may affect the influence of the determinants on the implementation of ABCM.
27
However, we do not know to what extent this situation affects the result of
the empirical work performed in this study.
28
Table 1 Surveys on the diffusion of ABCM
Country Population Period Adoption rate
Innes and Mitchell (1991)
United Kingdom
Members of the CIMA September 1990
6% began to implement ABCM
Ask and Ax (1992)
Sweden Engineering Industry January to April 1991
2% are applying ABCM
Bright et al. (1992)
United Kingdom
Manufacturers Latter half of 1990
32% are applying ABCM4*
Nicholls (1992) United Kingdom
179 companies that attended an ABCM seminar in May 1990
January 1991
10% had implemented ABCM
Armitage and Nicholson (1993)
Canada Financial Post list of 700 largest companies in Canada
Summer 1992
14% are applying ABCM
Drury and Tayles (1994)
United Kingdom
Sample of 866 business units drawn from a population of 3,290
manufacturing firms
1991 4% are applying ABCM
4The authors of this study regard the validity of the disclosed usage of ABCM in their survey with some reservation given the results of other surveys.
29
Table 1 (suite) Surveys on the diffusion of ABCM
Country Population Period Adoption rate
Innes and Mitchell (1995)
United Kingdom
Firms listed in TIME 1000 Early 1994 20% consider ABCM applicable to their
organizations (Only 8% used it extensively)
Shields (1995) United States of America
List of ABCM adopters provided by the CAM-I
1994 N/A
Lukka and Granlund (1996)
Finland Manufacturing firms 1992 - 1993 5% are implementing
Bjornenak (1997))
Norway Manufacturing organizations 1994 40 % wanted to implement, were currently implementing or had already implemented ABCM
Gosselin (1997) Canada Manufacturing strategic business units
1994 - 1995 30.4% are implementing ABCM
Innes et al. (2000)
United Kingdom
Firms listed in TIME 1000 1999 19% of the firms have implemented ABC
TABLE 2
30
NUMBER OF RESPONDENTS BY COUNTRY
Canada France Germany Japan Italy United Kingdom
United States
Total
Number of respondents
35 (8.4%)
39 (9.4%)
73 (17.6%)
95 (22.8%)
32 (7.7%)
85 (20.4%)
57 (13.7%)
416
TABLE 3
ORGANIZATIONS THAT EXPERIENCED ABCM BY COUNTRY
Canada France Germany Italy Japan United Kingdom
United states
Total
Number of respondents
23 (65.7%)
37 (94.9%)
32 (43.8%)
19 (59.4%)
82 (86.3%
52 61.2%
46 80.7%
291 70%
The percentages in parentheses represent the proportion of respondents that experienced ABCM in each country.
Chi-Square = 65.22, p< 0.001, with 6 degrees of freedom
31
TABLE 4
STAGES OF ABCM BY COUNTRY
Canada France Germany Italy United Kingdom
United States
Japan Total
Abandoned 1 (4.3%)
1 (2.7%)
0 (0%)
3 (15.8%)
2 (3.8%)
2 (4.4%)
57 (69.5%)
66 (22.7%)
Pilot ABCM 8 (34.8%)
4 (10.8%)
10 (31.2%)
7 (36.8%)
8 (15.4%)
10 (21.8%)
9 (11.0%)
56 (19.3%)
Use across units
9 (39.1%)
8 (21.6%)
16 (50%)
5 (26.3%)
29 (55.8%)
25 (54.4%)
5 (6.1%)
97 (33.3%)
Use in majority of
units
5 (21.7%)
24 (64.9%)
6 (18.8%)
4 (21.1%)
13 (25%)
9 (19.6%)
11 (13.4%)
72 (24.7%)
Number of respondent
s
23 37 32 19 52 46 82 291
The percentages in parentheses represent the proportion of respondent that abandoned ABCM, installed a pilot ABCM, use ABCM across units and use ABCM in the majority of the units in each country.
Chi-Square = 191.37, p< 0.001, with 18 degrees of freedom
32
TABLE 5
SPEED OF IMPLEMENTATION BY COUNTRY
Canada France Germany Italy United Kingdom
United states
Japan Total
Quick 1 (5.6%)
3 (7.9%)
0 (0.0%)
0 (0.0%)
2 (4.3%)
2 (4.6%)
8 (30.8%)
16 (7.4%)
4 (22.2%)
15 (39.5%)
10 (37.1%)
4 (22.2%)
13 (28.3%)
6 (14.0%)
4 (15.4%)
56 (25.9%)
7 (38.9%)
7 (18.4%)
10 (37.1%)
9 (50.0%)
19 (41.3%)
15 (34.9%)
11 (42.3%)
78 (36.1%)
3 (16.7%)
10 (29.0%)
7 (25.9)
5 (27.8%)
10 (21.7%)
13 (30.2%)
3 (11.5%)
51 (24.1%)
Slow 3 (16.7%)
2 (5.3%)
0 (0.0%)
0 (0.0%)
2 (4.3%)
7 (16.3%)
0 (0.0%)
14 (6.5%)
Number of respondents
18 37 27 18 46 43 26 215
The percentages in parentheses represent the proportion of respondent for each level of speed of implementation from 1 = Quick to 5 = Slow.
Chi-Square = 56.58, p< 0.0002, with 24 degrees of freedom
33
TABLE 6
SUCCESS OF ABCM BY COUNTRY
Canada France Germany Italy United Kingdom
United states
Japan Total
Successful 1 (5.3%)
7 (18.4%)
2 (7.7%)
3 (16.7%)
3 (6.7%)
6 (15.0%)
6 (23.1%)
28 (13.2%)
7 (36.8%) 17 (47.4%)
17 (65.3%)
4 (22.2%)
22 (48.9%)
13 (32.5%)
11 (42.3%)
92 (43.4%)
10 (52.6%)
11 (29.0%)
7 (27%)
6 (33.3%)
16 (35.6%)
18 (45.0%)
7 (26.9%)
75 (35.4%)
1 (5.3%)
1 (2.6%)
0 (0%)
5 (27.8%)
3 (6.7%)
2 (5.0%)
2 (7.7%)
14 (6.6%)
Unsuccessful
0 (0%)
1 (2.6%)
0 (0%)
0 (0%)
1 (2.2%)
1 (2.5%)
0 (0.0%)
3 (1.4%)
Number of respondents
19 37 26 18 45 40 26 212
The percentages in parentheses represent the proportion of respondent that experienced ABCM in each country.
Chi-Square = 33.88, p< 0.09, with 24 degrees of freedom
34
TABLE 7
STRATEGY*
Type Number of firms
Percentage
Analyzers 164 40.2%
Prospectors 120 29.4%
Defenders 124 30.4%
Total 408 100%
* 9 organizations have not responded to the strategy questions
35
TABLE 8
STRATEGY BY COUNTRY
Canada France Germany Italy United Kingdom
United states
Japan Total
Analyzers 15 (44.1%)
10 (25.6%)
13 (17.8%)
11 (34.4%)
36 (43.4%)
24 (44.4%)
55 (49.1%)
164 (40.2%)
Prospectors 9 (25.5%)
12 (30.8%)
30 (41.1%)
11 (34.4%)
24 (28.9%)
17 (31.5%)
17 (18.3%)
120 (39.4%)
Defenders 10 (29.4%)
17 (43.6%)
30 (41.1%)
10 (31.2%)
23 (27.7%)
13 (24.1%)
21 (22.6%)
124 (30.4%)
The percentages represent the proportion of strategy types in each country.
Chi-Square = 35.87, p< 0.00035, with 12 degrees of freedom
36
TABLE 9
EXPERIENCE OF ABCM AND STRATEGY: LOGISTIC REGRESSION RESULTSa
Expected Sign
Coefficient (Std. Error)
Intercept - 0.3235 (0.1392)
PRO + 0.0916* (0.054)
Canada - 0.034 (0.2781)
France 0.335 (0.269)
UK -0.151 (0.264)
USA 0.168 (0.266)
Japan 0.356 (0.149)
Germany 0.2286 (0.264)
Italy -0.109 (0.270)
Model X2 = 64.514, p = 0.0001
aThe model is ABCM = a + b1 PRO + b2 Canada + b3 France + b4 UK + b5 USA + b6 Japan + b7 PRO + e. Variables: ABCM indicates whether the respondents experienced ABCM (=1) or did not ABCM (=0); PRO was set to 1 for prospectors and 0 for analyzers or defenders.
Significance levels are determined using two-tailed X2 tests.
37
TABLE 10
SPEED OF ABCM IMPLEMENTATION AND STRATEGY: REGRESSION RESULTSa
Expected Sign
Coefficient (Std. Error)
Intercept - 2.80468 (0.1119)
PRO + 0.02344 (0.1940)
R-square = 0.0001
aThe model is SPEED = a + b1 PRO + e. Variables: SPEED represents the level of speed of the implementation; PRO was set to 1 if prospectors and 0 if analyzers or defenders.
38
TABLE 11
SUCCESS OF ABCM IMPLEMENTATION AND STRATEGY: REGRESSION RESULTSa
Expected Sign
Coefficient (Std. Error)
Intercept - 2.10769 (0.0907)
DEF + 0.37507** (0.1633)
R-square = 0.0276
**p-value = 0.0228
aThe model is SUCCESS = a + b1 DEF + e. Variables: SUCCESS represents the level of success of the implementation; DEF was set to 1 if defenders and 0 if prospectors or analyzers.
39
TABLE 12
STAGES OF ABCM BY STRATEGY
Abandoned
Pilot ABCM
Use across units
Use in majority of units
Total
Analyzers 34 (51.5%)
20 (35.7%)
45 (46.4%)
24 (33.3%)
123 (42.3%)
Prospectors 12 (18.2%)
18 (32.2%)
28 (28.9%)
26 (36.1%)
84 (28.9%)
Defenders 20 (30.3%)
18 (32.1%)
24 (24.7%)
22 (30.6%)
84 (28.8%)
Total 66 56 97 72 291
The percentages represent the proportion of strategy types in each ABCM stage.
Chi-square = 8.17, p-value = 0.226 with 6 degrees of freedom
40
TABLE 13
ABCM AND ORGANIZATIONAL STRUCTURE: REGRESSION RESULTSa
Coefficient (Std. Error)
Intercept 1 3485 (0.0756)
Centralisation 0.1474 (0.098)
Formalisation 0.1097 (0.223)
Planning 0.1422 (0.098)
R-square = 0.01
None of the three variables are significant.
aThe model is ABCM = a + b1 Centralisation + b2 Formalisation + b3 Planning + e. ABCM indicates whether the respondents experienced ABCM (=1) or did not ABCM (=0).
Significance levels are determined using two-tailed X2 tests.
41
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