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Volume Eighteen

pp. 2153

How Top Management Teams Use

Management Accounting Systems to

Implement Strategy

David Naranjo-Gil

Pablo de Olavide University at Seville

Frank Hartmann

RSM Erasmus University

ABSTRACT: In this paper we investigate how top management teams (TMTs) use
management accounting systems (MAS) for strategy implementation. Consistent with upper
echelon theory we argue that professional and administrative TMTs differ in their use of MAS,
which in turn affects the implementation of strategic policies. We extract three dimensions of
MAS use from extant research on the MAS-strategy relationships. We further distinguish
between sets of strategic objectives aimed at cost reduction and flexibility enhancement as part
of an overall firm strategy. Hypotheses are developed and tested in a survey study among 884
TMT members in all 218 general hospitals in Spain, forming 92 complete TMTs. Overall, we
find systematic differences between professional and administrative TMTs in their use of MAS
and its effects on strategy implementation. In a secondary analysis, we explore whether the
observed differences in the use of MAS are consistent with the coercive-enabling framework
recently introduced into the management accounting literature. We find considerable support for
the validity of this framework in our sample. Overall, the paper contributes to the growing
literature on the role of MAS in supporting strategy implementation. We extend this literature by
explicitly recognizing the role of TMT composition in both strategy implementation and the use
of MAS and by providing evidence of the validity of the coercive-enabling framework of MAS
in a cross-sectional analysis.

Keywords: cost reduction; flexibility; strategy implementation; nonfinancial information;

hospital management.

The management accounting literature makes strong claims about the importance of how
managers design and use management accounting system (MAS) to support the implementation
of organizational strategies (Dent 1990; Kaplan and Norton 1996; Naranjo-Gil and Hartmann
Simons 1995, 2000). However, despite considerable research effort and significant practical and
academic interest in strategy implementation in the wider management literature (e.g., Mintzberg
1994; Mintzberg et al. 1998; Braganza and Ward 2001), relatively little is known about which
aspects of MAS are effective antecedents of the realization of particular strategic objectives.
First, MAS studies have typically emphasized the fit between MAS and the organizations
strategy formulation (Langfield-Smith 1997; Gerdin and Greve 2004), whereas it is increasingly
considered important to understand the role of managers use of MAS in implementing strategies
(e.g., Mintzberg 1990; Burgelman 1991; Marginson 2002). Second, studies of the strategy-MAS
relationship typically model MAS use as exogenous (e.g., Abernethy and Brownell 1999),
without explaining why management use MAS in certain ways for strategy implementation in
the first place (e.g., Ittner and Larcker 2001).

In a recent study on the strategyMAS relationship, Abernethy and Brownell (1999)

therefore propose that it is important to understand the style in which top management uses the
MAS strategically. However, this study only suggested that the use of MAS reflected a certain
management style, without any formal test of this relation. In the present paper we aim to
develop and test a general model of how different top management teams (TMT) use the MAS
differently, and how this use of MAS affects strategy implementation. We ground our analysis in
the upper echelon literature (e.g., Hambrick and Mason 1984; Carpenter et al. 2004) that explains
organizational choices, arrangements, and outcomes by the composition of the organizations
TMT (e.g., Finkelstein and Hambrick 1990; Hambrick et al. 1996). In this study, we propose that
TMT composition determines the way in which MAS information is used (e.g., Johnson and
Kaplan 1987; Ahrens and Chapman 2004), which, in turn, affects the implementation of strategic

The present study attempts to contribute to the management accounting literature in

several ways. Despite considerable attention to the relationship between MAS and organizational
strategy, this is the first study of which the authors are aware that examines the linkages between
TMT composition, MAS use, and the implementation of strategy. The paper therefore addresses
implemented strategy as a consequence of MAS, rather than formulated strategy as an antecedent
of MAS (cf., Mintzberg 1990). Second, it explicitly considers TMT composition an antecedent of
MAS, thus extending models in which MAS is modeled as exogenous (cf., Mia and Chenhall
1994; Bouwens and Abernethy 2000; Ittner and Larcker 2001). In this way, the paper also
provides a more complete explanation of the contingency fit between MAS and strategy
implementation by using the mediation model of fit explicitly (cf., Gerdin and Greve 2004).
Third, we will explore the extent to which the MAS aspects we address are consistent with the
coercive-enabling framework recently introduced into the management accounting literature
(Ahrens and Chapman 2004).

The remainder of this paper is structured as follows. The next section develops a
theoretical model that combines individual hypotheses about the relationships between TMT
composition, MAS, and strategy implementation. The Method section describes and motivates
the design of the empirical survey study, conducted in all 218 general hospitals in Spain, to test
the hypotheses. The Results section presents the results from the statistical analyses of the
hypotheses for which we use partial least squares (PLS). The final section, Discussion and
Conclusions, presents the conclusions of this study, summarizes its strengths and weaknesses,
and points out directions for further research.


In their study of the strategy-MAS relationship in 63 public Australian hospitals,

Abernethy and Brownell (1999) analyze the effects of a match between top managers diagnostic
and interactive styles of using accounting budgets (cf., Burchell et al. 1980; Simons 1990;
Chapman 1997, 1998), and the organizations extent of strategic change. They conclude that
organizational performance is highest when a diagnostic use of budgets (i.e., using the budget to
monitor and control operational efficiency) is matched with low levels of strategic change, and
when an interactive use of budgets (i.e., using the budget to stimulate dialogue and continuous
learning) is matched with high levels of strategic change. These results are important for
understanding the performance effects of aligning the use of MAS with the extent of strategic
dynamism in an organization. As such, they can even suggest normative conclusions about the
way in which an organizations top management should use the MAS. However, because this
study modeled both strategic change and the use of MAS as exogenous variables, these results do
not explain why top management actually uses MAS in particular ways, nor how the use of MAS
is related to the strategic direction of the organization.

This study, and studies about the strategy-MAS relationship in which MAS is the
dependent variable (Gerdin and Greve 2004), thus provides little direct evidence on the role of
MAS in supporting the implementation of strategic policies once they are chosen (cf., Simons
1995, 2000), nor do they explain top managements role in using the MAS for this aim. The
present paper, while building on Abernethy and Brownells (1999) recognition of the importance
of style in which top management uses MAS, aims to extend their framework in several
directions. We elaborate on these directions in general terms now, after which we will develop
specific hypotheses.

Instead of Abernethy and Brownells (1999) focus on the use of budgets only, we address
MAS more broadly as the set of managerial instruments, part of the organizations planning and
control system, which are designed to provide top management with the information for their
decision making and control vis-a`-vis strategic policies (cf., Fisher 1992; Simons 1995;
Chenhall 2003). This acknowledges that managements repertoire for strategy implementation
extends beyond the use of the traditional budget. Consistent with extant research that suggests
the strategic relevance of several specific dimensions of the MAS, we extend the analysis of the
diagnostic and interactive styles of MAS use with an analysis of the use of financial and
nonfinancial MAS information (cf., Abernethy and Lillis 1995). This distinction corresponds to
the use of monetary versus operational metrics (Fisher 1992; Perera et al. 1997).

We also consider the extent to which top managers use MAS information for resource
allocation and for performance evaluation, which we regard as two central functions of every
MAS (cf., Kren and Liao 1988; Reck 2001; Zimmerman 2003).

The resource allocation function of MAS is defined as the distribution of monetary and
nonmonetary resources over decentralized units within the firm to enable managers to perform
the tasks in their area of responsibility (cf., Chenhall and Morris 1991; Meslin et al. 1997; Reck
2001). In a broad sense, it is the ex ante use of MAS for planning and coordination. Performance
evaluation, instead, relates to the monitoring and controlling of the achievement of goals and
targets preset for managers and their units (Kren and Liao 1988; Hartmann 2000; Reck 2001).
Thus, it reflects the ex post use of MAS for monitoring and control.

These three dimensions of MAS usediagnostic versus interactive style of use, use of
financial versus nonfinancial information, and use for resource allocation versus performance
evaluationare initially analyzed as separate variables. In a secondary analysis, we explore what
can be learned from treating them as elements of a second-order variable, coercive versus
enabling use of MAS (cf., Adler and Borys 1996; Ahrens and Chapman 2004).

A second extension of the previous framework concerns our interest in the role of MAS
for pursuing directional strategic objectives, rather than its alignment with a formal strategy as
such. We distinguish between the execution of strategic goals and policies aimed at cost
reduction, and strategic goals and policies related to increased flexibility, thereby following
classifications by Porter (1985) and Govindarajan (1988). In our analyses, however, we
acknowledge that these sets of policies and objectives may not be mutually exclusive, as in fact
contemporary organizations are more often pressed toward the implementation of strategic
policies that achieve cost efficiency and enhanced flexibility simultaneously (Ahrens and
Chapman 2004).

The third extension of the existing framework involves our modeling MAS as an
endogenous consequence of the top managers characteristics, answering to the critique about the
exogenous status of MAS in extant research (cf., Ittner and Larcker 2001; Hartmann and Moers
2003; Luft and Shields 2003). We use the upper echelon perspective to predict differences in the
way in which TMTs use MAS. The upper echelon perspective emphasizes that the cognitions,
values, and perceptions of the organizations TMT influence or determine the (strategic) behavior
and performance of organizations (Carpenter et al. 2004, 750). TMT member backgrounds, such
as education and functional experience, are considered observable proxies for underlying
psychological constructs that determine the way in which a TMT perceives the world and
processes informational cues (Hambrick and Mason 1984; Finkelstein and Hambrick 1996;
Carpenter et al. 2004). Education and experience thus explain why some TMTs are more familiar
with, or more knowledgeable about, certain courses of action than others (Song 1982; Michel
and Hambrick 1992), and why TMTs interpret and use available information differently
(Hambrick and Mason 1984, 195; Carpenter et al. 2004).
Several upper echelon studies have pointed to fundamental differences in behavior
between TMTs consisting of members with a background in general administration, such as in
economics, business, and law, and TMTs with members whose background is rooted in the
primary technical and professional processes of the organization, such as in engineering, physics,
and medicine (Benveniste 1987; Bacharach et al. 1991). We expect that this distinction may also
explain TMTs use of MAS, and the information contained therein, and will address it in terms of
TMTs with an administrative or a professional orientation. Specific hypotheses about the
relationships between TMT orientation, the use of MAS, and the implementation of strategic
objectives and policies are developed now.

TMT Orientation and the Use of MAS

The behavioral relevance of the professional or administrative orientation of individual

managers is recognized across the management literature (e.g., Daft 1982). Available evidence
suggests that this distinction has predictive power in MAS settings as well. Abernethy and
Stoelwinder (1990), for example, document the tension between professionals and administrators
in professional bureaucracies, and show that part of this tension is caused by the fact that
administrators show a higher preference for and use of formal controls than professionals. In a
study on TQM (total quality management) adoption, Young et al. (2001) found that managers
with an administrative background are more inclined to control system innovation than managers
with a professional background, as they appeared better able to perceive the advantages of
administrative innovation.

Since the upper echelon perspective concerns the organizations strategic behavior, it
proposes that managerial backgrounds should be analyzed at the level of the executive board, as
the collective responsible for the formation and implementation of strategies (Finkelstein and
Hambrick 1996; Mintzberg et al. 1998). By focusing on the TMT, the upper echelon perspective
emphasizes that differences between managerial orientations do not merely originate from
functional responsibilities, but instead are rooted in the cognitions, values, and perceptions that
are formed by education and experience (Carpenter et al. 2004, 750). For example, medical
education is shown to predispose managers toward emphasizing patient care and health
improvement, rather than toward the improvement of overall organizational or financial
performance (Carretero 2000; Kurunmaki 2004). MBA-type education, instead, is shown to
provide managers with mainstream mind-sets geared toward the commonalities and
regularities across organizations Finkelstein and Hambrick (1996, 104). Managers cognitive
make-up is also shaped by their work-related experiences (Song 1982; Michel and Hambrick
1992). Experience involves internalizing the tacit common knowledge of the organizations
production processes (Hambrick and Mason 1984; Athanassiou and Nigh 1999), which happens
over time through experience with, and feedback from, the organizations primary routines and
the human actors therein (e.g., Mc-Dermott 1999, 110). Together, the education and experience
of its members cause TMTs to adopt a more professional or administrative orientation in
(strategic) management. TMTs consisting of members with such professional experience and
education appear to be more interested in, and knowledgeable about, the primary processes of the
organization (Benveniste 1987, 33; Bacharach et al. 1991). Professional experience and
education also provide them with the skills and inclination to be operationally involved in the
organizations core operational activities (Henke et al. 1993). TMTs consisting of managers with
dominant administrative backgrounds are characterized instead by their knowledge of the
organizations general and financial management rather than the specifics of the operating core
(Benveniste 1987). We propose that these distinctive orientations also affect TMTs use of MAS.

Regarding the first aspect of MAS, we expect that the professionalism of TMTs is
positively related to the interactive use of MAS, and negatively related to the diagnostic use of
MAS. This expectation is based on both the general management style that professional and
administrative TMTs display, and the role MAS information plays in managerial decision making
and control. Regarding the former, Sheldon (1971), for example, demonstrates how professionals
tend to identify with other professionals, regard them as referent groups, and talk the same
language. TMTs with a dominant professional orientation have a larger understanding of the
production process, and will therefore be inclined to offer more autonomy and participation to
professional colleagues at lower hierarchical levels in establishing working goals (cf., Bacharach
et al. 1991). Abernethy and Lillis (2001, 113) claim, in a hospital setting, that professionals
typically resist obtrusive accountability mechanisms and suggest that the gap between the
required accountability and professional autonomy may be bridged by using the accounting
system to provide accountability about professional results.
Abernethy and Vagnoni (2004) showed, that professional managers indeed used the
accounting system to cope with the role conflict between their medical (professional) and
managerial (administrative) roles. In particular, professionals used the accounting system for
communication and dialogue with their professional peers, rather than in a traditional, cost-
oriented way (Abernethy and Vagnoni 2004, 219). In combination, these arguments suggest that
professionals will use the MAS not for mere top-down control, but as a device to stimulate
accountability, coordination, and motivation, which are constitutive elements of interactive
control (Simons 1995, 2000).

Administrative TMTs, instead, are more confident with, and more inclined to rely on,
distant and financial controls when managing the organization (Song 1982; Finkelstein and
Hambrick 1996). These controls require less specific knowledge and information on the specifics
of the primary process, and emphasize the measurement of performance against preset targets
(see, e.g., Baysinger and Hoskisson 1990). This aligns with a more diagnostic use of MAS
(Simons 1995, 2000). In sum, therefore, we formulate the following hypotheses:

H1: The level of professionalism in the TMT is (a) positively related to the interactive use
of MAS and (b) negatively related to the diagnostic use of MAS.

We expect that the distinction between professional and administrative orientation of

TMTs also affects the extent to which they will use the MAS as a source of primarily financial or
nonfinancial information. Although the MAS, in principle, provides each TMT and its individual
members with the same information, the actual selection and use of MAS information is likely to
be determined by personal preferences, which in turn are determined by cognitive, affective and
knowledge-related factors. Cognitive accounting research, for example, demonstrates the effect
of cognitive style on the use of opportunity cost information (see, e.g., Chenhall and Morris
1991), and the preference for financial and quantitative information (Hartmann 2005). Jones and
Dewing (1997) studied the resistance of health care managers toward a MAS change that
involved more reliance on financial information, finding that professionals opposed the dominant
use of financial controls. This is in conformity with our earlier arguments regarding the
familiarity of professional TMTs with the core operational processes of the organization. As a
consequence, we expect that they will emphasize information from the MAS that supports their
interest in, and emphasis on, processual, operational aspects (e.g., Sheldon 1971; Bacharach et al.
1991; Abernethy and Vagnoni 2004), as conveyed through nonfinancial information. Instead,
TMTs with an administrative orientation will be more confident with, and inclined to, the use of
financial, rather than nonfinancial, information, since this type of information aligns with their
general, administrative view of organizations (cf., Song 1982; Benveniste 1987; Finkelstein and
Hambrick 1996). In sum, therefore, we formulate the following hypotheses.

H2: The level of professionalism in the TMT is (a) positively related to the use of
nonfinancial MAS information and (b) negatively related to the use of financial MAS

Finally, we address the more exploratory question of whether TMTs with a professional
orientation differ from TMTs with an administrative orientation in the importance they attach to
the planning and control functions of MAS (cf., Kren and Liao 1988; Meslin et al. 1997; Reck
2001). As briefly discussed before, we distinguish between two such functionsresource
allocation and performance evaluationthat reflect two phases of the control cycle. Resource
allocation reflects the use of the MAS for decision making about the distribution of resources
among organizational units. This typically occurs at the planning phase of the control cycle, such
as when preparing the yearly budget (e.g., Fisher et al. 2002), but also with capital budgeting
(e.g., Chenhall and Morris 1991). Performance evaluation reflects the use of MAS for measuring
and evaluating managerial and unit goal achievement. This typically occurs at the evaluation
phase of the control cycle, when comparing budgetary with actual numbers (cf., Reed 1986;
Reck 2001; Abernethy and Vagnoni 2004).

Although MAS may typically support both kinds of functions (cf., Zimmerman 2003), we
expect that the importance attached to the MAS for resource allocation decisions and for
performance evaluation decisions may differ between managers (cf., Armstrong 1987; Chenhall
and Morris 1991; Chenhall 2003). Armstrong (1987), for example, found that managers with
education and experience in finance and accounting were inclined toward the detailed control of
outcomes of activities and processes. At the executive level, Bacharach et al. (1991) argued that
professional TMTs are inclined to attach the highest importance to information that supports the
effective organization of tasks and resources consistent with the needs of the production flow.
They may also pay less attention to MAS role in performance evaluation in the form of top-
down control of goal achievement, as they rely more on the self-control of subordinates or
interactive control (cf., Benveniste 1987). \

Overall, this suggests that professional TMTs emphasize the resource allocation role of
MAS. However, Coombs (1987) analyzed the use of the MAS by doctors, and found that doctor-
managers (professionals), who were expected to show a primary interest in the allocation of
funds to operations (i.e., resource allocation), were increasingly integrating their professional and
administrative roles. This suggests a more balanced role for the MAS for both resource allocation
and performance evaluation than would follow from the upper echelon perspective alone. This
finding also aligns with the recent finding by Abernethy and Vagnoni (2004, 219) that the formal
delegation of authority to physicians enhanced their use of the MAS for decision management
and decision control. Since evidence is limited, and we cannot predict which of these opposing
arguments is stronger, we propose to formulate the following hypothesis in the exploratory null-

H3: The level of professionalism in the TMT is (a) not related to the importance attached
to the performance evaluation function of MAS, (b) nor to the importance attached to the
resource allocation function of MAS.

In this section we formulate predictions on the relationship between strategy

implementation and the three characteristics of MAS that we explore. We analyze the
implementation of strategic policies and objectives that aim at cost reduction and at flexibility
enhancement respectively, thereby adopting the dichotomy that underlies the majority of studies
looking at the MAS-strategy relationship (see, e.g., Fiegener 1994; Perera et al. 1997; Chenhall
and Langfield-Smith 1998; Bouwens and Abernethy 2000). We do not make the assumption that
organizations can pursue only one set of strategic objectives at any given time, however, as cost-
related and flexibility-related goals may in fact be complementary rather than mutually exclusive
(cf., Porter 1985; Govindarajan 1988; Simons 1990; Nilsson and Rapp 1999; Carretero 2000;
Ahrens and Chapman 2004). Although we further acknowledge that the implementation of any
set of strategic policies may require some level of MAS sophistication (cf., Abernethy and
Brownell 1999), we expect, consistent with the extant MAS-strategy literature, that the MAS
characteristics that support the achievement of cost reduction goals may differ from the MAS
characteristics that support the achievement of the goals related to flexibility enhancement.
MAS studies suggest that the successful adoption of flexibility strategies requires a
combination of coordination, autonomy and decentralization within the organization (e.g,
Bouwens and Abernethy 2000), and a control system that allows and stimulates fluent working
relationships between hierarchical levels (Lopez 1999) and organizational functions (Abernethy
and Lillis 1995). Flexibility strategy implementation will thus benefit from the combination of
coordination and continuous learning that is encouraged by discussion and interaction in the
organization (Mintzberg 1990). These characteristics all correspond with an interactive style of
using MAS (Storey 1985; Simons 1995, 2000). In contrast, the implementation of cost strategy
policies and objectives seems to benefit more from centralized decision making and control, in
which work rules are transmitted through prescriptive guidance and tight control (Porter 1985;
Langfield-Smith 1997). Porter (1985) strongly argues that cost strategies emphasize solving
existing problems by optimizing current production, rather than searching for new products or
services. Thus, cost strategies tend to emphasize current rather than new structures (Porter 1985,
73). We expect that the diagnostic style of using MAS, which involves the monitoring and
controlling efficiency of prescribed tasks, will support this latter emphasis (Simons 1995, 2000).

Flexibility strategy implementation requires product customization rather than

standardization (e.g., Miles and Snow 1978; Porter 1985), and customization causes relationships
between inputs and outputs of production tasks to be unclear. This reduces the possibilities for
establishing a priori optimality of input-output ratios (cf., Thompson 1967; Galbraith 1973).
Under such conditions, the establishment and measurement of efficiency and effectiveness
requires an extended set of performance measures that provide more insight in the various parts
of transformation processes (cf., Abernethy and Lillis 1995). This suggests that operational,
nonfinancial information will be more consistent with, and useful for pursuing flexibility and
customization priorities, than information reported in the aggregated format of financial
indicators (cf., Fisher 1992; Simons 1995, 2000). Empirical evidence provides support for this
line of argumentation. Abernethy and Lillis (1995), for example, found a negative association
between the use of financial information and strategies based on manufacturing flexibility. Perera
et al. (1997) found that organizations with a customer-oriented strategy use more nonfinancial
and operational information for management control. Both Carr et al. (1997) and Ittner and
Larcker (1995) found empirical evidence for a relationship between quality strategies (based on
International Standards Organization [ISO] and TQM respectively), and an increased use of
nonfinancial information that expresses physical measurements. In contrast, cost reduction
strategies assume and require standardization and comparability of products and activities (Porter
1985), which demands the use of generic financial information. Financial information that
expresses cost control objectives in monetary terms enables standardization and
comparisonacross organizational functions (cf., Fisher 1992; Reck 2001).

Finally, since implementation of a flexibility strategy requires cross-functional interaction

and cross-functional responsiveness to specific customer demands (cf., Bouwens and Abernethy
2000), the MAS should support interdepartmental planning and coordination more than
intradepartmental performance control (Bouwens and Abernethy 2000). Lopez (1999) argues
that this requires managing information from interdependent departments directed at improving
workflows, prioritizing tasks, and optimizing resource consumption. This means that relatively
more importance should be attached to the resource allocation function of MAS, as this function
aims at the ex ante allocation of resources to different departments in appropriate levels and in
balance with overall organizational goals (cf., Cuervo 1996; Carretero 2000; Golden et al. 2000;
Reck 2001). In contrast, the use of MAS for performance evaluation focuses on ex post
monitoring and (top-down) control and clear specification of how performance is to be
improved. This is the traditional performance evaluation function of MAS, which stresses the
measurement and evaluation of unit performance rather than communicating operational
decisions (Morissette 1998; Reck 2001). Several authors have argued that the use of MAS for
performance evaluation fits cost strategy implementation, through emphasizing the efficiency of
units and services of the organization (e.g., Porter 1985; Cuervo 1996; Nilsson and Rapp 1999).
In sum, therefore, we propose the following set of hypotheses:

H4: Flexibility strategy implementation is positively affected by (a) the interactive use of
MAS, (b) the use of nonfinancial MAS information, and (c) the use of MAS for resource
allocation decisions.

H5: Cost strategy implementation is positively affected by (a) the diagnostic use of MAS,
(b) the use of financial MAS information, and (c) the use of MAS for performance evaluation.
TMT Composition and Strategy Implementation

The hypotheses above express our expectations about mediating effects of MAS on the
relationship between TMT orientation and the pursuit of strategic objectives. The upper echelon
literature, however, typically investigates direct relationships between TMT composition and
strategic decisions or the achievement of strategic objectives (e.g., Song 1982; Bantel and
Jackson 1989; Finkelstein and Hambrick 1996; Carpenter et al. 2004). Thomas et al. (1991), for
example, found that prospector firms were more likely to be led by managers with backgrounds
in output related functions (i.e., product research and development), while defender firms had
a significantly greater proportion of managers with backgrounds in throughput related
functions (i.e., finance). Song (1982) investigated two types of diversification strategies, and
showed that the financial and legal background of TMTs is associated with diversification
through profitable acquisition, whereas an internal production background is associated with
internal diversification strategies, which involved exploitation of synergies between existing
business lines. Hitt and Tyler (1991) found that the type of academic degrees managers held
affected their strategic decision making. TMTs with a dominant background in business and law
appeared more oriented toward organizational control and efficiency (Bacharach et al. 1991; Hitt
and Tyler 1991), whereas backgrounds in science and medicine were associated with innovation,
inventions, and strategic change (cf., Wiersema and Bantel 1992). Govindarajan (1989) found
that managerial experience in research and development (e.g., internal and technical experience)
contributed to effectiveness of strategic business units pursuing a differentiation strategy.
Although these TMT characteristics may affect strategy through the use of MAS, as our first set
of hypotheses acknowledge, we must take into account that there may be direct effects or effects
which are not MAS related. As the studies mentioned used various strategic perspectives, it is
difficult to summarize them into any straightforward prediction for the sets of strategic objectives
that we investigate. However, in combination these studies provide some suggestion that TMTs
with a dominant experience in the internal (i.e., technical and operational) processes of the
organization tend to be more inclined toward improving the content of processes (cf., Thomas et
al. 1991; Finkelstein and Hambrick 1996). In contrast, TMTs with a dominant experience in the
externally oriented processes of the organization (i.e., business and general management; cf.,
Song [1982]) are more inclined toward improving processes in general, financial, terms.
Therefore, we formulate the following hypotheses:
H6: The level of professionalism in the TMT is (a) positively related to flexibility
strategy implementation and (b) negatively related to cost strategy implementation.

The overall model, containing the hypotheses, is depicted in Figure 1.

TMT Composition, Enabling, and Coercive Use of MAS and Strategy

In addition to the separate hypotheses about individual aspects of MAS presented above,
we propose to explore the three sets of MAS aspects in combination. We chose to use the general
framework of coercive and enabling use of MAS, which has recently been introduced into the
management accounting literature by Ahrens and Chapman (2004), following the typology
developed by Adler and Borys (1996).1 Using case evidence, Ahrens and Chapman (2004)
illustrate how the coercive-enabling classification helps to describe how organizations balance
mechanistic and organic controls in the simultaneous pursuit of efficiency and flexibility (Ahrens
and Chapman 2004, 277). This type of analysis complements traditional MAS studies that have
addressed mechanistic and organic control as distinct and stable archetypes (e.g., Chenhall and
Morris 1995).

The enabling and coercive dimensions have not been operationalized for the
methodology applied in the present study, but according to the available definition of the
coercive use of MAS, which intends to apply top-down control and emphasizes centralization
and planning (see Ahrens and Chapman 2004, 271), we propose that the diagnostic use of MAS,
the use of financial MAS information, and the use of MAS for performance evaluation are
control elements that contain considerable similarity with the coercive use of MAS, as that refers
to more typical top-down management that focuses on central control, emphasizes its role in
performance evaluation, and uses preset financial standards (cf., Adler and Borys 1996, 7074;
Ahrens and Chapman 2004, 273).

Consistent with the definition of the enabling use of MAS, as an instrument to empower
employees to deal with uncertainties and to apply self-control (cf., Ahrens and Chapman 2004,
271), we propose that this resembles a combination of the interactive use of MAS, the use of
nonfinancial MAS information, and a dominant use of MAS for resource allocation decisions, as
this expresses a management style which seeks the delegation and participation of employees,
focuses on helping subordinates establish improvement opportunities for the processes under
their responsibility, emphasizes the use of operational measures, and de-emphasizes target-based
performance control (cf., Adler and Borys 1996, 7074; Ahrens and Chapman 2004, 279281).
Based on the argumentation presented earlier for the directional hypotheses, we have reason to
believe that the enabling (coercive) use of MAS will be primarily associated with professional
(administrative) TMTs. However, the correspondence between the individual MAS elements and
the enabling-coercive framework is likely to be less than perfect. Thus, to express the
exploratory nature of the analysis of these relationships, and given the lack of previous cross-
sectional evidence, we formulate the associated hypothesis in the null form:

H7: The level of professionalism in the TMT is (a) not related to the enabling use of
MAS, (b) nor to the coercive use of MAS.

Since a strategy focused on flexibility enhancement is customer oriented, and emphasizes

innovation, it requires control systems that facilitate product customization rather than
standardization (e.g., Abernethy and Lillis 1995), which may be supported better by the control
elements that make up the enabling use of the MAS, as argued before in the analysis of
individual MAS aspects. Ahrens and Chapman (2004), however, point to the more important role
of an enabling use of MAS for managing innovation and decentralization, and for balancing
objectives of efficiency and flexibility. This suggests that enabling use of MAS, in contrast with
the coercive or classical top-down role of MAS, may contribute both to strategic objectives
aimed at flexibility enhancement and cost reduction. In contrast, we expect that the coercive use
of MAS, which emphasizes top-down control and the evaluation of performance against preset
standards (Porter 1985), will primarily be able to support the adoption of strategic goals and
policies aimed at cost reduction, as centralized decision making and control is better facilitated
with monitoring and standardization. Also here, however, we prefer to formulate the associated
hypotheses in the exploratory null form, because of lack of previous evidence:

H8: Flexibility strategy implementation is (a) not affected by the enabling use of MAS,
(b) nor by the coercive use of MAS.

H9: Cost strategy implementation is (a) not affected by the enabling use of MAS, (b)or
by the coercive use of MAS.

Data were gathered with a written questionnaire that we distributed among the 884 TMT
members of all 218 public hospitals in Spain. We selected this specific setting for four reasons.
First, given the complexity of the variables and relationships in our model, we decided to focus
on a single industry, controlling for variables of no theoretical interest to the study, and thus
attempting to reduce noise in measurement and analyses. Second, the medical sector has been the
object of empirical study in several previous contingency studies that explored the organizational
and strategic roles of MAS, thus providing the present study with the empirical benchmarks (see,
e.g., Abernethy and Brownell 1999; Abernethy and Lillis 2001). Third, the medical industry
across the Western world is currently involved in processes of serious strategic and managerial
reorientation (Carretero 2000; Peirce 2000; Abernethy and Lillis 2001; Kurunmaki 2004).

In Spain, these developments have resulted in formal legislation that spurs hospitals to
pursue strategic goals expressed in enhanced cost efficiency and flexibility simultaneously,
which provided the context appropriate to the research questions (see, e.g., Cuervo 1996,
Naranjo-Gil and Hartmann 2004).2 Moreover, although these developments in the medical
industry were themselves not the object of the present study, it assured us that the topic of our
study would be considered relevant and salient by respondents, with positive expected
onsequences for respondents willingness to cooperate, the perceived relevance of the constructs
measured, and the validity of construct measurement. These expectations were supported in an
initial pilot-study conducted in a subset of the sample (cf., Abernethy and rownell 1999; see
Appendix A). We used the Spanish National Catalogue of Hospitals to obtain a list of all 218
public hospitals and developed a list of 884 TMT members from this catalogue, supported by
information from Internet and telephone calls to hospitals (cf., Naranjo-Gil 2003).3 The written
questionnaire was composed, distributed, and recollected using procedures recommended by
Dillman (2000). First, based on the extant literature, we selected instruments for the constructs
(see below), and created a draft version of the entire questionnaire. Second, we tested this draft
version of the questionnaire in 18 interviews with members of the target population, and made
small adaptations based on the comments received.4 Third, we chose an attractive layout for the
questionnaire, assuring good quality of paper and printing, a professional overall impression, and
the clear association with the two universities sponsoring the study. Fourth, the distribution and
recollection procedures involved sending (1) a prenotice letter announcing the survey; and
subsequently (2) the survey package containing the survey, a cover letter, a prepaid self-
addressed envelope, and a pen with the names of the two universities carrying out the project,
and (3) a follow-up letter to all respondents, reminding them of the survey and the importance of
participating. Three weeks later (4) a second copy of the survey was sent to nonrespondents.
Finally, (5) two weeks later contact was made by phone to all nonrespondents, who were
personally invited to respond to the questionnaire. All initial and follow-up letters contained
handwritten signatures, and were personalized for names and addresses.

A satisfactory response rate was achieved with 496 (56.10 percent) questionnaires
returned of which 473 (53.51 percent) were deemed useful for further analysis. From these data,
92 complete TMTs were formed for which all members had responded. The remainder of the
responses were discarded for the analyses of hypotheses, but were included for the validity and
response-bias tests.

Measurement of variables

Appendix B contains a full overview of the questionnaire and the results of the factor
analyses. Professional versus administrative TMT background was measured with factual
questions about managers years of educational and functional experience in the professional
(clinical) field and the administrative (general management) field (cf., Hambrick and Mason
1984; Bantel and Jackson 1989; Hambrick et al. 1996).5 From the individual scores, two TMT
variables were constructed. An ordinal variable TMT background was constructed as the ratio of
the average individual scores for years of professional background to the total number of years of
professional and administrative background.6 A dichotomous, variable, professional TMT, versus
administrative TMT, was constructed based on whether the majority of TMT members had a
professional or administrative background.7 Thus, the final variable scores accounted for all
years of professional or administrative background in the TMT and corrected for TMT size.

The MAS characteristics were measured as follows. The diagnostic and interactive styles
of MAS use were measured using a Likert-type instrument from Abernethy and Brownell (1999),
which we adapted to the specific setting.8 Ten items reflected the main features of an interactive
or diagnostic use of MAS (Simons 1995; Bisbe and Otley 2004). Exploratory factor analysis
revealed two factors, with all items loading higher than 0.50 on the expected factor. The
interactive style factor explained 31.36 percent of variance, and had a Cronbach alpha of 0.81.
The diagnostic style factor explained 27.39 percent of variance, and had a Cronbach alpha of
0.75. Both alphas thus exceeded the recommended 0.70 level (Nunnally 1978; Hair et al. 1998).

The use of (non) financial information was measured with a Likert-type instrument
adapted from Abernethy and Lillis (1995) and Perera et al. (1997). The ten information items
listed in the question corresponded with measures commonly reported by hospitals through the
Spanish Inter-Hospital Information System,9 which ensured that respondents were familiar with
the type of information and its potential use. The exploratory factor analysis revealed that all
items loaded higher than 0.50 on the expected factor. The nonfinancial information factor
explained 28.30 percent of variance and had a Cronbach alpha of 0.77. The financial information
factor explained 24.32 percent of variance and had a Cronbach alpha of 0.70.

The variables expressing the purpose of MAS use, resource allocation and performance
evaluation, were measured following the logic applied in the instruments used by Reed (1986)
and Reck (2001). Respondents were offered two (not mutually exclusive) descriptions, one for
each type of decision, and were asked to indicate on a five-point Likert-type scale the extent to
which they used the MAS, and the (non)financial information contained therein, for these
purposes. Cronbach alphas were 0.79 and 0.78 respectively.

The coercive and enabling uses of MAS were constructed as formative second-order
variables formed by the items used in the first-order MAS characteristics. As further explained
below, we used PLS-Graph (version 3.00) for our analysis. Thus, the enabling use of MAS is
formed by the items used for measuring the interactive use of MAS, the use of nonfinancial
MAS information, and the use of MAS for resource allocation. The coercive use of MAS is
formed by all items used for measuring the diagnostic use of MAS, the use of financial MAS
information, and the use of MAS for performance evaluation.

The implementation of strategic goals related to cost reduction and quality improvement
was measured with a nine-item, Likert-type instrument that was based on the instrument used by
Gupta and Govindarajan (1984) and Govindarajan (1988). We adapted the instrument to the
context, by assuring that the selected items were explicitly stated in the new strategic
governmental policy documents.11 Respondents were asked to indicate the extent to which these
sets of strategic policies and goals were implemented in their hospital. The exploratory factor
analysis revealed two factors, explaining 31.24 percent and 24.98 percent of variance
respectively, and Cronbach alphas of 0.71 and 0.76. One item did not exceed the 0.50 loading
criterion, and was discarded for further analysis.12 Two control variables were included. The
first is hospital size, which was measured by the number of beds (cf., Errasti 1997; Abernethy
and Lillis 2001). The second was a dummy variable for governmental dependency of

The test for potential nonresponse bias involved comparing survey respondents to the
original mailing list, comparing early and late respondents, and comparing respondents used for
TMT formation with other respondents (cf., Pedhazur and Pedhazur 1991; Roberts 1999). Chi-
squared tests and independent-samples t-tests on various characteristics, size of hospitals,
governmental dependency, and type of directors, did not reveal any sign of non-response bias.


The hypotheses are tested using Partial Least Squares (PLS). Similar to covariance based
structural equation modeling techniques (e.g., LISREL, EQS), PLS is a second generation
statistical technique that allows testing causal models with multiple independent, mediating and
dependent variables with multiple indicators or measures per variable. Unlike covariance-based
structural models, PLS explains variance and resembles ordinary least squares regression with
regard to output (Barclay et al. 1995). PLS allows smaller sample sizes than covariance-based
models. PLS does not report on the fit of the whole model (see Chin 1998), and thus overcomes
some of the theoretical and estimation problems associated with the use of covariance-based
models (see, e.g., Hulland 1999).

Before designing and testing the comprehensive model, a preliminary data analysis was
done to establish the appropriateness of the causal model (see Tables 1 and 2), following
recommendations by Hair et al. (1998, 600). We calculated bivariate correlations for the various
relationships proposed, using the variable scores based on the average item scores for the Likert-
type instruments. For hypotheses concerning TMT-MAS relationships, we tested for differences
of means between paired characteristics of MAS for the two subgroups, professional versus
administrative, that were based on the dichotomous TMT background variable score. Descriptive
statistics for the constructs are reported in Table 1. The results of the bivariate correlation
analyses are reported in Table 2. The results of the paired-samples t-test are depicted in Table 3.

The analyses in Tables 2 and 3 provide preliminary support for hypotheses H1a and H1b,
which predict that the level of professionalism in the TMT is positively related to the interactive
use of MAS and negatively related to the diagnostic use of MAS. Table 2 also shows support for
H2a and H2b, which predict that the level of professionalism in the TMT is positively related to
the use of nonfinancial MAS information and negatively related to the use of financial MAS
information. Table 2 shows support for H3a and H3b, which predict that the level of
professionalism of the TMT is not related to the use of MAS for performance evaluation, nor to
the use of MAS for resource allocation. Regarding the relationships between MAS use and the
adoption of strategic objectives and policies, preliminary support was found for hypotheses 4 and
5. The results of the t-tests between MAS scores for TMTs classified as either administrative or
professional, reported in Table 3, largely support the correlation findings, except for insignificant
differences between performance evaluation and resource allocation for the professional
subgroup, and use of financial and nonfinancial information for the administrative subgroup.
Table 2 further shows a positive relationship between the implementation of a flexibility strategy
and the interactive use of MAS, the use of nonfinancial MAS information, and the use of MAS
for resource allocation. Table 2 also shows a positive relationship between the implementation of
a cost strategy and the diagnostic use of MAS, the use of financial MAS information, and the use
of MAS for performance evaluation. Regarding the relationship between the level of
professionalism in the TMT and strategy implementation, only partial support was found for H6:
the level of professionalism in the TMT is positively related to both flexibility strategy
implementation and cost strategy implementation. Figure 2 displays the full PLS model tested
and reports on the standardized s and the R2 results from this analysis.14 In testing the model,
we use the manifest item scores for all variables, except for TMT background. Table 4 contains a
detailed analysis of the structural path coefficients and reports on the significance of these
coefficients, based on a bootstrapping procedure using 500 samples with replacement.15
Appendix B reports on the results for the measurement model. The PLS analysis confirms the
preliminary analyses of reliability and unidimensionality of the variables, with high composite
reliability of the latent variables (see Appendix B, Table B2) and with general loadings of
manifest variables on latent variables exceeding 0.60. We demonstrate discriminant validity of
the measurement model by comparing Average Variance Extracted (AVE, see Appendix B, Table
B2) with squared correlations between constructs (Table 2, cf., Fornell and Larcker 1981).16

The results in Table 4 show support for the expected positive relationship between
professionalism of TMTs and the interactive use of MAS, and the expected negative relation
between professionalism and the diagnostic use of MAS (H1a and H1b). Support was also found
for the expected relationships between TMT professionalism and the use of financial and
nonfinancial information (H2a and H2b). Table 4 shows that H3a and H3b cannot be rejected,
since the relationships between TMT orientation and the use of MAS for resource allocation or
performance evaluation are both insignificant. This suggests that TMT composition has no effect
on the perceived importance of the two roles of MAS. Regarding the relationships between MAS
characteristics and strategy implementation, results in Table 4 show support for H4, since there
are positive relationships between flexibility strategy implementation and the interactive use of
MAS, the use of nonfinancial MAS information, and the use of MAS for resource allocation
decisions. Table 4 also shows that the use of financial MAS information positively affects
flexibility strategy implementation. Regarding cost strategy implementation, Table 4 shows
positive effects of the use of financial MAS information (cf., H5b) and the use of performance
evaluation (cf., H5c) on cost strategy implementation. However no support was found for H5a,
since cost strategy implementation appears to be unrelated to the diagnostic use of MAS. Results
in Table 4 additionally suggest that cost strategy implementation is positively related to the
interactive use of MAS as well as to the use of MAS for resource allocation decisions, and
negatively related to the use of nonfinancial MAS information.

Regarding the relationship between professionalism of TMTs and strategy

implementation, partial support was found for Hypothesis 6, since the path coefficient between
professionalism of TMTs and flexibility strategy implementation is positive and significant.
However, no support was found for the relationship between the level of professionalism in the
TMT and cost strategy implementation, since the path coefficient is not significant, and even in a
direction opposite to our expectation. Overall, the results are largely consistent with the
correlation statistics.
For the secondary analyses, in which the MAS factors are studied as elements of the
coercive and enabling dichotomy, we followed the procedure for constructing second-order
variables outlined by Yi and Davis (2003, 158160).17 The results of the PLS analysis of show
significant relationships between the enabling and coercive uses of MAS, and its first-order
factors (see Table 5). Regarding the relationships between TMT professionalism, the coercive
and enabling uses of MAS, and strategy implementation (cost and flexibility), 7 furthermore
shows a positive and significant relationship between cost strategy implementation and both the
enabling and coercive use of MAS (H9).

These analyses, however, also show some notable differences with the separate and
combined analyses of the sets of MAS characteristics. For example, we established a negative
relationship between the use of nonfinancial MAS information and cost strategy implementation
in our separate analyses, but find a positive relationship when nonfinancial information is
modeled as a part of the enabling use of MAS. Similarly, the negative associations of TMT
professionalism and both the use financial MAS information and the diagnostic use of MAS
disappear when both these aspects are analyzed as part of the larger coercive construct. Finally,
the positive association between the use of financial MAS information and flexibility strategy
implementation disappears when the use of financial MAS information is modeled as a part of
the coercive use of MAS. Below we will discuss the substantive implications of these findings.


This paper has explored the role of management accounting systems (MAS) in supporting
strategy implementation, and how this role was affected by TMT background. Consistent with
our general expectation, we found that TMT background does affect the use of MAS, and such
use subsequently affects strategy implementation. As TMTs have a more professional
(administrative) orientation, they make more interactive (diagnostic) use of MAS, and the use of
nonfinancial (financial) information. These results are consistent with our hypotheses and extend
earlier findings by Abernethy and Lillis (2001) and Abernethy and Vagnoni (2004), who found
that physicians in management positions tend to de-emphasize cost information. Although the
correlation analyses suggested that professional TMTs also use MAS more for resource
allocation decisions than for performance evaluation decisions, we did not find significant
relationships between the professionalism of TMTs and these different uses of MAS, when
testing the full causal model. One explanation for this lack of association may be that TMTs use
MAS as a complement to, rather than as an extension of, their experience and educational
background. As TMTs are confronted with both types of decisions, they may use the formal
control system, and therefore the MAS, especially for those decisions not connected with their
background. Professional TMTs, who are more confident with resource allocation decisions
relating to their lower level peers, will therefore need less support from the MAS for this
function. This effect may also explain why Abernethy and Stoelwinder (1990) found that
professional managers preferred informal controls for decision making. The use of MAS
appeared to have an effect on strategy implementation as expected, but the patterns are more
diverse than recognized in our hypotheses. For example, we found in addition to our expectations
that the use of financial MAS information is positively related to flexibility strategy
implementation, which suggests its importance regardless of the exact strategic objectives
pursued (cf., Govindarajan and Gupta 1985). Moreover, the use of nonfinancial MAS
information, the interactive use of MAS, and the use of MAS for resource allocation all seem to
support cost strategy implementation as well. In contrast with our expectation, we did not find a
positive relationship between the diagnostic use of MAS and cost strategy implementation. These
particular results are of interest for understanding the relationship between MAS and strategy,
but in the context of our overall model suggest that different TMTs may achieve similar
strategies through different uses of MAS. For example, more professional TMTs may contribute
to flexibility strategy implementation by emphasizing the nonfinancial information in the MAS,
whereas more administrative TMTs may emphasize the financial part of MAS for the same
purpose. MAS studies do not typically recognize these kinds of alternative paths, nor have they
been investigated in the upper echelon literature. Our findings suggest that the simultaneous
analysis of MAS antecedents and consequences is beneficial for understanding alternative views
on the MAS-strategy relationship.

The professional orientation also appears to be related to the implementation of strategic

objectives directly, as well as through the mediating effect of MAS. More professional TMTs are
more inclined to implement strategic goals focusing on flexibility rather than on cost. This latter
finding seems consistent with some earlier research in management, for example, that found that
managers with a research and development background were more effective in organizations
pursuing a differentiation strategy, than those with a low-cost strategy (Song 1982; Govindarajan
1989). This is also consistent with some upper echelon studies that typically study only these
direct effects (Finkelstein and Hambrick 1996; Carpenter et al. 2004).

Overall, the findings support the relevance of TMT backgrounds. More specifically, they
support the theoretical argument that professional TMTs are more oriented to use systems in a
flexible and adaptive way to manage organizations (Benveniste 1987; Simons 1995, 2000). In
contrast, administrative TMTs seem to be focused on classical top-down control, with less
involvement of subordinates.

We have analyzed MAS elements both individually and jointly. This provides some
insight into the elements of the MAS that covary, but also provides additional evidence on the
meaning of coercive and enabling beyond that of their constitutive dimensions. For example, the
differences between our first and second models might be reconciled if some TMTs use the
nonfinancial figures within the MAS diagnostically and the financial figures within the MAS
interactively. This would not necessarily be consistent with the upper echelon perspective, but at
least suggests that understanding the style in which management uses the MAS may require
more subtle rules than currently recognized (e.g., Abernethy and Brownell 1999). Moreover, our
results show that the use of more nonfinancial MAS information has a negative incremental
effect on cost strategy implementation when other MAS elements are held constant (Table 4), but
that it has a positive effect on cost strategy implementation insofar as it is part of a constellation
of MAS elements representing the enabling use of MAS (Table 7). In combination, these
findings suggest that there may be interactions between various aspects of MAS, and that the
same objectives, such as cost reduction, may be achieved in different ways, through different
patterns of emphasis on the multiple aspects of MAS use. This suggests that our understanding of
MAS composition may be enhanced by taking into account that various combinations of controls
may be applied for various purposes. Furthermore, these results suggest that different TMTs may
not only make different strategic choices, but may also choose different paths through which
similar strategic objectives are pursued. As it is, our combined enabling and coercive onceptions
of MAS have picked up shared variance among each of the underlying MAS aspects, but clearly
do not fully explain all variance in its indicators.

Regarding the relationships between the use of MAS and strategy implementation, the
findings show positive and significant relationships between the different characteristics of MAS
and strategy implementation. They demonstrate a positive and significant relationship between
the coercive use of MAS and cost strategy implementation. Additionally, they show positive and
significant relationships between the enabling use of MAS and both types of implemented
strategy. Although this does not fully align with our expectations, it seems to confirm the
arguments provided by Ahrens and Chapman (2004) who argue that the enabling use of MAS
supports organizations balancing of their flexibility and cost objectives. These results also
corroborate the findings of Abernethy and Lillis (1995, 2001) and Perera et al. (1997), about the
importance of stressing nonfinancial performance measures for flexibility strategies; they are
consistent with Simons (1995, 2000) arguments that an interactive style promotes search,
innovation, and coordination, and thus enables strategies with multiple goals (Simons 1995,
2000). Since our findings also support an effect of the coercive use of MAS on cost strategy
implementation, we conclude that different uses of MAS may affect different parts of an overall
strategy differently (Chenhall and Morris 1995). This is consistent with the assertion by Fiegener
(1994) and Milgrom and Roberts (1995) that control mechanisms may complement each other,
for example in tight-loose combinations, to support the strategic focus of the organization. The
lack of consistency between the first and second model may indicate that the combined
characteristics of MAS we used for measuring the enabling and coercive construct are not fully
representative of these constructs. Thus, the operationalization of these second-order constructs
clearly requires further work in future research.

As with any empirical study, this paper has its limitations. Some limitations are inherent
to the survey method, such as the use of perceptual measures, purposive sampling (Young 1996),
and the common-method bias (Podsakoff and Organ 1986). Limitations may also be found in the
lack of testing of the directions of causality due to the cross-sectional nature of the study, and in
the focus on a single industry. Although we believed that this industry is well suited to test our
expectations, it may contain idiosyncrasies that have been overlooked. Finally, we proposed that
the first-order MAS factors are appropriate proxies for the coercive-enabling dichotomy in the
present survey study, but this claim needs confirmation from further studies.

Several possible paths for further research exist, of which we mention three here. First,
TMT variables could be associated with other and different contingencies, such as power and
communication structures, which are not studied or controlled for in this study (e.g., Finkelstein
and Hambrick 1996). Second, the constructs central to this study could be defined and
operationalized in different ways (see Carpenter et al. 2004 for new directions on upper echelon
research). For example, TMT background could be defined and measured in alternative, more
detailed, ways that involve other factors than education and experience alone. Also additional
MAS dimensions can complement our classification of MAS, including a more detailed
description and measurement of the distinction between the coercive and enabling use of MAS.
Strategy was conceptualized according to Porters (1985) typology, but alternative definitions
exist (cf., Langfield-Smith 1997). Third, the linear contingency model explored here could be
replaced by models that express other forms of contingency fit, given a proper theoretical
foundation. In this study, we argued that TMTs display a direct preference for the use of MAS
that, subsequently, was expected to affect strategy implementation. This assumption supported
our linear, mediating models, but since our explanation does not account for all variance,
alternative models and contingency formats may be developed and tested.

In sum, however, we believe that the results of the empirical study reported in this paper
support the importance of MAS for strategy implementation, and suggest that managerial
background is an important influential factor. Furthermore, we believe that the upper echelon
perspective is useful to explain management accounting phenomena, as it provides an antecedent
of the use of MAS, which in turn affects strategy implementation (Hambrick and Mason 1984).
Finally, we believe that our study shows the usefulness of extending current contingency work
on the use of MAS for strategy implementation, by analyzing different aspects and
characteristics of MAS beyond the standard accounting budget.


Pilot Study

A pilot survey study was performed, and designed in two steps, a pretest and the design
of the questionnaire. The pretest was done in three stages, following Dillman (2000, 1) interview
rounds, (2) question formulation, and (3) pretests of draft versions of the questionnaire among
members of the target population. A total of 18 interviews were performed between November
2001 and January of 2002, in four general hospitals. We interviewed three full TMTs (five
members each) in the four hospitals. A total of four general managers, four medical directors,
three nursing directors, three administration directors and four financial directors were
interviewed. Through these interviews we collected ideas and comments for designing the study,
for writing the various letters (prenotice, cover and follow-up letters), and for measuring the

The questionnaire was pretested among six Spanish colleague members of the accounting
and organization department, including Ph.D. students and professors, some of them holding
positions in general management in the recent past. Several changes were made to the survey
instrument based on their comments. Then the questionnaire was pretested among four managers
in the health care sector (two from private hospitals, working as directors in public hospitals, one
ex-director in a public hospital, still working in the public hospital, and one manager from health
care central services). With all of them, the questionnaire was discussed in a face-to-face, one-
hour interview. We asked all of them about the wording and understandability of the individual
items, and the instruments. Respondents highlighted some confusing words. Most wording
problems were due to the original English wording. Careful attention was paid to add clarifying
words, rather than completely changing the item. Some minor problems with alignment and
layout were found as well. These included insufficient space for answers and misunderstanding
of answer locations. Based on the respondents suggestions, some directions and titles were
clarified. Additional wording was added to clarify where answers should be located.

The layout of the questionnaire was also developed following Dillman (2000). Steps were
taken to ensure the vehicle of deliveryin this case, cover letter, survey, and envelopewould
create a positive impression. The survey was printed on high quality paper and in booklet form
and limited to three A4 (210 297 mm) sheets folded, including the cover. The layout was
designed as a booklet to provide an easy and comfortable reading and answer of the questions,
which was framed to highlight response areas.