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Management
Environmental innovation accounting and
practices and control
systems
operational performance
The joint effects of management 1325
accounting and control systems and Received 18 January 2018

environmental training Revised 1 October 2018

Accepted 17 December 2018

Jacobo Gomez-Conde
Department of Accounting, Universidad Autonoma de Madrid, Madrid, Spain, and
Rogerio Joao Lunkes and Fabricia Silva Rosa
Federal University of Santa Catarina, Florianopolis, Brazil

Abstract
Purpose – The purpose of this paper is to analyze the effect of management accounting and control systems
(MACS) on environmental innovation practices and operational performance. Specifically, this study relies on
Simons’ levers of control (LOC) framework to investigate how managers implement environmental innovation
practices. This paper hypothesizes that a forward-looking use of MACS (i.e. interactive use) triggers the
implementation of environmental innovation practices, resulting in higher operational performance.
Furthermore, the authors argue that the monitoring role of MACS (i.e. diagnostic use) combined with
environmental training improves the effect of environmental innovation practices on operational performance.
Design/methodology/approach – Hypotheses are examined through a questionnaire survey. The
analyses are based on responses in an empirical study from 89 Brazilian hotels.
Findings – Empirical findings from a hierarchical moderated regression analysis support the
hypothesized links.
Originality/value – This study contributes to the environmental management and management
control literature by providing novel evidence on the roles MACS play in the field of sustainable
development. Based on the LOC framework, the authors shed light on the understanding of how
managers introduce and monitor environmental innovation practices, as well as also outlining the key
effects of environmental training in enabling the novel abilities of managers and employees to better
understand environmental data and identify novel potential environmentally friendly solutions in the
case of deviations. This paper also adds to Wijethilake et al. (2017), providing new empirical evidence on
how firms design, implement and use MACS that capture institutional pressures for sustainability from
multiple stakeholders.
Keywords Management accounting and control systems, Environmental innovation practices,
Environmental training, Operational performance, Levers of control
Paper type Research paper

1. Introduction
An emergent stream of research has paid attention to how environmental innovation practices
can play a key role in organizational performance (Li et al., 2017; Albort-Morant et al., 2016;
Fraj et al., 2015; Wagner, 2015; Henri and Journeault, 2010; Molina-Azorín et al., 2009).
Hotels generate environmental impacts in developing their activities, processes and services,
contributing to an increase in global warming and a depletion of natural resources.
Environmental issues are different from other issues due to the involvement of common-pool
Accounting, Auditing &
resources and the fact that no users can be excluded (Bowen et al., 2018). The overuse and Accountability Journal
misuse of environmental resources punishes all organizations and society (Hardin, 1968). Vol. 32 No. 5, 2019
pp. 1325-1357
Thus, environmental innovation practices have essential externalities since they can lead to a © Emerald Publishing Limited
0951-3574
cleaner and safer world (Berrone et al., 2013). Environmental innovations usually refer to the DOI 10.1108/AAAJ-01-2018-3327
AAAJ reduction of energy, emissions, waste or water (Arena et al., 2018). In the case of hotels, for
32,5 example, these practices include reusing towels, using refillable shampoo dispensers, linen-
reuse programs, room energy-saving sensors, wastewater treatment systems or using
graywater garden irrigation systems (Han et al., 2018; Ayuso, 2006). This focus on energy or
waste reduction is why many of these environmental innovations overlap with cost
efficiencies[1]. However, there are environmental alternatives to “normal” ones that do not
1326 involve these cost efficiencies, for example, the use of non-chemical cleaning, placing special
bins for various recyclable items in guest rooms and hotel lobbies, providing green foods and
beverages or installing electric car charging stations. Thus, compared with other practices, the
management of environmental innovation practices is riskier (i.e. uncertainty about customer
reactions) and demands greater financial commitment (Berrone et al., 2013). Moreover, in a
context where demands for sustainability are continually growing, competition for tourism
destinations is increasing and stakeholder pressures are forcing companies to be more
environmentally efficient and transparent (Wagner, 2015; Tingey-Holyoak, 2014; Rodrigue
et al., 2013; Karatzoglou and Spilani, 2010), management accounting and control systems
(MACS) can help firms achieve the potential benefits of environmental innovation practices
(Parker and Chung, 2018).
MACS offer useful information for planning, evaluation and decision making (Tessier
and Otley, 2012a; Widener, 2007; Merchant and Otley, 2006). Simons’ (2000, 1995) levers of
control (LOC) are control systems that work together to benefit the organization through
monitoring (via diagnostic use) and forward-looking use (via interactive use). MACS offer
data and evidence supporting the potential benefits of the implementation of environmental
practices and information for decision making that guarantees the positive effect of
these environmental practices on firm performance. The management of these sustainable
innovations is particularly risky since not only must the uncertainty of the market be
managed but also its effects on sustainability must be taken into account (Hansen et al.,
2009). Overall, the aim of this study is to use the LOC framework to analyze the antecedents
and consequences of the implementation of environmental innovation practices.
Our reasoning is as follows. Through an interactive use of MACS, managers scan the
environment and detect strategic uncertainties, such as environmental issues. Data and
information of MACS used interactively triggers the implementation of environmental
innovation practices. These environmental procedures could enhance operational performance
through cost reductions and/or sales increases. A diagnostic use could moderate this
relationship, measuring deviations and implementing potential environmental corrective
actions. However, only managers and employees that have undergone environmental training
are able to understand the data from a diagnostic use of MACS. Thus, we expect that
environmental innovation practices must be monitored with a diagnostic use of MACS, but this
is only effective in hotels that have implemented environmental training.
Following Henri and Journeault (2010, p. 64), “this stream of research is hindered by
insufficient empirical evidence and unexplored topics, the findings about eco-control remain
fragmented and disparate.” Melville (2010) and Bstieler et al. (2018) also claim that more
research is needed on how the use of MACS can shed light on environmental innovation and
organizational outcomes. Using data from a survey of 89 CEOs, CFOs and general managers
of Brazilian hotels, we performed two main OLS analyses. First, we tested the effect of the
interactive use of MACS on environmental innovation practices. Second, we performed a
three-way interaction analysis to test the moderator effects of the diagnostic use of MACS
and environmental training on the relationship between environmental innovation practices
and operational performance. Overall, the results support our theoretical model.
Our study contributes to the emerging literature on the links between management control
and environmental management. By empirically and theoretically including the use of MACS
within the LOC framework rather than their design, we shed light on the understanding of
how managers introduce and monitor environmental innovation practices. We also outline the Management
key effect of environmental training in creating novel abilities of managers and employees to accounting and
better understand environmental data and identify novel (i.e. no window-dressing) potential control
environmentally friendly solutions in the case of deviations. Our study is also motivated by
the paucity of research on the role of LOC in environmental practices. Although both spheres systems
have attracted significant interest among management researchers, there have been few
empirical research works expanding our understanding of how organizations internally 1327
decide to adopt environmental innovation practices. Several studies suggest that stakeholders
play an important role by applying pressure, but the question of how firms manage these
pressures internally are largely left unanswered (Wijethilake et al., 2017). Consequently,
managers lack guidance on how to appease external environmental pressures and introduce
environmental innovations, and how to monitor environmental innovations. The closest study
to ours is the one by Journeault et al. (2016), which analyzes the effect of diagnostic and
interactive uses on environmental innovation practices. They show that only interactive use
triggers these practices, while the effect of diagnostic use on eco-production practices is
non-significant. This is consistent with our theoretical model and results. We complement
their findings by proposing a different role for the diagnostic use of MACS. We provide novel
evidence of the moderating effect of the diagnostic use of MACS on the relationship between
environmental innovation practices and operational performance. We show that diagnostic
use does not have an effect on the adoption of these environmental practices, but rather, it has
a monitoring role at a subsequent stage. In particular, we find a negative impact on
operational performance in the absence of environmental training. This means that
environmental innovation by themselves do not lead to superior performance improvements.
Disseminating environmental knowledge throughout the entire firm encourages managers
and employees to search for optimal environmentally friendly solutions in the monitoring of
these environmental practices. Thus, we also extend the theoretical approach of Gond et al.
(2012), providing empirical evidence of how managers move from an interactive use to a
diagnostic use in the integration of sustainability. In doing so, we respond to the recent calls
by Arjaliès and Mundy (2013), Sundin and Brown (2017) or Wijethilake (2017) to offer insights
into the role of MACS in managing environmental practices, focusing on the use rather than
the existence of certain accounting mechanisms. By shedding light on how LOC show effects
on both the implementation (via interactive use) and monitoring (via diagnostic use) of
environmental innovation practices, our study aims to clarify a claim in the LOC framework
that has until now been underspecified.
We also make two additional contributions. First, we contribute to the current debate on
the drivers of environmental innovation practices (Arena et al., 2018; Parker and Chung,
2018; Zubeltzu-Jaka et al., 2018; Galbreath, 2010) by highlighting the importance of the use of
MACS. Second, we offer novel insights into a large emerging economy that is facing
significant environmental challenges which must be addressed by companies, such as the
Brazilian context.
The remainder of this study is organized as follows. The section titled “Theoretical
background” provides an overview of the approaches to using MACS, strategic responses,
and consequences for innovation, while the section “Hypotheses development” describes the
main hypotheses of this paper. “Methods and data” explains the research methods and
measurement of the constructs, while the findings are presented together with a discussion
in “Results and discussion.” Finally, “Conclusions” gives a summary.

2. Theoretical background
2.1 Approaches to using MACS
MACS are “formal, information-based routines and procedures managers use to maintain or
alter patterns in organizational activities” (Simons, 1995, p. 5). These formal procedures and
AAAJ routines usually comprise the budget, balanced scorecard, resource allocation, strategic
32,5 planning or performance measurement systems (Malagueño et al., 2018; Garcia Osma et al.,
2018; Bedford, 2015, Langevin and Mendoza, 2013). Additionally, MACS also encompass
environmental management accounting (EMA) systems (Phan et al., 2018; Schaltegger, 2018;
Guenther et al., 2016; Hörisch et al., 2015; Rodrigue et al., 2013; Ferreira et al., 2010; Henri and
Journeault, 2010; Burritt et al., 2002; Schaltegger and Burritt, 2000). In addition to other
1328 information, these integrated systems contain financial and non-financial as well as
short-term and long-term information on the business environment, physical measures of
health and safety, data regarding stakeholders’ claims, information on energy and material
flows, environmental impacts of logistics, or information on the technical feasibility and
environmental impacts of new services (Parker and Chung, 2018; Jasch, 2009; Burritt et al.,
2002; Schaltegger et al., 2001)[2]. This is why Malmi and Brown (2008) refer to MACS as a
package, due to MACS not operating in isolation as they are usually a set of interrelated
controls. Following Appuhami (2017), in this study we also viewed MACS as an integrated
system that includes multidimensional indicators to aid managers in implementing and
evaluating organizational strategies (Melville, 2010). In this way, Simons’ (1995) LOC
disentangle how MACS can, on the one hand, help to implement strategies (via interactive
use) and, on the other, evaluate them (via diagnostic use) (Bedford, 2015; Moulang, 2015;
Naranjo-Gil and Hartmann, 2007). Underlying this duality is the idea of opposing forces
such as experimentation and efficiency or empowerment and accountability (Tessier and
Otley, 2012a, b; Simons, 1995). Although the interactive/diagnostic duality is equivalent to
some other approaches (Chenhall and Moers, 2015) such as enabling/coercive (Ahrens and
Chapman, 2004), flexible/inflexible (Hopwood, 1972), planned/emergent (Lewis et al., 2002),
feedback/feed-forward (Grafton et al., 2010) or mechanistic/organic (Ylinen and Gullkvist,
2014), it is the dominant framework in the recent literature (Kruis et al., 2016; Grafton et al.,
2010). Moreover, the LOC approach explicitly associates the role of the use of MACS with
aiding managers in formulating, implementing and evaluating innovations (Bedford et al.,
2019; Chenhall and Moers, 2015).
Bisbe et al. (2007, p. 797) defined an interactive use of MACS via five features: high
intensive use by top operating managers; intensive use by operating managers; a high level
of face-to-face discussions, challenges and debates; (iv) a strong focus on strategic
uncertainties; and non-invasive, highly inspirational involvement. Thus, the interactive use
of MACS fosters opportunity-seeking behavior, focuses attention, drives and improves
dialogue between employees, and encourages innovative approaches in dealing with
strategic uncertainties (Bisbe et al., 2007; Simons, 1995). The diagnostic use of MACS
involves the monitoring of organizational outcomes, detecting deviations and correcting
them (Chong and Mahama, 2014), and coordinating and scrutinizing the implementation of
intended strategies (Henri, 2006). Thus, managers concerned with their strategy address
whether the implementation is on track through a diagnostic use (Kruis et al., 2016).
A diagnostic use of MACS embodies the traditional feedback role, as a type of ex-post
monitoring. Feedback on deviation information allows for a fine-tuning of the strategy or
the process, triggering more adjusted future outputs (Simons, 1995).
Recent literature suggests that interactive and diagnostic uses are complementary and
must work together to build an effective control environment (de Harlez and Malagueño,
2016; Su et al., 2015; Plesner Rossing, 2013; Kober et al., 2007; Widener, 2007). In his seminal
work, Simons (2000, p. 305) argued that “the information and learning generated by
interactive systems can be embedded in the strategies and goals that are monitored by
diagnostic control systems.” The underlying idea is that since both uses play a different role,
they must be “nested” in order to become a powerful control system (Simons, 1995, p. 5).
Additionally, research into MACS emphasizes the importance of studying the effects of
combinations of controls rather than studying one control in isolation (Otley, 1999;
Abernethy and Brownell, 1997). Henri (2006) interacts the diagnostic and the interactive use Management
of control systems as a proxy for dynamic tension that influences organizational accounting and
capabilities. Similarly, Widener (2007) provides evidence that this dynamic tension increases control
performance, but does so without analyzing how and at what different stages of
implementation and monitoring of the strategy this dynamic tension is generated. This idea systems
fits within Naranjo-Gil and Hartmann (2006) and Janka and Guenther (2018), where: the
interactive use has a positive effect on the implementation of the strategy, while the 1329
diagnostic use shows no effect; and the interactive use increases the focus of organizational
attention and the diagnostic use shows a non-significant effect, respectively. Kober et al.
(2007) document, based on a case study, how the interactive use of control systems
facilitates changes in the strategy, while diagnostic use changes to be matched with this
new strategy. In their exploratory study, Bedford and Malmi (2015) provide evidence that
diagnostic and interactive uses take part in the same control package for strategy
implementation and follow-up. Recently, de Harlez and Malagueño (2016) also analyzed the
joint effects of diagnostic and interactive uses on performance based on the contingent effect
of personal background, while Lee and Widener (2016) showed the positive relationship via
the joint effect of the diagnostic and interactive use of business intelligence systems on
organizational learning. Research into MACS for environmental sustainability remains
under development (Pondeville et al., 2013; Perego and Hartmann, 2009), so we study
both levers related to the implementation (interactive use) and the monitoring (diagnostic
use) of environmental innovation practices, extending the call of Arjaliès and Mundy (2013,
p. 286): “An enhanced understanding of the role of MCS in managing CSR strategy may be
attained by investigating the use, rather than the existence, of specific accounting tools
and mechanisms.”

2.2 Using MACS as a strategic response

Contextual and strategic factors shape the development of MACS (Pondeville et al., 2013).
Early studies in organizational design highlighted the effects of external environment on
organizational structures (Chenhall, 2003; Galbraith, 1973; Lawrence and Lorsch, 1967).
Research in different management areas concludes that external pressures are a catalyst for
organizational adaption (Simons, 1995; Porter, 1990; Taylor, 1990). In accounting, the
external environment, conceptualized as uncertainty, turbulence, diversity, complexity or
dynamism, has been linked to broad scope information (Chenhall and Morris, 1986). Extant
research reveals that MACS play a key role in coping with the external environment (Becker
et al., 2016) and that these systems should be related to intra- and extra-organizational
pressures (Collins et al., 1997). Collins et al. (1997, p. 675) establish that “accounting control
system facilitates adaption to these externalities by mediating between external threats and
opportunities and the organizational functioning.” Schaltegger and Wagner (2006) refer to
the sustainability balanced scorecard as an instrument for a “better integration of the
environmental, social and economic aspects” (p. 686), and to identify the strategically
relevant environmental issues in order to assess their potential influence on business
success. In the same way, Figge et al. (2002) note that the identification of external pressures,
such as environmental issues, and the alignment of the business strategy is a core step in the
use of the balanced scorecard. To deal with these external pressures, managers take actions,
like for example new environmental procedures. Lisi (2015) puts forward the crucial role of
MACS, encompassing EMA systems, in aligning organizational conducts and stakeholder
pressures. Parker and Chung (2018, p. 1014) state that, using a field-based case study in a
hotel setting, pressure for a social and environmental strategy is “framed and controlled
top-down” through MACS, but “implemented and also controlled bottom-up.” Recent
evidence by Hsiao et al. (2018) also shows that hotel managers analyze the hotel’s status in
the industry through their MACS, inspect internal resources and, using this data, select the
AAAJ appropriate green activities to implement. Also, Jollands et al. (2018) state that managers use
32,5 MACS in an attempt to alleviate external pressures. They argue that environmental and
social reports are typically released once a year, however, pressures are usually ongoing and
continuous. This is why managers mobilize MACS to alleviate these pressures[3].
Several recent studies try to interpret how firms manage uncertainties and external
pressures through an interactive use of MACS. Widener (2007) provides evidence that
1330 strategic uncertainties and risks are associated with higher levels of an interactive use of
MACS. Abernethy and Brownell (1999) show that the interactive use of budgets helps to
improve performances in hospitals that are in need of strategic change. Bisbe and
Malagueño (2009) and McCarthy and Gordon (2011) find that different innovation modes
and innovation uncertainties trigger an interactive use of MACS. Su et al. (2015) demonstrate
that interactive use is positively associated with the maturity organizational life cycle stage.
Recently, Garcia Osma et al. (2018) and Janke et al. (2014) provide evidence of managers
assuaging debt pressures and economic crisis perception through the interactive use of
MACS. Their results suggest that interactive use is a way to manage the augmented
demand for information processing in an uncertainty situation, and the data provided by an
interactive use of MACS are the data requested by stakeholders. Garcia Osma et al. (2018)
also show that this increase in the interactive use of MACS in a debt pressure situation has
organizational consequences, such as a reduction in the future cost of debt.
Corporate social responsibility and stakeholder demands for environmental activities
imply strategic uncertainties since they create new sets of risk and opportunities to manage
(Guillamón-Saorín et al., 2018; Schaltegger and Burritt, 2010). Three recent case studies
provide evidence in support of this external pressure, driving an interactive use of MACS.
These case studies are important for understanding how and what we must analyze (Parker,
2012). Arjaliès and Mundy (2013) illustrate how companies mobilize the interactive lever to
manage CSR strategy. Thus, firms “aim to mitigate some of the difficulties associated with
balancing CSR strategy against short-term financial performance by ensuring that, where
appropriate, the requirements and interests of a wide range of stakeholders are captured in
their interactive processes” (Arjaliès and Mundy, 2013, p. 298). Rodrigue et al. (2013) point
out that strategic uncertainties, such as stakeholder pressures over environmental concerns,
are drivers for the interactive use of MACS. Kerr et al. (2015) show managers’ emphasis on
stakeholder interactions due to the importance of public opinion. They provide evidence of
the interactive use of MACS in four firms through discussions about environmental issues
at weekly meetings or continuous dialogue with interest groups. Recently, although more
broadly, Wijethilake (2017) reported a positive effect of proactive sustainability strategy on
sustainability control systems, including interactive control systems. The previous
literature provides evidence that managers choose an interactive use of MACS to guide data
gathering and the search for opportunities to manage the strategic uncertainties.

2.3 MACS and consequences for innovation

In the last 20 years, there has been an increase in the study of the relationship between
control systems and innovation (Chenhall and Moers, 2015). Early research focused on how
MACS should fit into the organizational context (Ouchi, 1977), mainly regarding the effect of
control systems on R&D units and departments (Abernethy and Brownell, 1997; Rockness
and Shields, 1988). MACS can align operative goals with official goals linked to the interests
of customers, suppliers and other stakeholders through learning and innovation (Chenhall,
2003). More recent studies analyze how managers can use MACS to encourage innovation
and creativity (Bedford, 2015; Ylinen and Gullkvist, 2014; Mundy, 2010; Bisbe and
Malagueño, 2009; Henri, 2006). EMA systems, as a part of organizational MACS, have also
been explored as drivers of innovation. Gago (2002) documented the diffusion of EMA
systems in 11 Spanish firms for the evaluation of the introduction of environmental
innovations. In her case study, Masanet-Llodra (2006) offers evidence that firms try to gain Management
competitive advantages through innovation using these EMA systems. Similarly, Albelda accounting and
Perez et al. (2007) extend how EMA systems, in addition to compliance, also promote control
technological innovation and research through fieldwork research. Using survey data,
Ferreira et al. (2010) provide weak evidence of the positive effect of EMA systems on process systems
innovation and a non-significant link with product innovation, while Henri and Journeault
(2010) show a positive link between MACS and environmental performance, including 1331
improved process innovations, product quality and product innovations. Although not
directly studying this issue, Dangelico et al. (2013) reveal positive correlations between
information from internal activities, green manufacturing processes and green product
design. Lisi (2015) also reports a positive effect of MACS on environmental issues, such as
complying with environmental emissions or waste disposals. Journeault (2016) suggests
that eco-control practices foster continuous environmental innovation based on the
resource-based view. Recently, through a mail survey questionnaire, Phan et al. (2018)
offered evidence on the positive effect of EMA systems on process innovations and the
improved management of the usage of firm resources.
As we disentangled at the beginning of Section 2.2, Simons (1995, 1991, 1990) proposes
that the interactive use of MACS triggers innovation, providing a priority agenda and a
forum for the stimulation of innovative ideas. Previous literature provides evidence in this
regard. Henri (2006) examines the effect of interactive use on several firm capabilities
including innovation. The results are consistent with Simons’ framework since this
interactive lever enhances innovation capability. Naranjo-Gil and Hartmann (2007) also find
that the interactive use of MACS triggers service innovations. Bedford (2015) provides
evidence of the positive link that the emphasis on interactive use has on exploratory
innovations. Bisbe and Malagueño (2015) find that interactive control systems foster
creativity and influence the different phases of innovation processes. Lopez-Valeiras et al.
(2016) examine the role of interactive use in promoting organizational and process
innovations. Their results suggest that this lever increases process innovations.
Notwithstanding the advocated benefits of the interactive use of MACS on innovation,
research involving environmental issues under the framework of Simons (1995) is scarce
and limited to case studies of specific firms. In their case study, Rodrigue et al. (2013) show
that the interactive use of MACS leverages further environmental improvements. Recently,
Herremans and Nazari (2016) provided insight into how companies incorporate new
sustainable practices using MACS interactively in a case study of firms and stakeholders in
the Canadian petroleum industry. To the best of our knowledge, only Journeault et al. (2016)
and Wijethilake et al. (2018) analyze the effect of diagnostic and interactive uses on
environmental innovation practices through a quantitative empirical study. Journeault et al.
(2016) report a positive influence of the interactive use of environmental performance
indicators on eco-production practices, while the effect of diagnostic use on these
eco-production practices is non-significant, showing that only interactive use acts as a
catalyst for environmental innovation practices. Wijethilake et al. (2018) examine the
moderating impact of both LOC in the relationship between environmental innovation
strategy and organizational performance. They show a positive (negative) interaction effect
for interactive use (diagnostic use). This evidence is consistent with our prediction that
diagnostic use plays a different role than interactive use and the potential key function of
environmental training.

3. Hypotheses development
The use of MACS in an interactive fashion has been put in the spotlight by accounting,
management and innovation research (Bedford, 2015; Bisbe and Malagueño, 2015;
Moulang, 2015; Adler and Chen, 2011; Bisbe and Malagueño, 2009; Bisbe and Otley, 2004;
AAAJ Bonner et al., 2002). Simons (1995) establishes that the interactive use of MACS puts
32,5 pressure on employees and operating managers at all levels of the firm, forces face-to-face
dialogue and debate and stimulates information gathering. Thus, the interactive use guides
and offers input to innovation initiatives. However, the opposite relation could also hold,
as rigid MACS can increase discipline among employees and managers in the selection and
implementation of new initiatives and procedures (Nohria and Gulati, 1996). Additionally,
1332 this tight control can also limit creative flexibility and generates rigidities that restrict the
knowledge update about market trends (Arend et al., 2017; Song et al., 2011). Environmental
innovation practices are neither random nor unstructured processes (Li, 2014; Gago, 2002).
This is why we focus on the inherent flexibility of the interactive use of MACS (Garcia Osma
et al., 2018). Rosa et al. (2015) or Chung and Parker (2008) note that firms, especially in the
hotel industry, need to have structures that meet customer demands (concerning quality of
facilities and services) for efficient economic performance (increase in revenues or increase
in return on investment) while, at the same time, these firms are under pressure to develop
responsible environmental practices (i.e. procedures to increase energy efficiency, reduce
water consumption, reduce greenhouse gas emissions or reduce liquid effluents and waste).
The interactive use of MACS may introduce structure and purpose while promoting the
introduction of environmental innovation practices (Henri and Journeault, 2010). An
interactive use of MACS could detect external pressures, such as social, customer or supplier
pressures, inducing the firm to manage the environmental impacts generated in their
activities through innovative practices (Garcia Osma et al., 2018; Wijethilake et al., 2017; Lee,
2011). Stakeholder theory establishes the interest of stakeholders in firms’ strategic choices
and suggests that their involvement and pressure could contribute to organizational goals
being reached (Damanpour et al., 2018; Lee et al., 2018; Pérez et al., 2017), and managers
becoming involved in addressing major societal issues (Bode and Singh, 2018; Parker, 2014;
Schaltegger and Burritt, 2010). Hence, managers are pressured to resolve the demands of
these stakeholders because if any of them feel that they are being unfairly treated, they will
seek alternatives (Hansen et al., 2009; Collier, 2008). Managers could decrease uncertainty in
planning and decision making by entrusting the interactive use of MACS to gain
information and feedback, facilitating the initiation and implementation of new initiatives,
processes and procedures (Damanpour et al., 2018; Albelda Perez et al., 2007). Moreover,
through the interactive use of MACS, managers could identify shared problems with
stakeholders, detect complex issues and stimulate the implementation of new initiatives
(Arjaliès and Mundy, 2013; Saravanamuthu and Lehman, 2013).
Managers are more likely to take stakeholders’ requests into account when facing
strategic pressure (Dai et al., 2018; Rodrigue et al., 2013), and an interactive use of MACS
enables interactions to improve relationships with stakeholders (Franco-Santos et al., 2012;
Ferreira and Otley, 2009), focusing the stakeholders’ pressure and the extent of using
environmental innovation practices (Abdel-Maksoud et al., 2016). Thus, the incorporation of
stakeholders’ knowledge into the strategic process may lead to new innovations (Hansen
et al., 2009). Prior research shows that when managers detect that stakeholders have explicit
environmental expectations, managers address these expectations by paying attention to
these issues (Wijethilake et al., 2017; Rodrigue et al., 2013; Ferreira and Otley, 2009; Rowley,
1997; Donaldson and Preston, 1995) through an interactive use of MACS. Simons (1995)
emphasizes the role of the interactive use of MACS to focus attention on strategic
uncertainties, such as the social and environmental expectations of the stakeholders,
building “internal pressure to break out of narrow search routines, stimulate opportunity-
seeking, and encourage the emergence of new strategic initiatives” (Simons, 1995, p. 93)[4].
Additionally, Perego and Hartmann (2009) and Adams (2002) expose the inefficient decision
of assuaging external stakeholder concerns by providing environmental reports if these
data are not also employed for internal control, planning and decision making. In this
context, they also emphasize that in response to these environmental institutional pressures, Management
firms are increasingly implementing environmental innovation practices. accounting and
Overall, the interactive use of MACS is expected to foster environmental innovation control
practices for two main reasons. First, this use of MACS may foster the search for new
initiatives, breaking complacency in response to external pressures for environmental systems
management. Second, interactive use is a platform to indicate throughout the organization
that environmental innovation practices are necessary, legitimate and welcome in the firm 1333
agenda (Bedford, 2015; Burritt and Schaltegger, 2010; Bisbe and Otley, 2004). Following the
previous reasoning, our first hypothesis is as follows:
H1. Interactive use of MACS is positively associated with environmental innovation
practices.
Having recognized that the interactive use of MACS and environmental innovation practices
are linked, a natural question is whether these practices are associated with firm
performance. Environmental innovation practices have been acknowledged as an effective
way to lead to a “win-win” situation characterized by both financial and environmental
benefits in a cost-effective manner (Rosa et al., 2015; Weng et al., 2015; Frondel et al., 2010;
Henri and Journeault, 2010; Porter and Van der Linde, 1995), offering potential for building
competitive advantage (Hansen et al., 2009). Misuse of natural resources generates more
waste that will reduce value and could also be symptomatic of problems in processes,
services or products (Porter and Van der Linde, 1995). Environmental innovation practices
are improved service designs for services “which will be more environment-friendly and
cost-effective over the whole of their life-cycles” (Schaltegger et al., 2008, p. 7), being less
pollutive, recycling more waste and residuals or even being more resource-efficient.
Environmental innovation practices are used to avoid undesirable environmental
behaviors and to encourage desirable actions through the organization (Henri and
Journeault, 2010). These environmental actions and behaviors are linked to firm
performance, for example, on the cost side, by improving the cost of materials, processes
or services and legal compliance. Similarly, on the revenue side, environmental innovation
practices can enhance environmental reputation and offer differentiated services
and products, enhancing organizations’ market share, marginal profits (Li, 2014) and
non-financial performance (Malmi and Brown, 2008; Chenhall, 2003; Ittner and Larcker,
2003). Henri et al. (2014) also add greater access to capital and environmental leadership in
the industry. Hansen et al. (2009) or Hockerts (2008) compile six market potentials of
environmental innovation practices: decrease in risk, increase efficiency and cost reduction,
assurance of legitimacy, planning reliability, new customers and market segments, and new
product and service segments. Hence, firms with environmental innovation practices are
better able to gain superior outcomes over competitors due to their intangibility and
difficulty to replicate (Ameer and Othman, 2012).
Thus, by impacting resource management, environmental innovation practices promote
operational performance. The following hypothesis is proposed:
H2. Environmental innovation practices are positively associated with operational
performance.
Li (2014) recalls mixed results between environmental innovation practices and
performance. On the one hand, there are positive relationships (Frondel et al., 2010; Henri
and Journeault, 2010), while on the other hand, there are also negative (Ambec and Lanoie,
2008) or non-significant effects (Li, 2014). This is why we question whether this relationship
is affected by other variables.
As we indicated at the beginning of this section, a diagnostic use of MACS can help the
organization evaluate and follow up on the new strategies incorporated, such as
AAAJ environmental innovation practices. The diagnostic use of MACS embodies the traditional
32,5 feedback role of control systems, that is, monitoring and rewarding the attainment of
pre-established standards of performance (Henri, 2006; Simons, 1995). Thus, this lever of
control enhances the motivation to achieve targets by centering and revising deviations
from pre-set goals, while also monitoring and coordinating the implementation of strategies
(Henri, 2006). Bedford (2015) indicates that, by making progress and firm objectives
1334 transparent, the diagnostic use of MACS promotes commitment and coordination toward
preferred outcomes and, in the end, increases performance (Widener, 2007; Burritt and
Saka, 2006). Likewise, Cheng and Van de Ven (1996) indicate that evaluation through pre-
defined goals is also useful for attempting to converge on a successful solution to a problem.
Firms must control and monitor environmental innovation practices because they could be a
key success factor in gaining and maintaining a competitive advantage (Arjaliès and
Mundy, 2013). Additionally, a diagnostic use of MACS is key to the correct monitoring
of environmental innovation practices since they will be forgotten by managers in favor of
mainstream business measures if they do not have measurable outputs (Arjaliès and
Bansal, 2018; Arjaliès and Mundy, 2013; Gond et al., 2012). In the same way, Joshi et al. (2001)
and Henri et al. (2014) suggest that a bad follow-up of these environmental innovation
practices could lead to suboptimal decisions, such as inappropriate product mix or
product mispricing, in addition to influencing implementation and whether corrective action
is taken.
A diagnostic use of MACS could facilitate the planning and coordination of the correct
implementation of environmental innovation practices. This implementation requires
constant communication and interaction with different departments to enhance
workflows, prioritize activities and optimize resource allocation ( Journeault et al., 2016;
Lopez-Valeiras et al., 2015). Despite the above arguments, several previous researchers
define diagnostic use as a negative force (Tessier and Otley, 2012b) due to its focus on
mistakes and negative variances and to avoid employees’ risk-taking behaviors beyond
what is allowed by the firm (Wijethilake et al., 2018). Wijethilake et al. (2018, p. 1146) also
point out that diagnostic use of MACS impedes the successful deployment of environmental
innovation practices since they require “unrestricted dissemination of information and
flexible channels of communication.” Previous studies argue that diagnostic use could only
be effective in certain settings, such as in supporting cost-reduction initiatives
(Arachchilage and Smith, 2013). Because we have no ex-ante motive to suppose that one
effect would dominate the other, our third hypothesis is non-directional:
H3. Diagnostic use of MACS is associated with environmental innovation practices
and performance.
Although the former hypothesis suggests an interaction of the diagnostic use of MACS
and environmental innovation practices on performance, the environmental management
and control systems literature urges us to understand the factors that could moderate this
relationship. Thus, superior firm performance occurs when the information jointly
provided by MACS and appropriate environmental formation facilitate the
implementation of strategic priorities (de Harlez and Malagueño, 2016; Kerr et al., 2015;
Abernethy and Lillis, 2001). As the environmental management literature generally
suggests that environmental training is a key component of firm performance ( Jabbour,
2015), we argue that environmental training is likely to be one such moderator of the
relationship between environmental innovation practices, the diagnostic use of MACS and
operational performance.
We posit that environmental innovation practices accompanied by a diagnostic use of
MACS will be more effective in enhancing operational performance when managers and
employees receive environmental training. These managers and employees with an
enhanced environmental background will be more accustomed to dealing with abstract Management
numbers and management (de Harlez and Malagueño, 2016). Thus, the magnitude of being accounting and
able to understand environmental data cannot be underestimated (Rothenberg, 2003). control
Managers and employees are usually trained to graph, chart and statistically analyze
production data (Rothenberg et al., 2001), but there is less emphasis on training that focuses systems
on the environment, such as recycling, prevention or management of hazardous materials[5].
Since environmental innovation practices must be monitored if they wish to have a 1335
significant impact on performance, this environmental training enables the ability to
understand data and identify potential solutions in the case of deviations (Albelda Perez
et al., 2007; Rothenberg, 2003). Employees and managers without training in environmental
activity will not be able to understand the information and data provided by the diagnostic
use. Albelda Perez et al. (2007) expose this shortcoming in their field research that shows
MACS might not work if the company does not pay attention to environmental training.
Thus, firms that have implemented environmental training might be more suited to
understanding, monitoring and coordinating the attainment of environmental
pre-established goals and, as such, correcting deviations involving an appropriate
alignment of structure and MACS (Parker and Chung, 2018; Cadez and Guilding, 2017;
Christ and Burritt, 2013; Bebbington and Thomson, 2013; Choe, 2004) and avoiding the
underutilization of eco-information (Burritt and Saka, 2006). Parker and Chung (2018) also
point out, in a hotel setting, the lack of environmental knowledge and skills or the
misinterpretation of environmental strategies as impediments to the adoption of
environmental practices. As an example, suppose that the hotel has implemented an
environmental practice of changing bed sheets and linens upon request only. On the day the
hotel changes these bed sheets, customers complain about the cleanliness and smells of the
bedding. In a hotel without environmental training and knowledge, the managers may
decide to use more chemical products to avoid these complaints. On the contrary, in a hotel
with environmental training, the corrective actions would be accompanied by an
environmental strategy, and the managers would opt for non-chemical cleaning products,
more expensive than the previous ones, but environmentally friendly. Thus, the diagnostic
use of the data reported by the MACS, together with environmental training, would seek
potential environmentally friendly solutions in line with the company’s environmental
strategy, positively impacting on operational performance[6]. Moreover, companies with
more training in environmental issues allow managers to better understand the links
between processes, activities and outcomes. Formally, we propose:
H4. There is a three-way interaction between environmental innovation practices, the
diagnostic use of MACS and environmental training, which implies that a positive
association between environmental innovation practices and performance is strongest
when both the diagnostic use of MACS and environmental training are high.
The theoretical framework is illustrated in Figure 1.

4. Methods and data

4.1 Research setting
We chose the Brazilian hotel sector setting for several reasons. First, our theoretical model
proposes a number of complex interrelationships that require focusing on a single industry
to reduce noise (Gomez-Conde and Lopez-Valeiras, 2018; Naranjo-Gil et al., 2008; Naranjo-Gil
and Hartmann, 2007; Ittner et al., 2003). Second, the hotel sector in Brazil was vitally
involved in the organization of the World Cup in 2014, receiving a million tourists from 203
nationalities. Additionally, in 2016 Brazil also hosted the World Olympic Games (Geetha
et al., 2017). These events triggered hotels to restructure some of their environmental
innovation practices. Brazil presents a distinctive biodiversity, fauna and flora, like the
AAAJ Interactive use of H1 Environmental H2 Operational
32,5 MACS innovation practices performance

H3
Environmental
H4
training
1336

Diagnostic use of
MACS
Figure 1.
Theoretical model
Notes: Full arrows show proposed hypotheses. Dotted arrows show effects included as controls

Amazon, the Iguazu Falls and paradise islands like Fernando de Noronha, thereby
enhancing the attraction of environmental tourism. Third, Brazil shows singularities in
terms of environmental management, like the absence of a public service for wastewater
treatment. Fourth, the hotel industry has a higher impact on the Brazilian economy,
representing about 8 percent of the GDP. Fifth, in a report by the World Bank, Brazil shows
a missing link between innovation and productivity due to human capital formation
(Rodríguez et al., 2008). This situation provides a unique setting to test our hypotheses in
relation to an increase in the presence of environmental training to aid the correct
monitoring of environmental innovation practices. Overall, Brazilian hotels provided a
national setting that was suitable for testing our theoretical model, especially since the
issues central to this study were considered important by this population.

4.2 Data collection

Data were collected using a questionnaire based on a literature review, and were distributed
to CEOs, CFOs and general managers of hotels in Brazil. The selected population was
obtained through Cadastur (Ministério do Turismo, 2016)[7], including flat/apartment
hotels, hotels, rural hotels, historic hotels and resorts. This stage comprises a population of
4,818 hotels. From this total amount, only 1,114 had more than 100 rooms or units that were
counted toward the research. The selection of hotel enterprises of at least 100 rooms is to
ensure the implementation of formal management processes (Bennouna et al., 2010;
Danielson and Scott, 2006; Block, 1997).
The draft questionnaire was pretested with four experts and five academics with
experience in the area (de Harlez and Malagueño, 2016). Based on this procedure, we made
small changes to the survey to improve the final reading. We also did a pre-test in five hotels
in Florianopolis, Santa Catarina (Brazil). Comments received were related to verifying the
managers’ understanding of the items, the extension and the response time.
As described by Dillman et al. (2014), the data collection included four stages: sending
letters requesting research participation to the 1,114 hotel enterprises (sent in June 2016),
sending a research link for the 398 hotels that responded to the first contact (two weeks later),
sending a second request (two months later) and making contact by phone (three months
later). After this procedure, a final reply of 89 questionnaires was obtained, representing
approximately 22.5 percent of the total, which is similar to the rates in the comparable studies
(Pavlatos, 2015; Best and Thapa, 2013; Rahman et al., 2012; Tarí et al., 2010).
We tested for the presence of potential non-response bias by comparing the responses of
early and late respondents, as late respondents are analogous to non-participants
(Abernethy et al., 2017). We also tested for the presence of common-rater bias by applying
Harman’s (1967) single-factor test. The solution returns five factors with eigenvalues greater
than 1. The cumulative variance was 72.4 percent, while the first factor explains 26.7 percent Management
of the variance. We conclude that our results were not subject to common-rater bias. accounting and
control
4.3 Variable measurement systems
4.3.1 Management control systems: diagnostic and interactive uses. Diagnostic and
interactive uses are measured based on several previous studies (de Harlez and Malagueño,
2016; Bedford, 2015; Widener, 2007; Henri, 2006). Diagnostic use of MACS is measured 1337
through six Likert scale items, reflecting the main stages of a conventional cybernetic
control cycle (Bedford, 2015; Simons, 1995): planning, identifying key goals, comparing
results and expectations, monitoring results, forecasting, and analyzing and correcting
deviations. The single factor solution of the six items is extracted with satisfactory internal
reliability (see Table I).
Likewise, interactive use of MACS is measured using five Likert scale items, following
previous studies (de Harlez and Malagueño, 2016; Bedford, 2015). Items included in the
scale are challenge, focus on critical issues, frequent attention, discussion and inspirational
involvement. The five items yielded one factor with satisfactory internal reliability
(see Table I).
4.3.2 Environmental innovation practices. The construct environmental innovation
practices is operationalized through five items (Li, 2014) related to several environmental
practices in the hotel: water, energy, fuel, liquid effluents, emissions and kitchen oil[8].
Anchors of the Likert scales referred to the degree to which they are sent for recycling or
are reused, reduced or repaired. Factor analysis results indicated that the five items loaded
on a single factor. Table I shows results supporting the unidimensionality and reliability of
the instrument.
4.3.3 Environmental training. In accordance with previous research (Shaw et al., 1999),
environmental training is understood as the degree to which firms provide environmental
ideas, skills and knowledge for improving processes and services ( Jabbour, 2015; Baldwin,
1992), evolving into a commitment to environmental practices and triggering openness and
top-down dialogue between employees and managers[9]. The adapted instrument consists
of six items measured through seven-point Likert scales, namely, the rate of environmental
training for the following groups: employees, collaborators, board and management, local
community, suppliers and customers. Anchors of the Likert scales referred to the frequency
of this training. The results of the factor analysis displayed in Table I indicated that the six
items loaded in a single factor, supporting the unidimensionality and reliability of the
measurement instrument.
4.3.4 Operational performance. We measured operational performance by using a
four-item variable, measuring the extent to which the manager perceived operational
performance, based on Wijethilake et al. (2018), Mahama and Cheng (2013), Spillecke and
Brettel (2013) and Widener (2007). The level of the operational performance was scored on a

Number
of items Factor
measuring loadings % variance Cronbach’s
the construct (range) Eigenvalue explained α

Interactive use of MACS 5 0.864–0.941 4.083 81.665 0.943

Diagnostic use of MACS 6 0.617–0.949 4.502 75.026 0.919
Environmental innov. practices 5 0.670–0.839 2.554 50.889 0.738 Table I.
Environmental training 6 0.707–0.872 4.091 68.182 0.904 Factor analysis and
Operational performance 4 0.525–0.935 2.789 69.732 0.841 reliability analysis
AAAJ seven-point Likert scale ranging from 1 “Completely disagree” to 7 “Completely agree.”
32,5 Table I shows that all items are loaded on a single factor with satisfactory reliability
and unidimensionality.
4.3.5 Control variables. Several control variables expected to be related to environmental
innovation practices and operational performance are included in the regression models to
avoid bias in the results. Larger companies tend to have higher performance than smaller
1338 organizations and are also subject to higher political and regulatory pressures. Thus, these
larger firms have more incentives to disclose more and perform better (Qian and Schaltegger,
2017). Hotel size is measured by the number of employees. Older hotels are also more likely to
survive and perform better than smaller hotels. Hotel maturity is measured as the number of
years since firm foundation. Manager age and tenure are measured in years and months,
respectively. As tenure and age increase, managers attain a better understanding of the way
their work is accomplished, increasing innovativeness and performance. We also include
gender (male-female manager) and hotel network as control variables due to previous
evidence of their relationship with innovation and performance (Kraft and Bausch, 2018). In
addition, we include three items (seven-point Likert scales) related to the extent of MACS’
reliance on (Mia and Chenhall, 1994): future events, stakeholders and external factors. These
items are modeled as control variables to isolate primary (diagnostic and interactive use of
MACS) influences on environmental innovation practices and performance and to isolate the
effect of the use of the MACS instead of their design (Lisi, 2015; Ferreira et al., 2010). We also
capture a measure of environmental disclosure from the websites of the companies in the
sample. Therefore, we control for the influence of environmental disclosure through a dummy
variable to assess whether a firm reports environmental issues on its website (1) or not (0).
Previous literature of environmental disclosure analyzes the effect of disclosure as a substitute
for performance (Qian and Schaltegger, 2017)[10]. Finally, we include in our models the scores
of Booking.com as a proxy for consumer-generated media. The hotel industry is especially
affected by these reviews, and customers are willing to pay higher prices for services with a
good score (Mellinas et al., 2016). Moreover, social media pressures were previously linked to
environmental practices (Islam and Deegan, 2010) and performance (Gomez‐Carrasco and
Michelon, 2017).
In addition, confirmatory factor analysis of the full measurement model was run using
AMOS, with the maximum likelihood estimation procedure. The measurement model
achieved an acceptable model fit to the data. Specifically, the normed χ2 (i.e. χ2/df ¼ 476.70/
289) of 1.66 is acceptable, as well as the root mean square error of approximation ¼ 0.067
and comparative fit index ¼ 0.906.
Survey questions for variables used in this study and descriptive statistics are displayed
in Table II.

4.4 Models specification

We used a hierarchical regression analysis to test the proposed theoretical model. Ordinary
least squares (OLS) models are most suitable for our research since the dependent variables
(environmental practices and operational performance) have continuous values. Following
Larsen et al. (2013) or de Harlez and Malagueño (2016), hierarchical regressions refer to the
gradual building of separate but associated models with a cumulative number of
independent variables until they reach the final model.
We test H1 by estimating the following model:

Environmental innov: practices ¼ b0 þb1 Interactive use of MACS

X
þ bk Controlsk þe:
Variable Mean SD Median Min.–Max.
Management
accounting and
Interactive use of MACS control
Item 1: to encourage continuous challenge, debate underlying data and
action plans 5.55 1.23 6.00 1–7 systems
Item 2: to focus on critical issues for the hotel success 5.82 1.32 6.00 1–7
Item 3: to unify the hotel vision about the problems that affect future
performance 5.74 1.29 6.00 1–7 1339
Item 4: to debate and question decisions and actions for better firm
performance 5.98 1.09 6.00 1–7
Item 5: to involve in regular and frequent attention 6.00 1.11 6.00 1–7
Diagnostic use of MACS
Item 1: to track progress toward goals 6.17 1.27 7.00 1–7
Item 2: to review key measures 5.83 1.26 6.00 1–7
Item 3: to compare outcomes to expectations 6.19 1.16 7.00 1–7
Item 4: to monitor results 6.40 1.02 7.00 1–7
Item 5: to forecast 5.87 1.42 6.00 1–7
Item 6: to analyze significant deviations 5.48 1.57 6.00 1–7
Environmental innovation practices
Item 1: practices to water reuse 3.61 2.35 3.00 1–7
Item 2: practices to reduce energy consumption 5.80 1.28 6.00 1–7
Item 3: practices to reduce fuel consumption 4.81 2.31 5.00 1–7
Item 4: practices to reduce the generation of liquid effluents 4.82 1.95 5.00 1–7
Item 5: practices to reduce emissions 5.14 1.59 5.00 1–7
Environmental training
Item 1: training for employees 1.36 1.06 1.00 1–3
Item 2: training for collaborators 1.09 0.95 1.00 1–3
Item 3: training for TMT 1.28 1.08 1.00 1–3
Item 4: training for local community 0.72 0.78 1.00 1–3
Item 5: training for providers 0.97 1.01 1.00 1–3
Item 6: training for customers 1.24 1.22 1.00 1–3
Operational performance
Item 1: customer (guests) satisfaction 5.45 1.17 6.00 1–7
Item 2: quantity of processes and services done 5.43 1.18 5.00 1–7
Item 3: quality of processes and services done 5.56 1.20 6.00 1–7
Item 4: compliance with deadlines 5.35 1.18 5.00 1–7
Manager age (years) 38.98 9.56 37.00 24–71
Gender (male ¼ 1; female ¼ 0) 0.62 0.49 1.00 0–1
Manager tenure (months) 154.37 97.51 155.00 12–420
Hotel size (no. employees) 112.63 238.24 45.00 11–2,000
Hotel maturity (years) 15.48 13.10 10.50 0.1–50
Hotel network 0.71 0.48 1.00 0–1
MACS reliance on future events 4.89 1.77 5.00 1–7
MACS reliance on stakeholders (information including customer
preferences, employee attitudes, labor relations, attitudes of
government and consumer bodies or competitive threats) 5.45 1.37 5.00 1–7
MACS reliance on external factors (information including economic
conditions, population growth or technological developments) 5.15 1.55 5.00 1–7
Environmental disclosure 0.51 0.47 0.51 0–1 Table II.
Consumer-generated media 80.21 4.22 80.21 70–90 Descriptive statistics
AAAJ Hierarchical entry of the independent variables was used in the regression models to test
32,5 H2–H4. The first regression in Table IV is a base model that only includes control variables,
while the second model also includes the main effect of the independent variables, which
serves to test H2. To test H3, the third model includes the two-way interaction term between
diagnostic use and environmental practices:
Operational performance ¼ b0 þb1 Environmental innov: practices
1340
þb2 Diagnostic use of MACS
þb3 Environmental innov: practices
X
Diagnostic use of MACS þ bk Controlsk þe:
The fourth model, as recommended in the previous literature, includes all possible two-way
interactions (de Harlez and Malagueño, 2016; Foss et al., 2013). Lastly, to test H4, we include
the three-way interaction in the fifth model:
Operational performance ¼ b0 þ b1 Environmental inn:practices
þb2 Diagnostic use of MACSþ b3 Environmental training
þb4 Environmental innov: Practices  Diagnostic use of MACS
þ b5 Environmental innov: practices  Environmental training
þ b6 Environmental training  Diagnostic use of MACS
þ b7 Environmental innov:practices  Environmental training
X
Diagnostic use of MACSþ bk Controlsk þe:

5. Results and discussion

5.1 Results
We now turn to our main tests. Table III presents the intercorrelations for the study’s
relevant variables. This correlation matrix does not show high collinearity among the
main constructs except for the correlation between the diagnostic and interactive use of
MACS[11]. However, as reported in previous studies (Bedford, 2015; Widener, 2007; Henri,
2006), this correlation is expected to be high, given the causal mechanism between these two
constructs. We also report the variance inflation factor (VIF) in our regression models, to
assuage any concerns about multicollinearity. VIF scores did not indicate multicollinearity
(from 3.498 to 3.861).
Table IV displays the results of the regression analysis to test H1 and of the hierarchical
regression analysis to test H2–H4. Standardized coefficient estimates are reported
(t-statistics in parentheses).
According to H1, interactive use of MACS has a positive, significant effect on
environmental innovation practices (β ¼ 0.478, po0.01). Model 1 in the hierarchical
regression analysis (operational performance as the dependent variable), which only includes
the control variables, serves as the baseline model. H2 establishes that environmental
innovation practices are positively associated with performance, as the parameter estimate is
positive and significant (β ¼ 0.224, po0.05), H2 is supported.
Table IV also shows that diagnostic use of MACS and environmental innovation
practices have a negative effect on operational performance (β ¼ −0.400, p o0.01). Thus, the
non-directional H3 was tested.
Finally, the fifth model includes the hypothesized three-way interaction term for
environmental innovation practices, diagnostic use of MACS, and environmental training.
 1 2 3 4 5 6 7 8
1. Interactive use of MACS 1.000
2. Diagnostic use of MACS 0.638*** 1.000
3. Environmental innov. practices 0.395*** 0.364*** 1.000
4. Environmental training 0.183* 0.171 0.115 1.000
5. Manager age −0.139 −0.068 −0.119 −0.059 1.000
6. Gender −0.280*** −0.233** −0.169 −0.011 0.334*** 1.000
7. Manager tenure −0.118 −0.016 −0.025 −0.006 0.730*** 0.336*** 1.000
8. Hotel size 0.046 0.148 0.103 −0.048 0.239** 0.106 0.196* 1.000
9. Hotel maturity −0.190* −0.238*** −0.256** −0.073 0.257** 0.157 0.164 0.397***
10. Hotel network 0.341*** 0.446*** 0.281*** −0.031 −0.188* −0.200 −0.105 −0.018
11. MACS reliance on future events 0.527*** 0.582*** 0.327*** 0.323*** −0.067 −0.107 0.077 −0.002
12. MACS reliance on stakeholders 0.503*** 0.442*** 0.274** 0.087 −0.214** −0.280*** −0.137 0.031
13. MACS reliance on external factors 0.327*** 0.385*** 0.250** 0.140 −0.122 −0.130 0.028 0.037
14. Environmental disclosure 0.403*** 0.405*** 0.192* 0.206* −0.041 −0.205* 0.012 −0.065
15. Consumer-generated media 0.112 0.109 0.077 0.198* 0.057 0.033 0.106 0.140
16. Operational performance 0.468*** 0.205* 0.243** 0.125 −0.094 −0.173 −0.093 −0.034
9 10 11 12 13 14 15 16
9. Hotel maturity 1.000
10. Hotel network −0.423*** 1.000
11. MACS reliance on future events −0.252** 0.387*** 1.000
12. MACS reliance on stakeholders −0.247*** 0.232** 0.385*** 1.000
13. MACS reliance on external factors −0.235** 0.283*** 0.508*** 0.509*** 1.000
14. Environmental disclosure −0.312*** 0.255** 0.346*** 0.291*** 0.367*** 1.000
15. Consumer-generated media −0.185* 0.120 0.068 −0.075 −0.051 0.187* 1.000
16. Operational performance −0.140 0.003 0.327*** 0.299*** 0.030 0.175 0.047 1.000
Notes: *,**,***Significant at 10, 5 and 1 percent levels, respectively (two-tailed tests)
systems

1341
control
accounting and
Management

Correlation matrix
Table III.
 32,5

1342
AAAJ

Table IV.

regressions
for H1–H4a
Results of hierarchical
Environmental innov.
practices Operational performance
Independent variables β (t-stat) β (t-stat) β (t-stat) Β (t-stat) β (t-stat) β (t-stat)

Interactive use of MACS 0.478*** (3.659)

Diagnostic use of MACS 0.119 (0.838) −0.127 (−0.844) −0.111 (−0.745) −0.120 (−0.819)
Environmental innovation practices 0.224** (2.023) 0.186** (1.766) 0.129 (1.182) 0.070 (0.620)
Environmental training 0.050 (0.476) 0.039 (0.403) 0.034 (0.347) −0.056 (−0.514)
Envir. innov. practices × Diagnostic −0.400*** (−3.466) −0.410*** (−3.468) −0.371*** (−3.127)
MACS
Envir. training × Diagnostic MACS −0.195 (−1.578) −0.137 (−1.092)
Envir. innov. Practices × Envir. training 0.190 (1.562) 0.169 (1.402)
Diagnostic MACS × Envir. innov. 0.212** (1.739)
practices × Envir. training
Manager age −0.172 (−0.958) 0.035 (0.192) 0.063 (0.345) 0.042 (0.244) −0.004 (−0.022) −0.003 (−0.019)
Gender −0.077 (−0.731) −0.041 (−0.379) −0.037 (−0.346) −0.072 (−0.731) −0.083 (−0.848) −0.113* (−1.147)
Manager tenure 0.188 (1.064) −0.109 (−0.607) −0.150 (−0.851) −0.068 (−0.412) −0.033 (−0.198) −0.037 (−0.227)
Hotel size −0.091 (−0.922) 0.037 (0.363) 0.048 (0.477) 0.068 (0.731) 0.034 (0.359) 0.033 (0.353)
Hotel maturity −0.217* (−1.794) 0.083 (0.691) 0.089 (0.752) 0.030 (0.268) 0.045 (0.407) 0.023 (0.211)
Hotel network 0.020 (0.172) −0.117 (−0.980) −0.153 (−1.238) −0.140 (−1.216) −0.130 (−1.120) −0.133 (−1.163)
MACS reliance on future events 0.038 (0.284) 0.366*** (2.816) 0.240* (1.725) 0.317** (2.412) 0.364*** (2.720) 0.372*** (2.820)
MACS reliance on stakeholders −0.025 (−0.192) 0.414*** (3.369) 0.352*** (2.756) 0.335*** (2.816) 0.346*** (2.902) 0.329*** (2.791)
MACS reliance on external factors 0.056 (0.430) −0.266** (−2.011) −0.234* (−1.819) −0.320** (−2.616) −0.370*** (−2.965) −0.374*** (−3.038)
Environmental disclosure −0.146 (−1.277) 0.084 (0.738) 0.088 (0.781) 0.147 (1.378) 0.165 (1.553) 0.158 (1.506)
Consumer-generated media 0.058 (0.567) 0.076 (0.734) 0.028 (0.266) −0.012 (−0.125) −0.005 (−0.046) −0.002 (−0.020)
R2 0.343 0.290 0.336 0.459 0.482 0.504
ΔR2 0.046** 0.123** 0.023 0.022*
2
R adj. 0.235 0.185 0.241 0.342 0.352 0.371
ΔR2 adj. 0.056** 0.101*** 0.010 0.019*
F-value 3.171*** 2.779*** 2.923*** 3.952*** 3.716*** 3.782***
Max. VIF 3.572 3.542 3.498 3.758 3.861 3.861
Notes: aStandardized coefficients are reported. *,**,***Significant at 10, 5 and 1 percent levels, respectively. Significance levels are one-tailed for variables with a
directional prediction and two-tailed otherwise
As Table IV shows, there is a positive and significant effect (β ¼ 0.212, p o0.05), which Management
supports H4. A likelihood ratio test was performed to evaluate the improvement in the accounting and
model fit between the hierarchical steps (Foss et al., 2013). The results illustrate that all steps control
result in a significantly better fit.
The R2 of each dependent model is also shown in Table IV. This table displays that systems
34.3 percent of variance in the environmental innovation practices construct can be
explained by the model (i.e. by the interactive use of MACS as well as control variables such 1343
as size, tenure, environmental disclosure or consumer-generated media, among others).
It also shows that the explanatory power of the model for operational performance (i.e.
environmental innovation practices, diagnostic use of MACS, environmental training, their
combined effects to test the three-way interaction and control variables) is 50.4 percent.

5.2 Discussion
The purpose of this study is to analyze the effect of the use of MACS in the implementation
of environmental innovation practices. Specifically, our reasoning is as follows. Managers,
through an interactive use of MACS, scan the environment looking for strategic
uncertainties, including pressures on the stakeholders regarding environmental issues.
When managers detect these pressures through this interactive use of MACS, they mobilize
the entire organization to implement environmental innovation practices. For the impact on
performance to be positive, managers must monitor the implementation of these
environmental practices. A diagnostic use of MACS will have detrimental effects if not
accompanied by environmental training. Companies with managers and employees with
environmental training will be able to better understand the data coming from MACS and,
where appropriate, correct possible deviations that may occur. Overall, based on a survey of
89 hotels in Brazil, we found empirical evidence for this theoretical model. The findings of
our study contribute to understanding the different roles of the interactive and diagnostic
levers in the implementation of environmental innovation practices.
Our first hypothesis predicts a positive effect relationship between the interactive use of
MACS and environmental innovation practices. The analysis reports a strong, significant and
positive effect that is consistent with the study by Journeault et al. (2016), which provides
evidence that the interactive use of MACS increases eco-production practices, while the effect
of diagnostic use on these eco-production practices is non-significant, showing that only
interactive use acts as a catalyst for environmental innovation practices. Because interactive
use is a unique lever with which to detect strategic uncertainties and external pressures
(Garcia Osma et al., 2018; Simons, 1995), it is likely to put greater value on environmental
innovation practices as a “valid vehicle” to respond to the environmental pressures that
companies face (Berrone et al., 2013, p. 906). Derived from our theoretical model, the results in
Table IV to test H1 raises the question of whether the results are driven by the absence of the
diagnostic use of MACS. In an effort to evaluate the robustness of our findings, as an
additional analysis, we also run our model to test H1 including the diagnostic use of MACS as
a predictor variable of environmental innovation practices. The results reported in Table V are
evidence that this diagnostic lever does not trigger the implementation of environmental
innovation practices (β ¼ 0.141, pW0.10), confirming our view. Thus, we conclude that this
increase in environmental innovation practices is largely driven by the interactive use of
MACS (β ¼ 0.402, po0.01). Our results differ from those of Ferreira et al. (2010) since they
show a very weak effect of MACS on process innovation and no significant effect on product
innovation. While in their study they analyze the design of these MACS, we respond to the
recent call by Arjaliès and Mundy (2013) to investigate the use rather than the design in the
incorporation of environmental practices, extending Simons’ LOC.
Our most important finding is the role of the diagnostic use of MACS and environmental
training. Our results suggest that this diagnostic lever together with environmental training
AAAJ Panel A. Alternative regression of H1. Diagnostic use of MACS as a driver of Environmental innov. practices
32,5 Environmental innovation practices
Independent variables β (t-stat)
Interactive use of MACS 0.402*** (2.532)
Diagnostic use of MACS 0.141 (0.852)
Hotel size −0.097 (−0.978)
Environmental disclosure −0.148 (−1.293)
1344 Consumer-generated media 0.063 (0.613)
Other control variables Included
R2 0.349
R2 adj. 0.232
F-value 2.972***
Max. VIF 3.863
Panel B. Additional regression of operational performance on financial performance
Financial performance
Independent variables β (t-stat)
Operational performance 0.182* (1.403)
Environmental innovation practices −0.108 (−0.885)
Environmental training 0.015 (0.134)
Manager age 0.044 (0.222)
Gender 0.089 (0.768)
Manager tenure −0.085 (−0.441)
Hotel size −0.046 (−0.418)
Hotel maturity 0.195 (1.504)
Hotel network 0.036 (0.277)
MACS reliance on future events 0.317** (2.121)
MACS reliance on stakeholders −1.197 (1.398)
MACS reliance on external factors 0.226 (1.570)
Environmental disclosure 0.008 (0.063)
Consumer-generated media −0.054 (−0.054)
2
R 0.237
R2 adj. 0.086
F-value 1.574*
Max. VIF 3.583
Table V. Notes: aStandardized coefficients are reported. *,**,***Significant at 10, 5 and 1 percent levels, respectively.
Additional analysesa Significance levels are one-tailed for variables with a directional prediction and two-tailed otherwise

can increase the effect of environmental innovation practices on operational performance.

We show that the diagnostic use of MACS does not have a role in the implementation of
environmental innovation practices, but rather, it has a monitoring role, which allows for the
managing of its effect on operational performance. The potential negative effect of
diagnostic use, suggested by several previous literature (Wijethilake et al., 2018; Tessier and
Otley, 2012b), is corrected by environmental training. Managers who are not used to dealing
with environmental numbers will not be able to “decipher” and “understand” the
information reported by the MACS. This is why the interaction effect is negative if we
consider only the diagnostic use of MACS. Managers with the training and background in
environmental issues will be able to understand the environmental information derived
from a diagnostic use of the MACS, which will allow them to correct possible deviations or
reduce costs and, consequently, increase operational performance. This role of diagnostic
use and environmental training extends the results of Journeault et al. (2016), which were
previously discussed, and also extends the theoretical approach of Gond et al. (2012),
providing empirical evidence of how managers move from an interactive to a diagnostic
lever in the integration of sustainable strategies. Similarly, we provide empirical evidence
that confirms the findings of the case studies by Chiesa et al. (2009) and Parker and
Chung (2018), suggesting that: the diagnostic use of MACS mainly emerges in late Management
development and the commercialization of products or services, and the environmental accounting and
strategy is controlled and framed top-down, in a diagnostic manner. control
Our study analyzes the effect of the interactive and diagnostic use of MACS in
environmental innovation practices and the effect on performance, although we are aware systems
that there is a wide literature that analyzes the effect of environmental disclosure as a driver
of environmental innovation practices and performance (Passetti et al., 2018; Michelon et al., 1345
2015; Qian and Schaltegger, 2017; Monteiro and Aibar‐Guzmán, 2010). This is why we also
included a control variable measuring environmental disclosure in order to control for the
potential effect on our variables of interest and to be sure that MACS, as internal tools
supporting management decisions, are the driver for the effects investigated in this study.
We obtain non-significant results in testing these effects (see Tables IV and V ). In their
recent study, Qian and Schaltegger (2017, p. 13) opened the gap, stating that environmental
practices and policies “should focus more on supporting management and employees to
improve knowledge, skills and capability to implement performance measurement, rather
than on producing more reports and guidelines […] for achieving the intended carbon
reduction targets.”
Finally, no specific hypothesis has been stated for the direct effect of operational
performance on financial performance. Empirical evidence suggests that there is no direct
effect on environmental control systems and financial performance (Lisi, 2015; Henri et al.,
2014; Henri and Journeault, 2010). Additionally, the previous results of environmental
sustainability in financial performance are controversial (Pedersen et al., 2018), which is why
we focus on operational performance. As an additional analysis, we test the effect of
operational performance on financial performance[12], controlling for environmental
innovation practices, environmental disclosure or size, among others. Table V, Panel B,
shows a positive and significant relationship (β ¼ 0.182, po0.10). This result suggests that
the integration of the diagnostic use of MACS and environmental training in monitoring
environmental innovation practices has a positive effect not only on operational performance
but also on financial performance in a subsequent stage. This is consistent with Henri and
Journeault (2010) and Lisi (2015) since both studies indicate that accounting and ecological
information support effective resource management, decision making and resource allocation.

6. Conclusions
In this study, we provide novel evidence of the LOC framework and the links with
environmental management practices and environmental training. We contribute to the
extant literature on management control, accounting and the environment by showing
empirical evidence of the interrelationships between the use of MACS, environmental
innovation practices, environmental training and operational performance. Previous
literature encourages further research to advance knowledge on how MACS are enacted in
practice (Kruis et al., 2016). Additionally, Parker and Chung (2018) claim that little is known
about the implementation of MACS within the important hospitality industry. Our study
enhances the understanding of how environmental innovation practices can improve
organizational performance and sheds light on the complex links involved to this effect.
Specifically, we suggest and offer quantitative evidence that the interactive use of MACS
triggers the implementation of environmental management practices, and these
environmental innovation practices enhance operational performance when managers in
firms that have implemented environmental training use MACS diagnostically.
The findings of this paper also suggest that because of the importance of economic
fitness for environmental issues, MACS could be a critical part of the effective
implementation of environmental innovation practices. First, we find that face-to-face
discussions, forward-looking use or focusing on strategic uncertainties involved in the
AAAJ interactive use of MACS, drive the successful implementation of environmental innovation
32,5 practices. Second, our results contribute to the literature by suggesting that the
implementation of the environmental innovation practices has had a positive influence on
operational performance, and this effect is reinforced for firms with stronger diagnostic use
of MACS and environmental training.
Although our results are robust and important, similar to most studies, there are some
1346 limitations that need to be explicitly acknowledged. First, our study uses survey data from 89
respondents in the Brazilian hotel industry. We take steps to ensure the reliability of the data,
and no bias was detected (non-response bias, common method bias test). Second, the
generalization of these findings to other industries or firms requires caution because Brazilian
hotels and the year 2016 show important specificities. Future research into other industries
and countries can extend this framework in order to establish its robustness. It is likely that
the influence of MACS on fostering and monitoring environmental innovation practices might
be constrained in a setting in which environmental issues are not a strategic uncertainty.
Our empirical findings could also be extended in several ways. We study the effects of
MACS on environmental innovation practices with cross-sectional data. A longitudinal
study might support the links between the different uses of MACS, environmental
innovation practices, environmental training and operational performance. Further research
into other control systems, informal or formal, could also benefit from our theoretical model.

Acknowledgments
The authors wish to offer a special note of thanks to Lee Parker, the editor, and the anonymous
referees for their helpful guidance and advice throughout the revision process. The authors
also gratefully acknowledge the helpful comments and suggestions of Daiane Antonini
Bortoluzzi (UFSC, Brazil), Beatriz Garcia Osma (UC3M, Spain), Ernesto Lopez-Valeiras (UVigo,
Spain), Ricardo Malagueño (UEA, UK), Marcleide Pederneiras (UFPB, Brazil) and Jose Luis
Ucieda (UAM, Spain) on earlier versions of this paper. The authors acknowledge financial
assistance from the Spanish Ministry of Education and Science (ECO2016-77579-C3-3-P),
Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq), and the Catedra
UAM-Auditores Madrid. All authors contributed equally to this manuscript.

Notes
1. We are grateful to an anonymous reviewer for suggesting this consideration.
2. Burritt et al. (2002) provide an excellent review of the type of information into the EMA systems.
3. Jollands et al. (2018, p. 1653) provide an example of how an organization “constructed and
enrolled a carbon footprint to act as a management control. This management control was
mobilized to give the required ‘answers’ to pressure groups who were advocating that they
should be taking action in regards to climate change.”
4. As an example, Simons (1995, p. 94) provides an illustration in his seminal study. For Pepsi,
external uncertainties involve changes in customer tastes, consumer response to changes in
promotion or pricing, or also customer perception of health risks of artificial sweeteners.
Managers must evaluate the nature of changes and the business adaption, using interactive
MACS to activate searches.
5. As an example, Rothenberg (2003, p. 1795) offers qualitative evidence of the need to: receive
information of an environmental nature, and employees without this training feel oversaturated
with information that they are not able to manage. For example, in the first case: “an engineer
stated, ‘I would like to see more detailed use of information on plastic waste and reuse. Sometimes
there is a dollar number that is reported, but that does not tell how much waste is being
produced’.” In the second situation, an engineer stated, “I don’t need more information” and
“I need to figure out how to use all the information I am getting now!”
 6. Another useful example is to manage inventory in an environmentally conscious way. Managers Management
of the hotels interactively using their MACS detect pressures for green menus and cooking. In accounting and
response to this pressure, managers include this environmental practice. Since green food, km0 or
short chain products are usually more expensive, data from a diagnostic use of MACS leads control
managers to correct potential deviations by making purchases by volume (with rappels) or with systems
discounts. This inventory mismanagement generates more waste that customers observe and,
potentially, has a negative effect on performance (i.e. customer satisfaction). A diagnostic
use of MACS, together with an environmental training, makes the inventory management more 1347
environmentally friendly, trying to generate less waste. That is, although potentially the unit
cost of the products is greater, a good inventory management will make the impact on
performance greater.
7. From this website, we also collected data such as e-mail, telephone number and address.
8. Environmental innovation practices from our sample involves cases of, for example:
improving health environments (no-chemical cleaning, fresh air), lighting and climate control
(i.e. linked to room cards), reusing towels and bed sheets, using refillable shampoo dispensers,
using low flow/intelligent showerheads, using low flow toilets and good sanitation practices,
using of recyclable/reusable packaging bags for souvenirs, using of recyclable/reusable
packaging for take-away food, elevators use single control button or providing bike
rental services.
9. Environmental training from our sample comprises cases of, for example: information to
front-line employees about environmental programs, training on procedures for purchasing,
handling of chemicals and hazardous waste, cooking oil management, providing information to
customers about environmental programs or information about potential environmental
consequences of mismanagement some pre-established operational procedures.
10. We are grateful to an anonymous reviewer for pointing out the inclusion of this control variable.
11. Due to our research question and theoretical framework, the interactive and diagnostic uses of
MACS are included separately in two different models.
12. We measured financial performance using the following four items (Spillecke and Brettel, 2013):
hotel profitability relative to competitors; return on investment relative to competitors; reaching
financial goals relative to competitors; and increase in revenues relative to competitors (five-point
Likert scale). Factor analysis results show that the four items loaded on a single factor (% of
variance explained 89.45 percent; eigenvalue ¼ 3.58; loading factors are in the 0.901–0.965 range;
Cronbach’s α ¼ 0.960).

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About the authors 1357

Jacobo Gomez-Conde is Associate Professor at the Universidad Autonoma de Madrid (Spain).
He received his Doctoral Degree in Accounting and Finance from Universidad de Vigo in 2012.
His research areas of interest are design and use of management control systems, firm external
pressures and innovation. He has published in journals like Management Accounting Research, Small
Business Economics and Sustainability Journal or Review of Managerial Science. Jacobo Gomez-Conde is
the corresponding author and can be contacted at: jacobo.gomez@uam.es
Rogerio Joao Lunkes is Associate Professor at the Federal University of Santa Catarina (Brazil). He
is graduate in Accounting Sciences of the Universidade Federal de Santa Catarina, and has a Master in
Production Engineering from Universidade Federal de Santa Catarina and a PhD in Production
Engineering from the same institution. Rogerio has experience in administration, dealing with the
areas of the Balanced Scorecard, budgeting activities, accounting control, budgets and activity-based
costing, and he has authored articles published in journals like Management Decision or Journal of
Cleaner Production.
Fabricia Silva Rosa is Associate Professor at the Federal University of Santa Catarina (Brazil). She
has a PhD in Production Engineering from UFSC, a PhD in Accounting from the Universidad de
Valencia, a Degree in Accounting from the University of Santa Catarina and a Master in Production
Engineering from the Federal University of Santa Catarina. She has published in journals like
Management Decision or Journal of Cleaner Production.

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