International journal of Contemporary Business Studies

International Journal of Contemporary Business Studies
Vol: 3, No: 6. June, 2012 ISSN 2156-7506
Available online at http://www.akpinsight.webs.com
interested in the literature of management accounting for a long time as an important subject.
Indeed, the basic utility of the subject comes from increasing importance of determining
dimensions of budgetary participation‟s effects on managers‟ performance in the present
competitive conditions for firms.
From psychological and cognitive perceptions, there are two advantages of managers‟
participation in budgeting process. First, owing to identification and ego-involvement with
budget objectives, participation is associated to performance and so, leads to enhanced
motivation and commitment to the budget (Brownell, 1982; Shields & Shields, 1998). The
second reason is improving flow of information between superiors and subordinates, budgetary
participation leads to good decision making. From this standpoint, participation escorts to higher
motivation, higher commitment, higher quality decisions and consequently higher performance.
2. LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
The effect of budgetary participation on the organizational performance has been the subject of
considerable research in management accounting (Chong et al., 2005).Early empirical studies
used a universalistic approach to examine the effect of budgetary participation. However, the
results have been mixed (Murray, 1990; Kren, 1992; Chong et al., 2005; Jermias & Setiawan,
2008).
Subsequent studies have attempted to reconcile the conflicting results by adopting a contingency
approach (Brownell, 1982a; Govindarajan, 1986; Chong et al., 2005). The empirical evidence
generated by these studies suggests that contingency factors such as locus of control (Brownell,
1982, 1983), perceived environmental uncertainty (Govindarajan, 1986), leadership style
(Brownell, 1983), decentralization (Gul et al., 1995), role ambiguity and role conflict (Chong &
Bateman, 2000), and feedback (Chong & Chong, 2002a) have an impact on participationperformance
linkage.
The present work aims to extend this field of research by examining another contingent variable,
namely level of competitiveness, which is an important external environmental factor.
Competitiveness has been identified as a major reason for companies to choose a customerfocused
strategy for gaining a competitive edge (Porter, 1979). It has been suggested that
managers will always be faced with problems associated with market conditions in their routine
planning and controlling behaviors.
The budgetary participation gives legitimacy to individuals to discuss problems of their
organization with their superiors, it can also provide a framework within which people can
exchange information and ideas to solve problems and agree on future actions, this may affect
the performance of their businesses (O‟Connor, 1995). However by adopting a contingent
approach, Chong et al., (2005) argues that, under conditions of low competition, companies are
focusing more on short-term trading. It follows that managers don‟t need to collect market
information for planning purposes.
It is further argued that managers in firms facing intense market competition are more likely to
make greater use of multiple performance measures in their attempt to trace the various market
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