International journal of Contemporary Business Studies

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International Journal of Contemporary Business Studies Vol: 3, No: 6. June, 2012 ISSN 2156-7506 Available online at http://www.akpinsight.webs.com The impact of Budget Participation on Organizational Performance via Competitiveness Lassaad Ben Mahjoub Assistant professor of accounting, Department of Accounting and Finance, Faculty of Economic Sciences and Management, Sfax, Tunisia. Khamoussi Halioui Associate Professor of Accounting, College of Economics, Management and Information Systems, University of Nizwa, OMAN ABSTRACT This paper aims to inquire aspect of linkage between budgetary and organizational performance across market competitiveness as an important variable affecting this relation. To test this association, the data is obtained via survey from 89 managers working in accounting and finance sub-departments in Tunisia in 2009. In the analysis of data, descriptive statistics, correlation analysis, factor analysis, multiple regression analysis and t-test analysis were used. The results of survey are consistent with the proposition that businesses with high performance are more participative and have higher competitiveness level than businesses with low performance. However, we conducted a bi-dimensional analysis of the budgetary participation, we obtained two dimensions 1 : influence and involvement. We concluded that the second dimension is the responsible of the studied effect. Keywords: Budgetary Participation; Organizational Performance; Competitiveness; Dimensional Analysis International Journal of Contemporary Business Studies Vol: 3, No: 6. June, 2012 pp.38-49 ©Academy of Knowledge Process 1. INTRODUCTION Budgetary participation that means participation of managers to determination process of resources using in their own activities and operations, has been 1 The two dimensions are: involvement and influence. For the purpose of this study, the involvement dimension of budgetary participation is defined as the extent to which information is exchanged between managers about factors that affect their budget, while the influence dimension of budgetary participation refers to the extent to which managers have command over the budget setting process that established the criteria under which they may be evaluated (Hassel and Cunningham, 1993, 1996). Copyright © 2012. Academy of Knowledge Process 38
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 Copyright © 2012. Academy of Knowledge Process 39
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