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Advances in Management AccountingCorporate Strategy, Employees Attitudes Toward the Balanced Scorecard, and
Corporate Performance: A Contingency Approach
Majidul Islam, Hani Tadros
Article information:
To cite this document:Majidul Islam, Hani Tadros. "Corporate Strategy, EmployeesAttitudes Toward the Balanced Scorecard, and Corporate Performance: A ContingencyApproach" InAdvances in Management Accounting. Published online: 09 Mar 2015;149-182.
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CORPORATE STRATEGY,
EMPLOYEES ATTITUDES TOWARD
THE BALANCED SCORECARD,
AND CORPORATE PERFORMANCE:A CONTINGENCY APPROACH
Majidul Islam and Hani Tadros
ABSTRACT
Behavioral aspects and positive attitudes toward the balanced scorecard
(BSC) could be a determinant factor in the success of BSC implementa-
tion. In the study we use the contingency theory framework to examine
whether adopting a planned strategy improves employees buying into the
BSC and helps to maximize the benefits of BSC implementation by
enhancing corporate performance. We hypothesize that employees
attitudes and perceptions toward the implementation of the BSC are
contingent upon the type of strategy the firm is employing and the
suitability of deploying the BSC with this strategy in place. We use a path
model that draws an association between the firms strategy and employee
attitudes toward BSC implementation and employs OLS regression to
test the association between the variables. We also examine whether
employees positive attitudes help to improve a firms performance as
proxied by the customer, internal processes, learning and innovation, and
Advances in Management Accounting, Volume 21, 149182
Copyright r 2012 by Emerald Group Publishing LimitedAll rights of reproduction in any form reserved
ISSN: 1474-7871/doi:10.1108/S1474-7871(2012)0000021012
149
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financial perspectives of the BSC. We sent a mail survey to Canadian andUS firms to collect the necessary data in order to conduct this study.
Conforming to our expectations, we find that firms that carefully plan
their strategic objectives are more likely to have a positive impact on their
employees perception of the BSC. A deliberate strategy or planned
strategy as defined by Mintzberg (1978) is associated with higher levels
of BSC awareness, perceptions of BSC ease of use, perceptions of BSC
usefulness, and intentions to use the BSC. We also find that higher
perceptions of BSC ease of use are positively associated with aspects of a
firms performance, such as from the customer, internal processes, andlearning and innovation perspectives. Hence, we conclude that firms
implementing the BSC need to take into consideration that the successful
implementation of the BSC requires careful planning to ensure that the
firms strategic objectives are well formulated, in agreement with BSC
measures, and effectively communicated to BSC users.
INTRODUCTION
Since Kaplan and Norton (1992) developed the balanced scorecard (BSC)
for performance and strategic management, the tool has gained prominence
in industry and academic research. The BSC relies on the interaction and the
complementarities between four aspects of the firm financial, customer,
internal business, and innovation and learning perspectives to drive the
firms future financial success in a sustainable manner. There is some
empirical evidence that firms that implement the BSC achieve some form of
success and enhanced financial performance (Bento & White, 2010; DeGeuser, Mooraj, & Oyon, 2009; Hoque & James, 2000; Maiga & Jacobs,
2003). The normative approach advocates that a blend of measures drawn
from the four scorecard perspectives would contribute toward organiza-
tional performance (Kaplan & Norton, 1992, 1996).Van der Stede, Chow,
and Lin (2006)emphasize that performance measures play a very important
role in translating an organizations strategy into desired organizational
behaviors and consequent results, as well as in helping to communicate
expectations, monitor progress, provide feedback, and on the other hand,
motivate employees who would be under the BSC control system throughperformance-based rewards. Nevertheless, the difficulty in implementing
the BSC impedes companies, on numerous occasions, from achieving the
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desired results (Chen & Jones, 2009; Johanson, Skoog, Backlund, &Almqvist, 2006).
Research studies cite employees behavioral issues as a potential
demotivator to the use of management control systems. The technology
acceptance model (TAM) (Davis, 1989;Davis, Bagozzi, & Warshaw, 1989)
examines employees behavioral issues and shows that positive perceptions
of the technologys ease of use and usefulness increase employees liking of
the technology and the likelihood that employees would use that techno-
logy. However, there is a lack of evidence that overcoming these behavioral
issues would have a positive impact on performance (Chenhall, 2003). Thisstudy aims at filling that gap in the literature by examining the link between
employee acceptance of the BSC and firm performance.
The Link Between Employees Behavioral Factors Toward Balanced
Scorecard Usage and Firm Strategy
Some studies that explain the failure of the BSC in improving performance
claim that the widespread adoption of nonfinancial measures is generallybased on the idea that financial measures are characterized by being narrow
in focus, historical in nature, may be aggregated, and too one-dimensional to
be useful (e.g., Budde, 2007; DeBusk, Killough, & Brown, 2005; Ittner,
Larcker, & Randall, 2003;Lau & Sholihin, 2005). On the other hand,Kaplan
and Norton (2001) emphasize the linkage between the different measure-
ments of the BSC and the firms strategy to promote the nonfinancial
measures from a strategic operational point of view. In other words, the fit
between the BSC and the firms strategy is fundamental for a successful
implementation. Firms with planned strategies strategies with well-definedobjectives are more likely to be able to integrate their strategic objectives
into the BSC system. That premeditated path, from developing the firms
strategy to accordingly designing the BSC system, may improve the effective-
ness of communicating the BSC objectives, which increases the likelihood of
having the employees buy into the BSC, develop positive attitudes toward
it, and accept to use it as a management control system. Therefore, we suggest
that the success of deploying the BSC relies on the firms ability to positively
affect employees attitudes toward the BSC. This is contingent upon the fit
between the firms strategy and the BSC, which is measured by how well thefirms strategy is incorporated into the BSC objectives and the suitability
of deploying the BSC while this type of strategy is in place.
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The Impact of the Internal Environment on the Firms Strategy andEmployees Attitudes Toward BSC Implementation
Finally, the fit between the BSC and strategy may not ensure enhanced
performance, since other variables, such as competition or cost structure
(Langfield-Smith, 2007), may also affect the usage of the BSC. Therefore,
to ensure a successful implementation, the firm also needs to manage a fit
between BSC usage and other internal factors of the firms environment. To
the best of our knowledge, this has not been examined in the management
accounting literature. This study would like to contribute to the literature byexamining the link between behavioral factors of BSC adoption and
corporate strategy and its impact on performance.
In this study, we first examine the effect of fit between the firms strategy
and the BSC on employees acceptance of the BSC as a management control
system. We hypothesize that firms that employ a planned strategy are more
suitable to deploy the BSC, since a planned strategy ensures that BSC
objectives are well communicated to employees, which positively affects
their attitudes toward the BSC. We also examine whether employees
acceptance of the BSC would lead to improved performance; a model ispresented inFig. 1. We study a sample of firms who implement the BSC and
Internal
Factors
Strategy
External
Factors
Employee
attitudes
toward BSC
Implementation
Performance
Fig. 1. Balanced Scorecard Implementation Model.
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assess the impact of having a deliberate or planned strategy on employeeattitudes and behaviors toward the implementation of the BSC. We
hypothesize that a deliberate strategy that ensures integration of BSC
objectives and proper communication of these objectives during BSC
implementation will positively influence employees attitudes toward
BSC implementation, which will consequently have a positive impact on firm
performance.
The findings of this study would help explain and predict the likelihood
that BSC implementation would lead to improved performance. We also
believe that this study provides a validation to the TAM, as it shows that thebehavioral aspect is an important factor in BSC implementation, since it has
an impact on performance. Furthermore, it also provides guidance to firms
on how they could make the most of BSC usage and maximize its expected
benefits.
Section Theory and hypotheses development provides a review of the
literature and hypothesis development. Section Method includes the
sample description and the methodology used for our analysis. Section
Results is a discussion of the research findings. Finally, the conclusion and
research limitation are presented in Section Conclusion.
THEORY AND HYPOTHESES DEVELOPMENT
Success of BSC Implementation, Firm Strategy, and
the Contingency Framework
The use of the BSC as a management control system is not a blueprint for
success, since different firms operate at different levels of uncertainty. Theability of the BSC to inform managers on how to respond to the firms level
of uncertainty determines the success of the BSC as a management control
system. In order to respond to uncertainty, the contingency theory
framework predicts that control systems would lead to improved perfor-
mance if they act in concurrence with other factors of the firms internal
environment (Govindarajan, 1984, 1988;Hayes, 1977;Hirst, 1983;James &
Elmezughi, 2010). For example, James and Elmezughi (2010) show that
improvement in performance resulting from the use of BSC and activity-
based costing (ABC) is contingent on the firms strategy. They find thatfirms adopting a cost leadership strategy improve their customer and inno-
vation performance in comparison with firms with a differentiation strategy.
Govindarajan (1988)finds that firms that employ a differentiation strategy
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achieve more success when they put less emphasis on meeting budgetaryconditions in comparison with firms that employ a low-cost strategy. In
brief, fit between the firms strategy as well as other internal factors and
the control system used by the firm is essential for a successful deployment
of the control system.
Employees Attitudes Toward Balanced Scorecard Implementation and
the Firms Performance
Further, human resource factors are a major factor in the failure to deploy
management control systems (Chen & Jones, 2009;Johanson et al., 2006).
The disconnection between the firms strategic objectives and the BSC
objectives might lead to poor development and communication of BSC
objectives, resulting in lower levels of employee acceptance of the control
system, which, in turn, could harm rather than benefit performance. In this
article, we study this relationship between the firms strategy, employee
attitudes toward BSC implementation, and performance, using a sample of
firms who have implemented the BSC as a tool for management control.There are many cases where firms fail to put the BSC into operation, and
academic research attempts to explore the factors behind failures (Johanson
et al., 2006). In a survey of 96 MBA students, Chen and Jones (2009)
highlight the importance of employee buy into the BSC for the firm to
derive the expected benefits from implementation. They find that the
disengagement between employees goals and those of the BSC in other
words, goals set by their managers is the reason for employee
dissatisfaction. Further, they also find that BSC measures and benefits
are not well communicated to employees. Johanson et al. (2006) criticizecompanies for employing a top-down approach in BSC implementation that
does not allow employee participation in the process. Therefore, employee
involvement and attitude toward the BSC are major success factors in BSC
implementation.
Islam and Kellermanns (2006)examine an individual-level model similar
to the TAM developed by Davies (1989) that embraces behavioral issues
that could enhance or impede BSC usage inside the firm. They examine the
association between four different factors and find that employee awareness
of the BSC capabilities leads to a better perception of the BSCs ease of useand usefulness. Further, perception about the BSCs ease of use is also asso-
ciated with positive perception of the BSCs usefulness. Finally, perception of
the BSCs usefulness among employees leads to greater intention to use the
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BSC as a management control tool. Whether the findings of Islam andKellermanns (2006)have an impact on firm performance remains unknown.
Based on contingency theory framework, Chenhall (2003) predicts that
positive perceptions about the ease of use and usefulness of a management
control system would lead to better usage of the system, which would
accordingly improve performance. Hence, we hypothesize that the four
behavioral issues examined by Islam and Kellermanns (2006) would
influence firm performance following the implementation of the BSC.
H1. Awareness of BSC capabilities is positively associated with firm
performance.
H1a. Perception of BSC ease of use is positively associated with firm
performance.
H1b. Perception of BSC usefulness is positively associated with firm
performance.
H1c. Intention to use the BSC is positively associated with firm
performance.
Strategy and Employees Attitudes Toward Balanced Scorecard
Implementation
The association of management control systems with the companys strategy
is documented in management accounting literature (Langfield-Smith,
2007). In this reciprocal relationship, the firms strategy helps to define
the type of control system required by the firm (Kaplan & Norton, 2001). Inreturn, the control system provides the companys management team with
the necessary support for strategy realization.
Strategy is quite an abstruse term that many scholars attempt to define.
According to Mintzberg (1978), strategy goes through two phases:
formulation and realization. He suggests that not every formulated strategy
ends up being implemented. On the other hand, a firm might realize a
strategy that results from regular daily operating decisions that end up
building the firms strategy, which he calls emergent strategy. Miles,
Snow, Meyer, and Coleman (1978) define three types of firm strategies:defender, prospector, or analyzer. A defender strategy is based on
maintaining stability through continuous improvement of current products
or services. Meanwhile, a prospector strategy is built around a dynamic
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environment that favors innovation. The analyzer strategy falls halfway onthe defenderprospector spectrum. Similarly, Porter (1980) also defines
three types of strategies: cost leadership, differentiation, and focus.
Despite the differences, there is common ground between these defini-
tions. According to Langfield-Smith (2007), a defender strategy and a cost
leadership strategy require a high level of planning with structured and
detailed control systems in order to achieve results. This draws a parallel
withMintzbergs (1978) definition of deliberate strategy, a strategy that
goes from a careful phase of formulation into the implementation phase.
Alternatively, Langfield-Smith (2007) claims that prospector and differ-entiation adopter firms prefer more flexibility and less formal control
systems, as mandated by the dynamic environment in which they operate.
These types of firms may adopt an emergent strategy, as defined by
Mintzberg (1978), where the realized strategy is a result of the decisions
made in response to the changes in the environment rather than a pre-
planned process.
We suggest that firms adopting a deliberate strategy are more inclined to
adopt a structured management control system, including one such as the
BSC. These firms would carefully plan the implementation of the BSC andensure that the four elements customer, financial, internal business,
learning, and innovation were reflective of the firms strategy. Further, they
would ensure that objectives were carefully communicated to employees,
which would have a positive impact on their attitudes toward the BSC
implementation. Hence, we hypothesize that a deliberate strategy is positively
associated with the four behavioral factors of BSC implementation.
H2. A deliberate strategy is positively associated with awareness of BSC
capabilities.
H2a. A deliberate strategy is positively associated with perception of BSC
ease of use.
H2b. A deliberate strategy is positively associated with perception of BSC
usefulness.
H2c. A deliberate strategy is positively associated with the intention to
use the BSC.
Alternatively, firms following emergent strategies might have theirobjectives changing constantly. If these firms adopt the BSC, they would
have difficulty in embedding their continually changing strategic objectives
into the four perspectives of the BSC. Thus, firms would not be able to rely
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on predefined measures of financial, customer, learning and innovation, andinternal processes, since their emergent strategies would require these
measures to evolve continually. Consequently, it would create confusion
among the users of the BSC and negatively affect their perception about the
tool. Therefore, we hypothesize that an emergent strategy is negatively
associated with the four factors of BSC implementation.
H3. An emergent strategy is negatively associated with awareness of BSC
capabilities.
H3a. An emergent strategy is negatively associated with perception ofBSC ease of use.
H3b. An emergent strategy is negatively associated with perception of
BSC usefulness.
H3c. An emergent strategy is negatively associated with the intention to
use the BSC.
Control Variables
Employees Attitudes Toward BSC Implementation and the Firms Internal
Characteristics
A firms internal characteristics affect the success of implementing a control
system such as the BSC. For example, Chen and Jones (2009) find that
differences exist between BSC adopters and nonadopters in terms of
information capital. They claim that BSC adopters have more developed
information systems that enable firms to process information in real time,thus facilitating the adoption process. Lingle and Schiemann (1994)discuss
the role of management information systems in the success of strategy
formulation and implementation. They suggest that inefficient information
systems lead to data scatter, which creates three problems that hinder the
effective formulation and implementation of the firms strategy. First, it
creates strategy silos, where executives define the firms strategy according
to their set of data. Second, it creates a data war, where each executive
uses the data at his/her possession to defend his/her strategic focus. Again,
inadequate data at the time of strategy formulation leads to continualchanges in strategic objectives as new information emerges. Therefore, it is
necessary to control for the firms internal characteristics, since they may
play a role in determining employees attitudes toward BSC implementation.
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Based on prior research, we control for firm size, marketing strengths(change in market share, percentage of sales from new products), oper-
ational strengths (employee productivity and employee retention), and
information system strength.
Firm Strategy and External Variables
Govindarajan and Gupta (1985)suggest that a good fit between the elements
of the firms external environment, the firms strategy, and its choice of controlsystem would result in better corporate performance. There is evidence that
external variables are determinants of the firms strategy; furthermore, there is
also evidence that external variables would affect the choice of the
management control system. Khandwalla (1972) finds that operating in a
market characterized by strong competition increases the need for formal
control systems. Therefore, we suggest that variables of the firms external
environment would determine the firms type of strategy, which, conse-
quently, would determine the success of implementing that control system
with this type of strategy in place. We control for the level of competition formarket share, change in consumer behavior, change in product life cycle, and
change in social, legal, and political environments as determinants of the
firms strategy.
METHOD
Sample Selection
We collected data for this study by surveying individuals in management
teams in American and Canadian companies, using the Dunn and Bradstreet
database. We sent the survey questionnaires to 800 companies by mail in
November 2008. We followed up with phone calls two weeks after the mailing
date and received responses until February 2009. The survey consisted of
questions about the firms internal processes, external environment, strategy,
BSC perceptions, and corporate performance. In most of the questions,
the respondent showed his/her level of agreement with the subject by using
a seven-point Likert-scale (seeTable 1for details). The survey ensured thatall respondents were kept anonymous.
We received 91 responses, representing an 11.4% response rate. In this
study, we analyze the responses of 63 firms who indicated that they use the
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Table 1. Measures of Strategy, Employees Attitudes Toward the BSC Implem
Internal and External Factors.
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BSC. The main reason for the low response rate was that the firmsmanagement was busy managing the economic depression at the end of
2008. Other reasons for not answering the survey included company policy
on not responding to surveys and the unavailability of the contact person.
Definition of Variables
Table 1shows the measures that we use to proxy for the different variables
employed in this study.Corporate performance: We use a large number of indicators to proxy for
firm performance. Since these indicators could be linked together, we
employ factor analysis to reduce the number of indicators for performance.
The study examines the four dimensions of performance as described by
Kaplan and Norton (1992): financial, customer, internal business, and
innovation and learning. Measures of firm performance are presented in
Table 1.
Employees behavioral factors toward BSC implementation: As was
previously mentioned, we adopt the four measures developed by Islam andKellermanns (2006) to proxy for the different behavioral factors affecting
the implementation of the BSC. These factors were awareness of BSC
capabilities, perceptions of BSC ease of use, perceptions of BSC usefulness,
and intentions to use the BSC.Table 1presents the measures of employees
attitudes toward BSC implementation.
Firm strategy: We examine one characteristic of firm strategy as defined
by Mintzberg (1978): whether the firms realized strategy is a result of a
preformulated strategy (i.e., deliberate strategy) or whether it is an outcome
of a management decision-making process in response to a changingenvironment (emergent strategy). The survey asks the respondents to
describe whether the firms strategy is planned in advance or whether it is
formulated over time. Measures of the firms strategy are presented in
Table 1.
Internal factors: We examine the firms capabilities and characteristics
such as the extent of use of information systems, productivity, employee
retention, product development, and market performance.
External factors: In terms of external factors, we examine the level of
competition in the firms market, changes in consumer demands, changes inthe outside technology related to product, manufacturing, and information
processing, changes in social, political, and legal environments, and product
life cycle.
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RESULTS
Determining Firm Performance Using Factor Analysis
To understand the association between the different variables, we draw a
path model where we use OLS regression to test the relation between the
variables, as indicated inFig. 1.Table 2summarizes the results of the factor
analysis that define the different constructs of BSC awareness, perception of
BSC ease of use, perception of BSC usefulness, intention to use BSC,
strategy, financial perspective, customer perspective, internal businessperspective, and innovation and learning perspective. According to Kwok
and Sharp (1998), we test the reliability of the different measures using
Cronbach Alpha and use the results of the factor analysis to assess the
validity of our constructs. The results in Table 2 show that the different
measures have an acceptable level of internal consistency (Cronbach Alpha
between 0.5 and 0.9) except for one measure of the firms performance
customer perspective which has a low Cronbach Alpha (0.126 for the
customer satisfaction component and 0.293 for the new products
component). The high factor loading (above 0.5) provides assurance thatthe different measures are representing the constructs we want to measure.
Table 1 shows the definition we employ for the internal and external
characteristics of the firm. For the internal characteristics we asked the
respondents to report on the emphasis placed by their firm on the intro-
duction of new products, gain of market share, productivity, and employee
retention. We also assess the firms information system capabilities and
control for firm size. As for the external environment in which the firm was
operating, we asked the respondents to assess changes in product, manu-
facturing, and information technologies and product life cycle. We alsoasked them to assess the threats made by changes in customer preferences
and the legal, political, and social environment.Table 3presents the Pearson
correlation between the different variables.
It should be mentioned that the customer perspective reported in Table 2
has two components. The first component is associated with the introduc-
tion of new products; hence, it is called New Products. The second factor,
called Customer Satisfaction, is related to customer satisfaction measures
and product quality. The strategy construct also has two components. The
first component reported in Table 2 loads positively on measures ofDeliberate Strategy and loads negatively on measures of Emergent
Strategy. The second component loads on one measure of Emergent
Strategy. We retain the first component, since it provides an explanation
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Table 2. Results of Factor Analysis.Component
Loading
Variance
Explained
(%)
Factor analysis for the attributes of strategy
We typically dont know what the strategic priorities of
our business strategy should be until we engage in
some trial and error actions
0.480 42.9
My Organizations strategic priorities are carefully
planned and well understood before any significant
competitive actions are taken
0.606
Formal strategic plans serve as the basis for our
competitive actions
0.841
My Organizations strategic priorities are typically not
planned in advance but, rather, emerge over time as
the best means for achieving our objectives become
clearer
0.622
Competitive strategy for my organization typically
results from a formal business planning process (i.e.,
the formal plan precedes the action)
0.672
Cronbach Alpha for measures of emergent strategy 0.511
Cronbach Alpha for measures of deliberate strategy 0.709
Factor analysis for the attributes of BSC awareness
I know the feature of the balanced scorecard approach 0.931 74.1
I am aware of the cost of deploying balanced scorecard 0.893
I know the extent of benefits that can be derived by
deploying the balanced scorecard
0.931
I dont know the type of business activities in which
balanced scorecard information can be deployed
0.658
Cronbach Alpha for measures of BSC awareness 0.709
Factor analysis for the attributes of perception of BSC ease of use
The balanced scorecard approach is easy to learn 0.903 75.1
The balanced scorecard approach is clear and
understandable
0.919
The balanced scorecard approach is easy to use 0.863
The balanced scorecard approach is flexible 0.878
The balanced scorecard approach is hard to follow 0.760
Cronbach Alpha for measures of perception of BSC ease
of use
0.923
Factor analysis for the attributes of perception of BSC usefulness
Using balanced scorecard would improve company
performance
0.949 86.3
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Table 2. (Continued)
Component
Loading
Variance
Explained
(%)
Using balanced scorecard in the company would
increase productivity
0.896
Using balanced scorecard would enhance effectiveness
in the company
0.926
I find balanced scorecard would be useful in my
company
0.944
Cronbach Alpha for measures of perception of BSC
usefulness
0.947
Factor analysis for the attributes of BSC intention to use
Assuming I had access to BSC, I intend to use it 0.95 90.2
Given that I had access to BSC, I predict that I would
use it
0.95
Cronbach Alpha for measures of BSC intention to use 0.892
Factor analysis for the attributes financial perspective
Rate of return on investment (ROI) 0.823 48.9Percentage of market share 0.648
Sales growth 0.561
Cash flow from operations 0.737
Cronbach Alpha for measures of financial perspective 0.643
Component Loading Variance Explained (%)
New Products Customer
Satisfaction
Factor analysis for the attributes customer perspectiveProduct (or service) quality 0.138 0.838 57.8
Customer satisfaction with
product/service delivery
process
0.232 0.553
Percentage of sales from new
products
0.632 0.329
Development of markets for new
or existing products
0.838 0.137
Cronbach Alpha for measures of
measures of customersatisfaction
0.126
Cronbach Alpha for measures of
new products
0.293
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for 43% of the variation in strategy measures and since the interpretation of
that component is in agreement with our expectations. The second component
is not reported in this study. The higher the values of the strategy construct,
the more the firm is inclined toward the adoption of a Deliberate Strategy,
and the lower value of that construct meant that the firm tends to adopt an
emergent strategy.
Discussion of the Correlation Matrix
Regarding the correlation between the different variables, Table 3 shows
that there is a positive correlation between a firms strategy and the four
variables representing employees attitudes toward the BSC implementation.This suggests that a deliberate strategy is associated with higher levels
of BSC awareness, perception of BSC ease of use, perception of BSC
usefulness, and intention to use the BSC. The high levels of correlation
Table 2. (Continued)
Component
Loading
Variance
Explained (%)
Factor analysis for the attributes of internal processes perspective
Comparative costs with similar unit of competitors (or
service provider)
0.574 41.4
Decrease in percentage of waste and rework (or error
correction)
0.770
Decrease in percentage of total cost to net sales (services
or products)
0.737
Decrease in percentage of sales returns 0.593
Time to market (make available to public) new products 0.560
Your companys budget for waste management 0.593
Cronbach Alpha for measures of internal processes 0.683
Factor analysis for the attributes of learning and innovation perspective
Employee satisfaction 0.568 54.2
Investment in information technology/E-commerce 0.786
Workplace relations 0.617
Employee health and safety 0.810
Employee training and development 0.857
Cronbach Alpha for measures of learning and
innovation
0.781
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Table 3. Pearson Correlation.
Strategy BSC_ Awareness
BSC_Ease_of_Use
BSC_Usefulness BSC_Intention_to_Use
Financial N
Strategy 1
BSC_Awareness 0.562 1
BSC_Ease_of_Use 0.465 0.610 1
BSC_Usefulness 0.466 0.895 0.680 1
BSC_Intention_to_Use 0.477 0.777 0.698 0.827 1
Financial 0.309 0.334 0.275 0.252 0.223 1
Customer_New_Product 0.182 0.023 0.295 0.006 0.047 0.013
Customer_Satisfaction 0.155 0.116 0.148 0.157 0.209 0.182
Internal_Processes 0.078 0.041 0.404 0.012 0.037 0.235
Learning_Innovation 0.123
0.073 0.451
0.105 0.027 0.267 Size 0.129 0.266 0.399 0.183 0.340 0.414
Sales from new products 0.022 0.021 0.232 0.098 0.039 0.013
Market share 0.143 0.241 0.107 0.303 0.097 0.338
Productivity 0.02 0.181 0.106 0.06 0.276 0.043
Information systems 0.176 0.392 0.107 0.418 0.153 0.477
Employee retention 0.141 0.016 0.101 0.066 0.095 0.237
Competition 0.471 0.422 0.11 0.413 0.366 0.005
Product technology 0.21 0.471 0.106 0.448 0.27 0.257
Manufacturing
technology
0.313 0.480 0.205 0.488 0.477 0.310
Information technology 0.238 0.291 0.285 0.332 0.281 0.152
Legal environment 0.219 0.084 0.066 0.031 0.082 0.021 Customer preferences 0.274 0.509 0.138 0.536 0.283 0.108
Product life cycle 0.213 0.413 0.024 0.408 0.198 0.193
Social environment 0.119 0.396 0.181 0.393 0.300 0.178 DownloadedbyUniversityoftheSunshin
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Table 3. (Continued)
Size Sales from
New Products
Market
Share
Productivity Information
Systems
Employee
Retention
Competition Product
Technology
Manufacturing
Technology
In
Te
Size 1
Sales from new products 0.082 1
Market share 0.068 0.11 1
Productivity 0.233 0.318 0.637 1
Information systems 0.153 0.042 0.483 0.12 1
Employee retention 0.077 .292
0.411
0.459
0.231 1Competition 0.009 0.158 0.394 0.26 0.293 0.12 1
Product technology 0.135 0.044 0.311 0.034 0.351 0.279 0.314 1
Manufacturing technology 0.169 0.037 0.307 0.011 0.241 0.16 0.395 0.677 1
Information technology 0.199 0.257 0.122 0.044 0.309 0.248 0.415 0.466 0.471
Legal environment 0.036 0.084 0.344 0.021 0.357 0.165 0.158 0.004 0.23
Customer preferences 0.056 0.068 0.19 0.027 0.204 0.119 0.348 0.415 0.421
Product life cycle 0.043 0.019 0.433 0.103 0.414 0.288 0.395 0.700 0.614
Social environment 0.081 0.015 0.379 0.118 0.391 0.293 0.257 0.414 0.463
N63.
po.1 level (2-tailed); po.05 level (2-tailed).
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between the four variables representing employees attitudes toward theBSC implementation may raise questions about the colinearity between the
measurements. It may be possible that the users overall experience with
the BSC biases their assessment of the level of awareness of BSC capabi-
lities, perceptions about the BSC, and intention to use it. In other words,
users who have a positive BSC experience might be willing to provide a high
evaluation regarding their level of BSC awareness, perception of BSC ease
of use, perception of BSC usefulness, and intention to use the BSC and vice
versa. A positive correlation between BSC ease of use and internal processes
and innovation and learning shows that BSC ease of use is essential toengage employees in using the BSC and improving some aspects of a firms
performance. However, it is the higher awareness of the BSC capabilities
that results in higher financial performance, as shown by the positive corre-
lation between the two variables.
Regression Analysis
Association between a Firms Strategy and Employees Attitudes TowardBSC Implementation
Table 4 shows that firms that face increased market competition, higher
changes in manufacturing technology, and higher legal and political threats
are more likely to adopt a deliberate strategy, meaning that these firms plan
Table 4. Regression Results of the Effect of Firms External
Factors on Strategy.
Strategy
b R2 F
Competition 0.356 0.386 3.064
Product technology 0.175
Manufacturing technology 0.306
Information technology 0.076
Legal environment 0.301
Customer preferences 0.220
Product life cycle 0.026
Social environment 0.119
N63. po.1 level (2-tailed); po.01 (2-tailed).
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their strategic actions more carefully and ensure that their plans areimplemented accordingly.
As predicted in H2 and H3, there is a positive association between the
type of strategy used and the employees attitudes toward BSC implementa-
tion awareness, perception of ease of use, perception of usefulness, and
intention to use (refer to Table 5). This means that firms that adopt a
deliberate strategy are more likely to positively influence employees
attitudes toward BSC implementation, and firms that adopt an emergent
strategy are less likely to do so. A possible explanation for this finding is that
the implementation of the BSC requires a lot of preparation on the part ofthe firm; therefore, anticipation and early resolve on objectives facilitate the
communication of the BSC capabilities to the employees and ensure their
buy-in.
Association between a Firms Internal Factors and Employees Attitudes
Toward BSC Implementation
Table 6shows the association between the internal characteristics of the firm
and the employees attitudes toward the BSC implementation. Intuitively,
firms that focus on the development of their information systems areassociated with higher levels of BSC awareness. A probable explanation is
that the development of information systems helps communicate the BSC
capabilities effectively to employees. However, a developed information
system neither ensures that the employees would perceive the BSC as being
easy to use or its usefulness nor guarantees that employees will use the BSC.
Firms with a focus on revenue-side activities, such as increase in market
share, would find the BSC more useful and would be much more willing to
use it. A focus on market share is also associated with higher BSC awareness
but is not associated with BSC perception of ease of use. Interestingly, firmsassociated with cost-reduction activities, such as increasing productivity, are
not in favor of implementing the BSC. A possible explanation is that the
implementation of formal control systems requires a lot of time and could
be seen as being counterproductive. A focus on increasing productivity
means that employees are less aware of BSC capabilities. They are less likely
to perceive it as a useful tool and less likely to use it.
Similar to the results of the study by Islam and Kellermanns (2006)
(results are not reported), BSC perception of ease of use and BSC perception
of usefulness are associated with BSC awareness. BSC perception of ease ofuse positively affects BSC perception of usefulness. Finally, BSC perception
of ease of use and BSC perception of usefulness positively affect BSC
intention to use.
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Table 5. Regression Results of the Effect of Strategy on Employee Attitud
BSC Awareness Perception of BSC Ease of Use Perception of BSC Usefulne
b R2 F b R2 F b R2 F
Strategy 0.526 0.316 22.6 0.338 0.216 12.12 0.39 0.218 12.79
N63. po.01 (2-tailed).
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Table 6. Regression Results of the Effect of Firms Internal Factors on Employee
BSC Awareness Perception of BSC Ease of Use Perception of BSC U
b R2 F b R2 F b R2
Size 0.032 0.375 2.897 0.096 0.124 0.638 0.099 0.375
Sales from new
products
0.063 0.107 0.153
Market share 0.407 0.002 0.405
Productivity 0.466 0.036 0.398
Information
systems
0.282 0.031 0.226
Employee
retention
0.148 0.087 0.164
N63. po.1 level (2-tailed); po.05 level (2-tailed).
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Association between Employees Attitudes Toward BSC Implementation andFirm Performance
As shown inTable 7, employees attitudes toward BSC implementation are
associated with improved levels of performance, as predicted by H1. It
seems that employees perception of BSC ease of use is the most important
factor that leads to improved performance. It is positively associated with
improved performance in the learning and innovation, customer, and
internal processes perspectives. Furthermore, awareness of the BSC
capabilities is associated with higher levels of financial performance.
Inexplicably, awareness of BSC capabilities is negatively associated withthe internal processes perspective. The only explanation for this finding is
that the reliability of measuring internal processes, though acceptable, is not
high enough to guarantee a reliable measurement of the firms internal
processes (Cronbach Alpha of 0.683).Fig. 2summarizes the findings of our
model that links the firms strategy, employees behavioral factors toward
the implementation of the BSC, and firms performance.
CONCLUSION
In this study, we examine whether the fit between the firms strategy and
management control in using the BSC had a positive impact on corporate
performance. We focus on behavioral issues affecting the implementation of
the BSC in companies. We hypothesize that a fit between strategy and the
BSC would have a positive impact on the behavior of BSC users, which
could lead to better performance. We also control for the firms internal
characteristics and external environment that could affect the choice of the
firms strategy and the implementation of the BSC as a management controltool.
We examine four behavioral factors that affect BSC implementation,
which are BSC awareness, perception of ease of use, perception of useful-
ness, and intention to use. Islam and Kellermanns (2006) show that these
factors are interrelated and that awareness about BSC capabilities is the
driver of employees perception of ease of use and usefulness, which in turn
increases the likelihood that employees will buy into the BSC and become
more willing to use it. Our study confirms these findings. We argue that a fit
between the firms strategy and BSC objectives would enhance employeesunderstanding of BSC capabilities and strengthen their view that the BSC
could help the firm to improve; thus, it could lead to advancing a firms
performance. BSC implementation is a complex task that requires careful
Strategy, Balanced Scorecard, and Corporate Performance 177
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Table 7. Regression Results of Employee Attitudes Toward the BSC on Co
Financial Perspective Customer Perspective Internal Processes
Perspective
New Products Customer Satisfaction b R2
b R2 F b R2 F b R2 F
BSC awareness 0.731 0.180 2.147 0.231 0.096 0.983 0.296 0.044 0.430 0.808 0.275 3.2
Perception of
BSC ease of use
0.081 0.406 0.153 0.697
Perception of
BSC usefulness
0.327 0.173 0.140 0.375
BSC intention
to use
0.030 0.032 0.269 0.282
N63. po.1 level (2-tailed); po.05 level (2-tailed); po.01 (2-tailed).
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planning, preparation, and thorough understanding. Hence, we expect those
firms with clear and planned strategies deliberate strategies, as defined by
Mintzberg (1978) to be more successful in communicating BSC
capabilities and selling the BSC to their employees. Alternatively, firms
with emergent strategies do not have a clear strategic vision, and BSC
implementation might cause confusion among the users if they experiencecontinuously changing objectives.
In agreement with our expectations, we find that a planned strategy
facilitates BSC implementation, as it fosters employee buy-in of the control
system. Employees of firms with deliberate strategies are more likely to be
aware of BSC capabilities, have better perceptions about its ease of use and
usefulness, and are more willing to use the tool. We also find that the
perception of BSC ease of use is the most important factor affecting perceived
performance. Our explanation is that employees awareness of BSC capabi-
lities and usefulness is essential but not enough to drive performance. It isemployees perception that the BSC is easy to use that drives system
effectiveness, which leads to improvement in performance. Finally, we find
that the development of strong communication and information systems was
Internal Characteristics
Size
Sales from New Products
Market Share (*)
Productivity (*)
Information Systems (*)
Employee Retention
Strategy
External Characteristics
Competition*
Product Technology
Manufacturing Technology (*)
Information Technology
Legal Environment (*)
Customer Preferences
Product Life Cycle
Social Environment (*)
Awareness
Perception
Ease of Use
Perception
Usefulness
Intention to
Use
Employee behaviours toward BSC
Implementation
Performance
Financial
Customer
Internal
Processes
Learning and
Innovation
0.731*
0.406*
0.697***
0.719**
0.526*
0.338***
0.390***
0.394***
***p < .01 (2-tailed), **p < .05 level (2-tailed), *p < .1 level (2-tailed)
(*) Significant external and internal variables (refer to Tables 4 and 6 for detail s)
Fig. 2. Summary of Results.
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vital for BSC implementation, as it helps to increase awareness of BSCcapabilities.
These findings could be interesting to firms implementing, or planning
to implement, the BSC, as it provides them with a perspective on how to
maximize their benefits from using the BSC as a management control
system. We propose that firms provide employees with planned objectives
that embrace the different BSC measures and clear guidelines on handling
the BSC in order to eliminate possible frustrations that could occur during
implementation and ensure employee buy-in.
Limitation of the Study
This is one of the studies exploring the survey data of the manufacturing
companies who are using the BSC. This study tests some hypotheses, and
the results are encouraging. However, the results cannot be generalized,
because there are some limitations of the study, and further investigation is
needed. We recognize that, during the period when the survey was
conducted, in 2008, the world economy, including that of the USA andCanada, was undergoing an economic depression. Understandably, it may
be argued that the survey period was not a normal one, which could have
caused the sample size to be small. The current study mailed out the survey
questionnaires to all types of companies at random, based on sales and
industry description criteria. The findings show aggregate inferences for
industries in general rather than for a particular type of industry. The result
of the use and implementation of the BSC could be different depending on a
type of industry, which requires further investigation. Future study for BSC
implementation and its implications on performance is required based onthe industry-specific data of the companies.
In this research study, we use a methodology that relies on surveying a top
management representative from each firm for his/her views of the firms
strategy, employees attitude toward the implementation of the BSC, and
the firms performance. One shortcoming of this research methodology is
that it generalizes the respondents attitude toward the implementation of
the BSC to represent other employees behavior. Another limitation is the
use of the respondents perception of the firms strategy and performance to
represent two constructs that take place at the firm level. These short-comings could not be avoided, since we need to preserve the anonymity of
the firms and the respondents; therefore, we were not able to survey other
employees from the same firm or determine the firms performance through
MAJIDUL ISLAM AND HANI TADROS180
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the collection of secondary data. However, this research methodology isaccepted in management accounting research and has been employed in
many studies of management control systems (see Hoque & James, 2000;
Ittner, Lanen, & Larcker, 2002;Ittner et al., 2003;Pizzini, 2006).
ACKNOWLEDGMENTS
We acknowledge gratefully the funding from the SAP-CAAA Research
Grant program. We appreciate very much the comments by Emilio Boulianneof Concordia University and Zahirul Hoque of La Trobe University on an
earlier draft of the article.
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