Linking management control system with product development and process decisions to cope with environment complexity

Abstract

In this study, we report the results of a large-scale survey study on business strategy and innovations conducted in China in November 2002. We focus on the impact of environmental complexity on the choice of management control systems and the effects of management control systems on product development and process decisions. Our findings provide some valuable insights to strategic change. When the pressure for change comes from the external environment, the strategic control approach is usually chosen to cope with environmental complexity. Strategic control focuses on the process of benchmarking a firm's strategic and operational decisions with that of their competitor's. Additionally, strategic control emphasises R&D and new product development, and aligns manufacturing strategy with corporate objectives. This approach has a long-term impact on a firm's position in the market place. When the pressure for change comes from the inside of an organisation and the company is more interested in maintaining its current market position, financial control approach is usually chosen to cope with environment complexity. Financial control approach focuses on incremental improvement in the manufacturing process and short-term financial performance. This approach provides risk-averse benefits to the company.