Effects of budget system use on innovation performance

Abstract

Purpose The purpose of this paper is to analyze the effects of the budget system use on innovation performance concerning products and processes in Brazilian companies. Design/methodology/approach A survey was conducted in companies with economic activities addressed by the Brazilian Industrial Research of Technological Innovation carried out by the Brazilian Institute for Geography and Statistics, which provided 111 valid answers. The structural equation modeling was used to test the hypotheses. Findings The results indicate that considering the budget use with control (diagnostic) characteristics as a mechanism able to elide the benefits of innovation does not find support because no negative effect may be detected in the moderation tests. On the other hand, the belief that budget use with (interactive) planning characteristics might potentiate the effects of innovation on performance has also not been confirmed, i.e. rather flexible budget use types, which could be aligned with the elasticity required by creative processes, do not seem to have the positive effect advocated in the literature. Research limitations/implications The sample did not allow a detailed analysis of other contextual characteristics that could evidence heterogeneity. The size difference between companies, based on the number of employees rather than the volume of innovation investments, may have affected the results. Originality/value The results show there is no moderation in the relation between technological innovation and performance, both by using interactive budget and diagnostic budget.