Activity Based Costing- Diffusion and Adoption

Few new ideas in management accounting have achieved the same attention in terms of books, reports, conferences and implementation efforts, as has Activity Based Accounting (ABC). A lot of survey studies have been carried out describing the diffusion of ABC in different countries, for example Krumwiede (1998a) in USA, Gosselin in Canada (1997), Innes & Mitchell in Great Britain (1995), Sherrer in Germany (1996), Lukka & Grönlund in Finland (1996) and Björnenak in Norway (1997). The surveys give a general picture of the extent to which ABC has been considered and adopted at certain points in time. No such study has so far been made in Sweden. This paper reports on a survey conducted during autumn 1999. The sample contains 400 Swedish manufacturing firms with more than 50 employees with a response rate of 37%. The aim of the paper is to describe and explain the diffusion and the adoption of ABC in Swedish manufacturing industry and, wherever possible, compare the results with surveys from other countries. From a diffusion perspective, the survey shows that the majority of Swedish manufacturing firms (53%) never even discussed adopting ABC. In the end, however, 16% of the Swedish firms have implemented and are currently using ABC. Out of these, only 17% have chosen a complete implementation. In the adoption perspective 27 variables were tested, all generated from the ABC literature. The factor analysis reduced the 27 variables to 9 factors, which are size, competition, differentiation, system quality, automation, strategic importance of costing, budgetary control, product diversification and finally Relevance Lost variables. The results from the study show that only three of the factors were statistically significant and could explain why Swedish firms have adopted and are using ABC. Notably none of the classic “ABC factors”, e.g. product diversification (Cooper, 1988ab), was significant.