The Effects of Management Controls and National Culture on Manufacturing Performance: an Experimental Investigation*

The increasing dominance of Asian manufacturing firms in the global economy has raised an important issue: whether these firms’ superior manufacturing performance is caused by their management control systems, the national culture of their employees, or the interaction of these two factors. This experimental study provides a direct test of the effects of national culture and management control system on manufacturing performance. The dimension of national culture studied was individualism ( vs collectivism ) because this work-related attribute has been noted as a major difference between Asian and Western cultures. In turn, the focus on cultural individualism motivated a study of two aspects of management controls: work flow interdependence and pay interdependence. The results are consistent with cultural individualism and management controls having independent, but not interactive, effects on manufacturing performance. The potential implications of these findings and suggestions for future research are discussed. The globalization of the world economy has greatly increased manufacturing firms’ concern with maintaining their competitive advantage. In the U.S.A., considerable attention has been focused on that country’s declining competitiveness in manufacturing (Hayes & Abernathy, 1980; Hayes et al., 1988; Skinner, 1985). Critics have attributed this situation, in part, to U.S. firms’ management control systems (Hayes & Abernathy, 1980; Hayes & Wheelwright, 1984; Johnson & Kaplan, 1987; Kaplan, 1983, 1984). In the meantime, firms from the Asian countries have become increasingly dominant in many segments of the world market. This development has prompted U.S. academics and businesses to study the Asian firms’ management control systems, with a view towards transplanting such systems to U.S. firms. The success of many Asian manufacturing firms is due in part to their producing superior quality products at a lower cost. However, an issue that remains unresolved is whether this manufacturing performance is the result of these firms’ management controls, the national “<n t-arlier version of this paper was presented at the 12th Annual Congress of the European Accounting Association. wuttgart, 1989, and the International Conference on Research on ,Management Control Systems, London, 1989. The authors wish to thank Anthony Hopwood, Deigan ,Morris, the seminar participants (especially Geert Hotktede ) at the University of I,imburg :md wo anonymous reviewers for their many constructive suggestions for revising this paper.