Target Cost Management and Organizational Theories

The purpose of the paper is to clarify the relationship between organization-related theories and target cost management (TCM). We can learn a lot from published articles on target cost management about its implications, power of cost reduction, needed supporting tools, and more. Most of the available articles, however, lack the theoretical bases as social science research. Among organization-related theories, organizational capability theories are research orientation derived from management strategy research and would provide a sound theoretical base for management accounting research. An extensive literature survey for both organization-related theories and TCM will be taken place. The focus of the former is organizational capability theories. It sees enterprises as a collection and/or combination of various resources and capabilities. Utilizing this perspective, we may be able to handle the simple but hard to answer question; why one firm out-perform others even the entities reside in the identical industrial group? Based on our survey, we will present possible research opportunities of TCM studies. The ultimate goal of our research is to explain the relationship among cost management capabilities, other managerial capabilities, and performance. This particular research can provide insights for various type of future management accounting research. Research Motivations Many researches relating to target costing or target cost management (TCM) have been accumulated, and our knowledge base has been enriching. However, the research that can answer the following questions is hard to obtain; l Does TCM really contribute to the better performance of the firm? l Why one firm out-perform others in the same industry, even all these companies utilize the almost identical TCM system? l What is the relationship between cost management capabilities and other managerial capabilities? We have to say that current knowledge of target cost management is not sufficient to provide meaningful opportunities for the future management accounting research. Also, lack of promising theories of target cost management has prohibited even to set hypothesis that should be empirically examined. The purpose of this paper is to examine whether the existing research of knowledge creation and organizational capabilities (OC) could bring better understandings of TCM. The next section deals with the contribution and limitations of previous TCM researches through the examination of TCM literatures mostly written in Japanese, which are usually noneaccessible to most Westerners. Some of these researches provide valuable information in terms of technical aspect of TCM. However, one of the weaknesses of Japanese TCM researches is that they too much focus on TCM techniques and/or procedures, and very few mentioned TCM processes and its organizational context. More research will be needed to explore the TCM dynamics in organizational context to our better understandings of TCM. Therefore, in the section three, relevant organization theories are examined. These perspectives include contingency theory approach, interactive control research, and theory of organizational knowledge creation. TCM researches utilizing these organization theories are also surveyed. Section four explores the various types of organizational capability studies. We identified five inter-related research orientations that are driven by Japanese management researchers. Based on these discussions, this paper finally presents the potential research opportunities for future TCM research. Contribution and Limitations of Existing TCM Researches