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Differences in the Role of Job-Relevant Information in the Budget Participation-
Performance Relationship among U.S. and Mexican Managers:
A Question of Culture or Communication
(Maria A. Leach-Lopez, William W. Stammerjohan, Frances M. McNair)
Journal of Management Accounting Research, Vol. 19, 2007, pp. 105-136
presented by:
Wulandari Fitri Ekasari - 340465
Research Background
• U.S. companies continue to move operations into Mexico (Lindquist, 2001; The Economist, 2000) and maquila exports from Mexico growing at 20%/yr since NAFTA implementation
• U.S. multinationals export U.S.-based management control systems to manage their foreign operations (Harrison, 1992; Harrison & McKinnon, 1999)
What is “maquiladora”?
factories that import materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then re-exports the
assembled product
This study is important for several reasons . . .
• To answer the unanswered questions from findings of Frucot & Shearon (1991)
• Some refinements to the existing literature by concentrating on the management environment faced by U.S.-controlled maquiladoras
Research Questions
• Can parent companies expect budget participation to be associated with performance among their Mexican managers in U.S.- controlled maquiladoras? (H1 – H5)
• Are there significant cultural differences between Mexican managers currently employed by U.S.-controlled maquiladoras and their U.S. counterparts? (H6)
• Do these cultural, or other, differences lead to differences in the basic level of correlation between budget participation and performance and/or any differences in the causal mechanisms connecting budget participation to performance between U.S. managers working in the U.S. and Mexican managers working for U.S.-controlled maquiladoras? (H7 – H8)
Path Relationships
• Path A: PART PERF (Shields & Shields, 1998; Frucot & Shearon, 1991)
• Path B: PART SAT (Frucot & Shearon, 1991)
• Path C: SAT PERF
• Path D: PART JRI (Kren, 1992)
• Path E: JRI SAT (Lau & Tan, 2003)
• Path F: JRI PERF (Kren, 1992)
PART – PERF Hypotheses
• H1: Increased budget participation leads directly to increased performance. (A)
• H2: Increased budget participation leads directly to increased performance. (A)
• H3: Increased budget participation leads to increased job satisfaction and increased job satisfaction leads to increased performance. (B&C)
• H4: Increased budget participation leads to increased job-relevant information and increased job-relevant information leads to increased performance. (D&F)
• H5: Increased budget participation leads to increased job-relevant information, increased job-relevant information leads to increased job satisfaction, and increased job satisfaction leads to increased performance. (D, E, & C)
U.S. & Mexico Cultural Differences
• Hofstede:
- Power Distance
- Individualism vs. Colectivism
- Uncertainty Avoidance
- Masculinity vs. Femininity
• Measurement Instability (Fernandez et al., 1997)
• Selection Bias & Training
Cultural Differences & Effects Hypothesis
• H6: There are differences on Hofstede’s national-culture dimensions between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S.
• H7: There is a difference in the basic budget participation-performance relationship (as hypothesized in H1) between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S.
• H8: There are differences in the complex budget participation-performance relationships described in H2–H5 between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S.
Sample Design
• 143 mid-level managers from:
- 45 U.S. managers working in the U.S.
- 98 Mexican managers working for U.S.-
controlled maquiladoras in Mexico:
Border (Nuevo Laredo) 58 people
Interior (Puebla) 40 people• Survey instrument written in English/Spanish• For U.S. subjects were distributed by email, for
Mexican were hand-delivered
Conclusions from Hypotheses Testing
• H1 is supported, H7 is not supported
• H2 is supported for sample U.S.
• H3 and H5 is not supported for both sample
• H4 is supported for sample Mexico
• H6 is supported
• H8 is supported for path C, E, and F
Ex-Post Analyses:Culture vs. Communication
• Cultural difference explanation was rejected due to similarity for both regions
• 3 additional tests regarding communication:
- Bilingual vs. non-bilingual
- Bilingual ability
- Supervisor nationality
Communication Tests Result
• Path F, JRI PERF, sig. larger for non-bilingual Mexican managers
• Hypothesis 4, PART JRI PERF marginally supported for every level of bilingual ability other than “very well” (least physic distance)
• Hypothesis 4 is supported, however path F, sig. larger for Mexican supervised by U.S. nationals
Conclusions
• While there are strong associations between budget participation and performance for both U.S. managers working in the U.S. and Mexican managers working for U.S.-controlled maquiladoras in Mexico, the causal mechanisms connecting budget participation with performance are quite different
• The importance of the information-communication aspect in Mexico may be related to the psychic distance, the level of difficulty our Mexican managers face in communicating with their U.S. parent companies
• Management tools that provide additional job-relevant information to foreign managers may help improve performance
Limitations
• the lack of temporal precedence between the independent and dependent variables
• any limitations imbedded in the scales used to measure the variables
• the generalizability of the samples