1 S2
Accounting, Organizations and Society 25 (2000) 609±622
www.elsevier.com/locate/aos
The relationship between two consequences of budgetary controls: budgetary slack creation and managerial short-term orientation$
Wim A. Van der Stede*
University of Southern California, Leventhal School of Accounting, Los Angeles, CA 90089-0441, USA
Abstract
Previous studies have provided contradictory evidence with respect to the eect of rigid budgetary controls on slack and other dysfunctional behaviors. One motivation for the current study was to test whether spillover eects exist between two alleged dysfunctional consequences of a rigid budgetary control style: budget slack creation and managerial short-term orientation. The data support this contention: reducing one form of dysfunctional behavior (slack creation) through rigid controls seems to spill over into another form (stronger management focus on business matters that aect short-term results). However, the budgetary control styles that organizations implement, as well as the behaviors that they encourage, may be aected by two important antecedents: business unit past performance and competitive strategy. The results indicate that business units that either pursue a dierentiation strategy or have been more pro®table are subject to less rigid budgetary controls, which augment the propensity to build slack as well as the tendency for managers to think long-term. These relationships are tested in a structural equation model on survey data obtained from 153 business unit general managers. # 2000 Elsevier Science Ltd. All rights reserved.
Since Hopwood 's (1972) seminal paper, the budgeting literature has shown great interest in understanding possible eects of budgetary control styles. It is generally maintained that the incidence of so-called dysfunctional behavior is aected by the rigidity of budgetary controls. A rigid budgetary control style is one in which employees, mostly at management organization levels, are
www.elsevier.com/locate/aos
The relationship between two consequences of budgetary controls: budgetary slack creation and managerial short-term orientation$
Wim A. Van der Stede*
University of Southern California, Leventhal School of Accounting, Los Angeles, CA 90089-0441, USA
Abstract
Previous studies have provided contradictory evidence with respect to the eect of rigid budgetary controls on slack and other dysfunctional behaviors. One motivation for the current study was to test whether spillover eects exist between two alleged dysfunctional consequences of a rigid budgetary control style: budget slack creation and managerial short-term orientation. The data support this contention: reducing one form of dysfunctional behavior (slack creation) through rigid controls seems to spill over into another form (stronger management focus on business matters that aect short-term results). However, the budgetary control styles that organizations implement, as well as the behaviors that they encourage, may be aected by two important antecedents: business unit past performance and competitive strategy. The results indicate that business units that either pursue a dierentiation strategy or have been more pro®table are subject to less rigid budgetary controls, which augment the propensity to build slack as well as the tendency for managers to think long-term. These relationships are tested in a structural equation model on survey data obtained from 153 business unit general managers. # 2000 Elsevier Science Ltd. All rights reserved.
Since Hopwood 's (1972) seminal paper, the budgeting literature has shown great interest in understanding possible eects of budgetary control styles. It is generally maintained that the incidence of so-called dysfunctional behavior is aected by the rigidity of budgetary controls. A rigid budgetary control style is one in which employees, mostly at management organization levels, are
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