An empirical investigation of the impact of management accounting on structural capital and business performance
| Published date | 13 July 2015 |
| Date | 13 July 2015 |
| Pages | 566-586 |
| DOI | https://doi.org/10.1108/JIC-10-2014-0114 |
| Author | Peter Cleary |
| Subject Matter | Information & knowledge management,Knowledge management |
An empirical investigation of the
impact of management
accounting on structural capital
and business performance
Peter Cleary
Department of Accounting, Finance and Information Systems,
University College Cork, Cork, Ireland
Abstract
Purpose –The purpose of this paper is to develop and test a series of conceptual models that
investigates the impact of management accounting (MA) (systems and information) on firms’
structural capital and business performance. It also replicates previous research in this area which
focused on the interplay between the three primary elements of intellectual capital (IC) (i.e. human
capital, structural capital and relational capital) and business performance.
Design/methodology/approach –A survey instrument was used to collect the data required to
conduct the study. All respondents who participated occupied the role of chief financial officer or
equivalent and were employed by firms competing within the indigenous Irish information and
communications technology sector. Consistent with prior quantitative IC-based research, a form of
structural equation modelling called partial least squares was used to test the data collected.
Findings –The findings reject the suggestion that MA is most appropriately situated as an element of
firms’structural capital. The findings support a plausible and statistically significant relationship
between advanced MA systems and business performance. The findings also generally support
previous research on the relationship between the three elements of IC and business performance.
Originality/value –Although much has been written about the potential role for MA in the IC area,
little empirical evidence has yet emerged. This exploratory research begins to address this deficiency
by developing and testing a series of MA-related constructs within the IC research domain.
Keywords Management accounting, Structural capital, Intellectual capital, Business performance
Paper type Research paper
1. Introduction
In this paper, intellectual capital (IC) is deemed to consist of a firm’s unique collection of
human capital (i.e. employees), structural capital (i.e. systems and procedures) and
relational capital (i.e. external relationships). Despite the continuing debate surrounding
the importance of IC to organisational competitiveness, the potential contribution of
management accounting (MA) in this regard has yet to be fully established despite the
fact that much of the original IC literature emerged from an accounting perspective
(Bontis, 2002). Theoretically, MA ought to have a prominent role to play in IC
measurement and management, as without it, firms’primary competitive resource
(i.e. their knowledge), may never realise its full potential (Mouritsen, 2009).
The accounting function has been challenged to respond in unison to the elevation of
intangible assets (which underpin IC) as the primary driver of organisational performance
(Guthrie and Boedker, 2006). This transformation has required the development and
deployment of management (accounting) systems capable of supporting organisational
knowledge-based competencies which has heretofore not been the case (Isaac et al., 2009).
However, from the accounting perspective, it has been suggested that this requirement
Journal of Intellectual Capital
Vol. 16 No. 3, 2015
pp. 566-586
©Emerald Group Publishing Limited
1469-1930
DOI 10.1108/JIC-10-2014-0114
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
566
JIC
16,3
has not been actively pursued, resulting in accusations of neglect being levelled at the
profession (Sharabati et al., 2010). Furthermore, it has been claimed that incumbent MA
systems are now at risk of becoming increasingly irrelevant due to theirinability to cater
for the unique characteristics of knowledge-based organisations (Ghosh and Mondal,
2009; Lonnqvist et al., 2005). This is in spite of the realisation that to succeed in the
knowledge economy, senior management need to be able to access relevant and timely
information upon which to inform their subsequent decision making (Bose and Thomas,
2007; Tseng and Goo, 2005); a role traditionally the preserve of MA.
Thus far, limited research has been conducted on the organisational factors required
to facilitate firms in effectively managing their IC. Consequently, guidance relating to
what combination of internal structures, systems and practices (including MA) that
would assist firms in achieving this particular objective is notably lacking from the
academic discourse (Isaac et al., 2009; Tayles et al., 2007). Therefore, this exploratory
research aims to contribute to this debate by investigating whether, and how, the use of
MA (systems and/or information) can positively influence the subsequent performance
of Irish indigenous knowledge-intensive firms. It will also seek to determine whether
MA is most appropriately situated as an element of firms’structural capital as has been
suggested (see, e.g. Novas et al., 2012; Roberts, 2003).
The remainder of the paper is organised as follows: Section 2 provides a literature
review of the primary areas of interest covered in this paper and concludes by outlining
the rationale for the proposed research, Section 3 describes the research methodology
adopted, Section 4 traces the development of a series of new and exploratory MA
constructs before outlining the results obtained from the study, Section 5 discusses the
research findings and finally, Section 6 offers some concluding remarks.
2. Literature review
It is generally assumed that the vast majority of organisational knowledge originates from
afirm’s employees and constitutes their primary value-creating resource (Blanco et al.,
2002; Kelley and Caplan, 1993; Rogers, 2001). However, as legal ownership of such
organisational knowledge cannot be easily determined; the challenge for firms’is to embed
it within their very fabric, so as to allow it to become of sustained value and therefore
potentially capable of influencing future organisational performance (Bontis and Fitz-enz,
2002; Bontis et al., 2000; Bontis, 1998; Cabrita and Bontis, 2008; Do Rosario Cabrita
and Landeiro Vaz, 2006; Garcia-Ayuso, 2003; Grant, 1997; Ordonez de Pablos, 2002;
Wang and Chang, 2005).
Although intangible assets rarely affect business performance directly; they can do so
indirectly through relationships of cause and effect (Kaplan and Norton, 1993). Empirically
testing the relationship between IC and business performance is not straightforward as no
global consensus exists as to the most appropriate means of measuring a firm’sIC(Clarke
et al., 2011). Nevertheless, in those studies that have occurred, a very strong association
between business performance and IC has generally been found. Examples of such
findings include; Perrin (2000) who found that certain human capital, structural capital and
relational capital dimensions were each positively associated with business performance,
whereas Sharabati et al. (2010) and Cabrita and Bontis (2008) found that only relational
capital and structural capital had a positive impact on firm performance. Alternatively,
Novas et al. (2012), Jardon and Martos (2009) and Ordonez de Pablos (2002) reported that
structural capital alone had a positive and significant relationship with firm performance,
while Mention and Bontis (2013) came to the same conclusion for human capital.
567
Management
accounting
on structural
capital
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