Factors Influencing the Implementation of Activity-Based Costing: A Study on Malaysian SMEs

Abstract

Literature has indicated that factors such as--the external environment, cost saving mechanisms, user attitude and company size--may have an effect on the implementation of activity-based costing (ABC). Furthermore, literature has revealed that there is still lack of research on the effect of these factors on the implementation of ABC among small and medium sized enterprises (SMEs) in Malaysia. As such the aim of this research is to test the relationships of these factors on the implementation of ABC among SMEs in Malaysia with the aim of contributing to existing research on the ABC system in the area of management accounting. A total of 200 respondents participated in this research. The results of the study revealed that all four factors; the external environment, cost saving mechanisms, user attitude and company size have significant relationships with the implementation of ABC among SMEs in Malaysia.

A Framework of Contingencies Factors, Government Support and Management Accounting Practices in Malaysian Small and Medium-Sized Enterprises

“…From a study of South African manufacturing SMEs, Msomi et al (2019) concluded that the size of the firm influenced the adoption of MAPs. This accords with the findings of Prihastiwi and Sholihin (2018), Nair and Tan (2018), Ahmad and Mohamed (2015), Albu and Albu (2012), and Holmes and Nicholls (1989). Within SMEs, larger SMEs employ more MAPs than smaller SMEs, owing to the increased complexity of their business (Lopez & Hiebl, 2015).…”

“…As a result of insufficient training to adopt sophisticated MAPs, accounting staff lack knowledge and skills, resulting in a decreased use of MAPs. However, Nair and Tan (2018) found no significant relationship between the level of accounting staff's qualification and the use of MAPs in Malaysia. This implies that the widespread use of MAPs in medium-sized businesses is not contingent on the presence of qualified accountants.…”

“…Similarly, Waweru et al (2004) discovered that changes in the environment as a result of government policy have influenced management accounting and control system changes. According to Nair and Tan (2018), advanced production technology and organization size have a significant effect on MAPs. The study argues that the government and accounting organizations should develop appropriate policies and procedures to promote MAP adoption.…”

“…However, research on the factors affecting the use of MAPs in Malaysian SMEs is still lacking. Nair and Tan (2018) previously focused on factors affecting Malaysian businesses, whereas Ahmad (2014) and Ahmad and Mohamed (2015) used a sample of Malaysian SMEs in manufacturing industries, which limiting the generalizability of the findings to all Malaysian SMEs. Given the significance of SMEs to the Malaysian economy, this paper aims to determine the extent to which MAPs are used in SMEs across various industries and to identify possible factors affecting MAP use in Malaysian SMEs from a contingency theory perspective.…”

Factors affecting the adoption of activity-based costing in a South African state university

“…Prior literature on the impact of IT on ABC implementation is conflicting (Krumwiede 1998;Nair & Tan 2018). For some organisations adopting ABC, high-quality information systems are considered a key factor in reaching the highest implementation stage where ABC is used extensively and integrated with the primary financial system.…”