Management Control Systems and Performance: The Mediating Role of Organisational Capabilities in Malaysia

Abstract

This study focuses on the interactive use of Management Control System (MCS) and the identification of threats and opportunities that enables management to respond quickly to changes in the environment. The study aims to examine, from a resource-based view (RBV) perspective, the relationship between interactive use of MCS and organisational capabilities (market responsiveness, strategic networking, process reliability and efficiency, innovativeness and learning) as well as their subsequent impact on organisational performance. An empirical study was conducted involving 70 public-listed companies in Malaysia. The analysis included the use of descriptive and multiple regression tests. The findings provide empirical evidence that interactive MCS facilitates the development of organisational capabilities and that organisational capabilities play a mediating role in the relationship between MCS interactive usage and organisational performance. This study indicates that companies in Malaysia still focus on financial measures rather than on non-financial ones in most of their decision making. Managers who are shortterm focused or financially oriented in their decision making may jeopardise the long-term sustainability of their organisations' performance.

The Rise of MCS and EMA in the Sustainable Field: A Systematic Literature Analysis

“…Furthermore, conducting a multivariate mediation analysis that includes control variables or adding other factors related to EMA and MCS is also advocated [30,50]. In future studies, longitudinal data collection is suggested to examine casual associations [14,37,40] extensively. Following these future research directions, only the emerging countries had been adopted; some research had been developed in the emerging-country context, such as China [24,46,51], Malaysia [14,35,47], Uganda [38], Bangladesh [37], Australia [52,53] and Indonesia [49,50].…”

“…MCS, as a term, is used to describe the "formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities" [8]; there are other similar terms, such as "environmental management control systems" [1,9,10], "environmental management systems" [11], "environmental MCS package" [12], and "CSR in management control systems" [13], used to describe the sustainability aspects. In generating information for managerial decision making, MCS could help firms track their decisionmaking performance and feedback and feedforward information [14]. Analyzing the feedback and feedforward information generated by MCS could help firms to measure past activities and find future directions to achieve Sustainability Performance.…”

“…For example, Hasanudin et al (2019) [23] used the diagnostic and interactive systems of MCS to affect firm performance. Tze San Ong, ZohReh Haghshenas, Boon Heng Teh, BabatunJi SaMueL AdedeJi, and Magsi (2021) [14] explored the impact of the interactive use of MCS on organizational performance. Bresciani, Rehman, Alam, Ashfaq, and Usman (2022) [12] discussed the influence of the environmental management control system (EMCS) package and perceived environmental uncertainty on green performance.…”

“…Table 3 demonstrates the theory employed in these identified articles. As shown in Table 3, the natural resource-based view was the most popular theory employed by researchers to explain their studies [11,12,14,23,[26][27][28][29][30][31][32][33][34]. Other theoretical perspectives also were found to be used, such as contingency theory [1,10,13,35,36], stakeholder theory [11,23,37], institutional theory [11,27,29,33,37,38], natural resource orchestration perspective [17,31,39], and cognitive-behavioral theories [40].…”

“…The theory suggests that the organizational ability to generate rent-earning resources and capabilities leads to a competitive advantage and highlights the limited scope of the resource-based view of the firm to explain the competitive advantage gained when the organization interacts with the natural environment. [11,12,14,23,[26][27][28][29][30][31][32][33][34]43] Contingency Theory…”