The Role of the Interactive Use of Budgeting Systems on Relations between Differentiation Strategy or Decentralization and Organizational Performance

It has been emphasized that companies should pursue management strategies fitted for a rapidly changing environments and for a variety needs of customers, and to do these efficiently, it has been also emphasized that they have to have proper organizational structures and proper using of budgeting systems. In particular, recent management accounting studies focus on the interactive use of budgeting systems which emphasizes sustained discussion, creativity and innovation about the assumption of management plans and goals. But, there is no study looking at the mediating effects of the interactive use of budget in the relationship between the environment variables such as differentiation strategy, the degree of decentralization and organizational performance. Thus, the purpose of this study is looking at the effects of management strategy and organizational structure for the interactive use of budgeting systems, the effects of interactive use of budgeting systems for organizational performances, and the mediating effects of the interactive use of budgeting systems in the relationship between management strategy or organizational structure and organizational performance. Because this study targeted business units, we use differentiation strategy to represent management strategies of business unit and the degree of decentralization to represent organizational structures. The main results of this study can be summarized as follow; ⅰ. Firms with differentiation strategy and firms with more decentralized structure tended to use the interactive use of budgeting systems. ⅱ. Firms pursuing the interactive use of budgeting systems had better financial and non-financial performance. ⅲ. The interactive use of budgeting systems has mediating effect between differentiation strategy or decentralization and organizational performance. In summary, in the case of the firms which pursue a differentiation strategy in a decentralized organization, when they use budgeting systems more interactively, their financial performance and non-financial performance will improve significantly.