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1.  Introduction to Cost Accounting Standards for Educational Institutions  

• Definition of Four Cost Accounting Standards

Responsibility for Compliance

2.  Guidelines for CAS Applicability 

• Definition of CAS-covered sponsored projects
• Definition of Non-CAS-covered sponsored projects
• Criteria to be considered in determining the allowability of a cost

3.  Costs

• Direct Costs
• Additional Criteria for Determining Direct Costs
• Unacceptable Direct Costing Practice
• Indirect Costs

Charging Costs Normally Classified as Indirect to Sponsored Projects

• Special Circumstances where Direct Charging of Indirect Costs may be Appropriate

4.  General Criteria for Determining How Costs Are Charged to Sponsored Projects 5.  Reliance on Agency Approval 6.  Unallowable Costs

Introduction to Cost Accounting Standards for Educational Institutions

• Federal awards issued prior to December 26, 2014 are required to be managed in accordance with OMB Circulars A-21, A-110, and A-133. Federal awards issued on or after December 26, 2014 are to be managed in accordance with 2 CFR Part 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for federal Awards (The Uniform Guidance) or the appropriate regulations applicable to the award as specified in the Notice of Award issued by the funding agency.
• Cost Accounting Standards (CAS) 48 CFR 9905.501, 9905.502, 9905.505, and 9905.506 were included in the revised cost principles of the Uniform Guidance ( See 2 CFR §200.419 ).
• Effective May 8, 1996 , the Office of Management and Budget (OMB) revised Circular A-21 to incorporate four Cost Accounting Standards applicable to educational institutions. The Cost Accounting Standards Board (CASB) issued these on November 8, 1994, and the A-21 revision extended the standards to all sponsored agreements.

Definition of the Four Cost Accounting Standards

501 - Consistency in Estimating, Accumulating and Reporting Costs by Educational Institutions

• Fundamental Requirement - An educational institution's practices used in estimating costs in pricing a proposal shall be consistent with the educational institution's cost accounting practices used in accumulating and reporting costs.

502 - Consistency in Allocating Costs Incurred for the Same Purpose by Educational Institutions

• Fundamental Requirement - All costs incurred for the same purpose, in like circumstances, are either direct costs only or F&A costs only with respect to final cost objectives.

505 - Accounting for Unallowable Costs

• Fundamental Requirement - Costs expressly unallowable or mutually agreed to be unallowable shall be identified and excluded from any billing, claim, application, or proposal applicable to a Sponsored Agreement.

506 - Consistency in Using the Same Accounting Period for Purposes of Estimating, Accumulating and Reporting Costs

Responsibility for compliance with the Cost Accounting Standards lies primarily with principal Investigators (PIs) of sponsored projects, department heads, and college/department fiscal officers. The University administration is responsible for guidance and training, and for ensuring compliance through periodic internal and external audits.

Guidelines for CAS Applicability

CAS-covered sponsored projects can be defined as follows:

a) All federal awards

b) All awards that contain any federal flow-through money. If you discover the project is being funded with federal flow-through money after the award period has started, any unallowable direct charges need to be removed from the account

c) The terms and conditions of the proposal or award documents reference OMB Circular A-21 or Cost Accounting Standards

d) Any sponsored project whose funds are being used as cost sharing on a CAS-covered project. Only the individual cost(s) being used as cost sharing will be subject to the definitions of direct charges and "unlike circumstances."

Non-CAS-covered sponsored projects include:

1) State non-federal awards 2) Industry/private awards that do not meet any of the above criteria

Awards not covered under CAS administration are still subject to the requirements listed in the award, as well as University and State guidelines. Just because an award is not under CAS administration does not mean expenditures unrelated to the award can be charged. All expenditures on an award must be reasonable, allocable and allowable.

The following criteria must be considered in determining the allowability of a cost:

1. Costs must be reasonable . A cost is considered reasonable if the nature of the goods or services acquired and the amount involved reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision was made to incur the cost.

2. Costs must be allocable to sponsored agreements under the principles and methods of Circular A-21 . A cost is allocable to a particular sponsored project if the goods or services involved are chargeable or assignable to the project in accordance with the relative benefits received.

3. CAS and the revised Circular A-21 emphasize the importance of consistent application of cost accounting principles . Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs. Where the University treats a particular type of cost as a direct cost on sponsored agreements, all costs incurred for the same purpose in like circumstances must be treated as direct costs for all activities of the institution. Consistent treatment of costs is necessary to avoid inappropriate charges to the federal government or other sponsors when sponsored agreements are charged directly for specified costs, then charged again through the University's indirect cost rate. PIs, department administrators, and in some specific instances, central administration officials should review costs to ensure that they are allowable and allocable to a project. Size, nature and complexity of sponsored agreements, although not the final determining factor, are in the aggregate important considerations in determining unlike circumstances. Due to the unique requirements of each sponsored agreement, unlike circumstances are determined on a case-by-case basis.

Definition of Direct Costs

OMB Circular A-21: Cost Principles for Educational Institutions states " Direct costs are those costs that can be identified specifically with a particular sponsored project, an instructional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect costs. Where an institution treats a particular type of cost as a direct cost of sponsored agreements, all costs incurred for the same purpose in like circumstances shall be treated as direct."

Additional Criteria for Determining Direct Costs:

1. The cost must be included in the awarded budget, or the cost must be permitted within rebudgeting authority granted by the sponsor. When preparing applications for sponsored projects, the PI usually submits a detailed budget. This budget includes line items such as salaries and wages, benefits, travel, supplies and other direct costs. The award reflects approved budgeted items and becomes a part of the agreement between the university and the sponsor. Only those costs that are included in the budget or rebudgeted costs allowed by the sponsor should be charged. If the cost requires institutional and/or sponsor prior approval after the award is made, the approval must be secured before the cost is incurred.

2. The sponsor must not restrict the cost. Costs that are restricted or unallowable as indicated in the award notice or sponsor guidelines may not be charged to a sponsored project.

Unacceptable Direct Costing Practices:

The following direct costing practices are unacceptable because they do not meet A-21's standard for a "high degree of accuracy" in the assignment of costs to sponsored agreements:

• Rotation of charges among sponsored agreements by month without establishing that the rotation schedule credibly reflects the relative benefit to each sponsored agreement;
• Assigning charges to the sponsored agreement with the largest remaining balance;
• Charging the budgeted amount rather than charging an amount based on actual usage;
• Assigning charges to a sponsored agreement in advance of the time the cost is actually incurred;
• Identifying a cost as something other than what it actually is, such as classifying an item of equipment as a supply;
• Charging expenses exclusively to sponsored agreements when the expense has supported non-sponsored agreement activities;
• Assigning charges that are part of normal administrative support (indirect costs) for sponsored agreements (e.g., accounting and payroll).

Definition of Indirect Costs [Facilities and Administrative (F&A) Costs]

Indirect costs are defined in A-21 as "those that are incurred for common or joint objectives [of the University] and, therefore, cannot be identified readily and specifically with a particular sponsored project, an instructional activity or any other institutional activity." ( A-21, E.1. ) These costs are also referred to as "Facilities and Administrative" and are comprised of a number of components. Facilities includes "depreciation and use allowances, interest on debt associated with certain buildings, equipment and capital improvements, operation and maintenance expenses, and library expenses. Administration is defined as general administration and general expenses, departmental expenditures not listed specifically under...Facilities." ( A-21, F.1. ) At the college and department level "salaries of administrative and clerical staff ...[and] items such as office supplies, postage, local telephone cost, and memberships shall normally be treated as F&A costs." ( A-21, F.6.b. ) The University must consistently treat costs incurred for the same purpose in like circumstances as either direct or indirect.

Note: Throughout this document the terms F&A and Indirect Cost are interchangeable.

A-21 does not strictly prohibit costs identified by the institution as indirect from being charged directly to a sponsored agreement. However, strict criteria must be met. Costs normally treated by the University as indirect may be charged to a sponsored project when ALL of the following conditions are met:

• The cost can be readily identified specifically with the project with a high degree of accuracy;
• The costs are incurred for a different purpose or circumstance
• The cost is explicitly budgeted, with justification, and awarded:

a) The cost is separately budgeted in the proposal budget (Note that for certain fixed-price funding arrangements a detailed budget is not required by the sponsor; however, the internal budget should reflect the cost.)

b) The budgeted amount reflects a realistic estimate of the cost and, in the case of salary, the percent of effort;

c) A reasonable justification is given for the cost. In the case of federal agency sponsors the "Budget Justification" section of the proposal should state that the costs are normally treated as indirect by the institution, but are being requested due to a special purpose or circumstance; an explanation of the special circumstance should be clearly outlined in the "Budget Justification;"

d) The sponsor approves the item in the award. Since these items are specifically set forth in the proposal, it is assumed that the sponsoring agency has approved this exceptional treatment of administrative and clerical salaries or other costs normally treated as indirect if they accept the proposal, fund the project and do not prohibit the cost on the notice of award. It is the principal investigator's responsibility to notify the Division of Research Proposal Services of any changes made to the proposed budget in pre-award negotiations with the sponsor in which Sponsored Research did not participate.

Note that the determining factor in classifying salaries of administrative and clerical staff as direct costs must relate to the different work they perform to meet the exceptional requirements of the project as compared to that of administrative and clerical staff who perform work related to routine departmental or general institutional administration. Generally, a project that requires more of the same type of administrative support as that required for routine departmental or institutional administrative support would not meet the criteria of a different purpose and circumstance.

General Criteria for Determining How Costs Are Charged to Sponsored Projects

The proper classification (direct vs. indirect) of any charge should be determined based on a logical thought process. This process can be described in four steps as follows:

• Review -Regulations, Policies, Procedures applicable to the project. This would include internal or institutional regulations policies and procedures (e.g., USF's Disclosure Statement) as well as any external regulations, policies, or procedures (for example, A-21 and other relevant federal circulars, sponsor terms and conditions, and specific award terms and conditions).
• Judgment -Based on the review of specific facts and circumstances, a judgment is made by the institution's appropriate personnel as to the proper allocation (direct vs. indirect).
• Justification -Appropriate level of justification disclosed in the proposal narrative or "Narrative Budget Justification" page (or a justification is prepared when the need arises during the life of the project that could not have been anticipated in the proposal process).
• Agency Approval -of budget based on justification in the proposal and reliance on the fact that the institution made an informed decision based on the particular facts and circumstances.

There are some cost objectives that can be direct or indirect depending on the facts and circumstances of the individual project. The questions that should be asked to determine if it can be charged direct are:

1) Does the cost provide a direct benefit to the purpose or objective of the project as opposed to a cost that is "needed" to complete the project but is incidental to the purpose?

2) Can the cost meet the definition of a direct cost? Can the cost be specifically identified with a project with relative ease and with a high degree of accuracy and allowed by all terms and conditions governing a particular award?

3) For clerical and administrative salaries, do the facts and circumstances meet the criteria to qualify as an exception described by OMB guidelines to the general rule that these costs are an F&A cost?

Cost Accounting Standards require consistent treatment of costs in "like circumstances". Consequently "unlike circumstances" must be demonstrated/justified if a cost will be budgeted, charged, and reported inconsistently. The following arguments cannot be used in and of themselves to demonstrate "unlike circumstances":

a) Sponsor approval of the allocation of a particular cost without proper review by the institution

b) Insufficient F&A cost money returned to support the projects

c) Sponsor limits or will not pay F&A costs

d) Sponsor is willing to pay for the cost as a direct charge

Reliance on Agency Approval

Sponsor approval of a budget does not in and of itself constitute approval of the specific line items. The sponsor assumes the university has complied with A-21, with the Cost Accounting Disclosure Statement, our F&A cost proposal assumptions, and any other regulations cited. A cost that may be allowable at one institution as a direct charge may not be allowable at another because of the differences in the Disclosure Statement. Since there is no way for a sponsor to make a determination of allowability because of these variables it is university personnel who are responsibility to exercise this judgment.

Agency approval can be relied upon when USF personnel have reviewed regulations, policies and procedures; made a judgment based on this review; and disclosed the appropriate justification. Please note that even if the agency approves the expenditure, an auditor [Department of Health and Human Services (DHHS), sponsor, state, or internal] could come back at a later time and disallow the expenditure based on his or her review and judgment.

Unallowable Costs

Costs considered "unallowable" in accordance with various authoritative documents and the individual Sponsors must be identified and accounted for separately. These costs may not be budgeted, charged or reported to a sponsor.

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The good news is that firms are not powerless. A growing number of tax and accounting firms are taking proactive measures to remain competitive and boost profitability. Let’s take a closer look at the top four challenges and the steps firms can take to solve them.

Attracting, hiring, and retaining staff

Staffing constraints is far from a new concern for the profession. However, there’s no doubt that shifts in employee expectations, an anemic pipeline of new accounting majors and graduates entering the profession, and a growing number of seasoned professionals seeking retirement has exacerbated the issue.

In fact, Thomson Reuters research found 32% of survey respondents rated hiring and development of talent as their highest priority. This is up from 23% in 2023 . More specifically, recruitment was listed as the most important priority, especially at midsize accounting firms.

When it comes to talent, perhaps the most daunting challenge facing firms is finding personnel with the requisite tax experience and technical skills necessary in today’s environment. In fact, 64% of respondents said recruitment in 2024 was likely to be highly or somewhat challenging.

Meanwhile, 58% of respondents said they thought training and development of existing employees would be either highly or somewhat challenging, and 41% said the same about retention of existing employees.

In light of such challenges, it comes as little surprise that increasing salaries and incentives (49%), ramping up training and personnel development (16%), and easing workloads to provide a better work/life balance (10%) are among the planned strategies for maximizing retention in 2024.

However, it is critical that firms not overlook the role that greater technology automation can play in easing bandwidth constraints and driving greater efficiencies. This involves w eed ing out as many time-consuming, manual tasks as possible through greater automation and ensuring that systems are tightly integrated to better streamline workflows.

According to the findings, nearly half (49%) of survey respondents said that increasing the use of automation is an option if they are unable to fill certain roles.

Recruiting freelancers and turning to outsourcing (both onshore and offshore) are also strategies that a growing number of firms are considering.

Time management and deadlines

Given the bandwidth constraints and rise in client demands and expectations that many firms are facing, it is no surprise that a lack of time to meet deadlines and file taxes in a timely manner is a top challenge facing many firms.

According to Thomson Reuters research, efficiency remains the top strategic priority for firms in 2024, with roughly one-third of respondents (32%) citing it now, just as they did in the 2023 report (34%).

Improved time management and meeting deadlines not only eases the strain on staff but also leads to happier clients and a greater ability to provide clients with higher-value, higher-margin advisory services — all important factors that today’s firms must consider.

When asked about barriers to offering requested advisory services, time constraints was cited as a barrier to providing more strategic tax services. As stated by one survey respondent, “I have enough work. I don’t want to spread my time too thin and not be able to be effective.”

One of the most common ways for tax and accounting firms to improve effici encies, which can lead to better time management, is to introduce some measure of automation . Eliminating as many time-consuming, manual tasks as possible and ensuring that systems are tightly integrated to more effectively streamline workflows can help provide staff with the time they need to better meet deadlines.

The critical role that technology plays in fueling efficiencies is not going unnoticed, judging by the top investment priorities among firms.

When rating investment priorities over the next two years, the priorities firms most often mentioned were improving processes and workflows and investing in tax-technology solutions. In fact, two-thirds (66%) of respondents said their firms were going to be streamlining their processes over the next two years, and 47% said they were eyeing new technology solutions, up from 41% in 2023.

Keeping up with tax law

Keeping pace with ever-changing tax laws and regulations is no small feat, especially in today’s dynamic and global market. That’s why it is imperative that firms have the right tools and resources in place to help ensure compliance and mitigate risk. Failure to do so can not only tarnish a firm’s reputation and result in a loss of clientele, but it can also lead to hefty fines and penalties.

According to the report, keeping up with tax law and government regulations ranked No. 3 among the top accounting challenges in 2024. This is not surprising as tax rules are frequently revised, and the changes aren’t always easy to interpret.

Fortunately, there are measures that firms can take to help ensure team members are up-to-date on their tax knowledge. Such efforts include:

• Running workshops so team members can share their knowledge and expertise in a particular tax area.
• Attending industry-leading seminars and conferences, such as Synergy , to get team members up to speed on the most recent tax law developments.
• Taking advantage of live webinars and on-demand events hosted by leading tax, audit, and accounting experts.
• Leveraging technology, such as artificial intelligence (AI)-powered tools to stay on top of tax law changes. For instance, with AI-powered tax research software , professionals can get targeted search results in less time.

Billing and cash flow issues

As a growing number of firms look to pivot away from compliance-based services in favor of providing more higher-value, strategic offerings, it is imperative that firms are being properly compensated for the value they deliver and are optimizing cash flow. For many, this means moving away from hourly billing and embracing different pricing models as a strategic tool to help boost revenue .

While hourly billing may still have its place in some instances, the challenges surrounding hourly billing are manifold. Such issues include:

• Clients not considering the overall value a professional is providing.
• Clients don’t know how much they will be paying for a firm’s services until the work is done and the hours are calculated. This lack of transparency can leave clients feeling frustrated.
• It contradicts a firm’s quest to improve efficiencies because, under an hourly billing model, fewer billable hours means less profitability for the firm.

The need to rethink pricing models to keep pace with industry changes is clear. In prior surveys, pricing barely hit the radar screen. However, this year it catapulted to No. 3 on the list of strategic priorities, with 23% of survey respondents referencing their pricing model as a top priority for 2024.

According to Thomson Reuters research, the billing model gaining the most traction in 2024 is value-based pricing , in which charges are based on expertise, guidance, and results, rather than time spent. Nearly half (48%) of respondents said their firms already offer value-based pricing on some of their services, and 18% said their firms plan to start offering it by the end of the year.

Additional pricing models that are attracting more attention include:

• Market-value pricing: 21% of survey respondents said their firm plans to roll this model out in 2024.
• Retainer pricing: 19% of respondents plan to offer this model.
• Competition-based pricing: 13% of respondents have plans to offer this pricing model.
• Cost-plus pricing: 11% of respondents said their firms are considering this pricing structure.

Clearly, there’s no cookie-cutter approach to pricing, and client preferences are another factor to consider. However, firms offering a range of pricing options are keen to optimize cash flow by leveraging the pricing method that will generate the most revenue for the service they provide.

Rising challenges for accountants

There’s no doubt that the accounting profession is in the middle of significant change. While navigating the complexities of staffing, time management, tax law changes, and billing and cash flow issues may be high on the list among current challenges, there are additional issues raising concern.

For instance, economic headwinds, such as inflation and cost of living, rising labor and operational costs, and privacy breaches continue to persist. Additionally, generative AI is top of mind as more and more firms explore how they can leverage the innovative technology within their practice while maintaining data security and ethical usage.

Make sure your firm is in the know — read the full Thomson Reuters Institute 2024 State of Tax Professionals Report to learn more about how accounting firm business priorities have changed since 2023.

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• MANAGEMENT ACCOUNTING

Highlights of management accounting research

Learn what the scholarly community has to say about the balanced scorecard, performance reviews, and other management accounting topics..

• Management Accounting

Academic research in management accounting can provide companies with insight in using management accounting systems to better achieve strategic and operating objectives. It explains or predicts how the design of managerial accounting systems will affect management actions and an organization's success, or how internal and external organizational forces will affect the design of management accounting systems. Below, we summarize recent management accounting research from leading academic accounting journals.

THE BALANCED SCORECARD: A VISUAL WAY TO SPARK STRATEGY

The management of operations is largely a plan, control, and evaluate process that typically shapes itself as a complete feedback loop. However, the design and implementation of strategy is a much more open and evolutionary process. In their article, "Exploring How the Balanced Scorecard Engages and Unfolds: Articulating the Visual Power of Accounting Inscriptions" ( Contemporary Accounting Research , Winter 2015), Cristiano Busco and Paolo Quattrone explore the balanced scorecard model as a helpful but somewhat "incomplete" way to energize and anchor dialogue among managers in an organization's process of refining and deploying strategic objectives and measures.

The authors report on their experience in a large multinational corporation operating in the oil and gas industry. They collected data over a four - year period through interviews, documentation, observation, and participation as the organization designed and rolled out its balanced scorecard system.

In describing the balanced scorecard's success for this company, the authors propose four functions that it can perform. The scorecard can act as (1) a "visual performable space" for shared strategy development, (2) a "method of ordering and innovation" that invites employees to debate crucial processes, (3) a "means of interrogation and mediation" for community dialogue, and (4) a "motivating ritual" that provokes recurring discussion.

The authors conclude that the balanced scorecard does not always provide an obvious way to define strategy and build performance measures around it. Instead, and perhaps more importantly, the authors' research demonstrates how this scorecard model guides the evolving work that managers do to build and deploy strategy.

WEIGHTING SCALES CAN CAUSE BIAS IN EMPLOYEE EVALUATIONS

Often, companies provide numerically weighted scales on employee evaluations to help ensure evaluators' assessments are in line with organizational goals. However, weighting the measures can also create problems. Specifically, it may make evaluators less likely to take important external information (i.e., factors beyond the control of the employee being evaluated) into account. A Spring 2015 article in the Journal of Management Accounting Research ("The Effects of Firm - Provided Measure Weightings on Evaluators' Incorporation of Non - Contractible Information," by James H. Long, Lasse Mertins, and Brian Vansant) examines how weighted measures affect employee evaluations.

The authors conducted an experiment in which they asked MBA students with prior corporate experience to complete a performance evaluation for a fictional retail store manager. The evaluations were based on four measures: sales, profit margin, customer satisfaction, and employee satisfaction. One group was given weights for each measure, but another group received no instructions about weights. Each group was then provided with uncontrollable external data such as growth in the economy and competitor actions. No instructions were provided to either group regarding how to use the uncontrollable data to evaluate how much the store manager's work actually affected the performance measures.

The authors found that, when performance evaluators were given a weighted measure, they placed less emphasis on the impact of external information on the employee's performance (e.g., how changes in the economy may have affected sales) than performance evaluators who were not provided a weighed measure. As a result, they assessed the employee's performance differently.

The authors note that unintended consequences such as these can bias an evaluation, suggesting that organizations should be conscientious in their subjective performance evaluation design.

THE BALANCING ACT OF MANAGING CREATIVITY

The management of creativity presents a dilemma. How can an organization plan, control, motivate, and evaluate creative people and processes without stifling creativity? Isabella Grabner and Gerhard Speckbacher discuss the complexities of managing creative and innovative employees in their article, "The Cost of Creativity: A Control Perspective" ( Accounting, Organizations and Society , January 2016).

Organizations that depend on creativity rely on employees who are internally motivated to engage in crucial innovative tasks. However, creativity without external control can pose significant risk to an organization. Creative individuals run the risk of getting lost in details, striving too much for perfection, and becoming more concerned about their own work than about the organization as a whole. Also, creative employees often have more knowledge about their innovative task than do their managers, which creates unique challenges in control and evaluation processes. That's why managing creativity requires a trade - off between creating "space" for creative employees and overseeing them to ensure that they pay attention to corporate policies and goals.

The authors used a carefully developed survey to explore managers' trade - off decisions on three types of management controls: (1) hiring, (2) limiting how much choice employees have about how they perform their tasks, and (3) performance evaluations. Their results show that when a creative employee's internal motivation is more important to an organization, managers will reduce controls by delegating decision rights to their employees and by not setting targets on specific creative results. However, managers will then increase controls that emphasize goals important to the whole organization and will invest more in hiring the right creative employees.

HOW LOSING EXECUTIVES TO OTHER COMPANIES AFFECTS COMPENSATION POLICIES

Organizations often suffer when they lose senior executives to other companies that offer higher pay. Recent research reveals that companies can improve executive retention when they make certain adjustments after the loss of a key employee.

The article's authors used executive compensation statistics from Standard & Poor's ExecuComp database to track 510 instances of movement among top executives at publicly held companies from 1993 to 2011.

The study confirmed that companies generally lose executives because they offer less - competitive pay relative to their industry. The authors also found that, for executives who stayed at a company following another executive's departure, median compensation increased 46%, with median cash compensation increasing 18% and median stock - based compensation jumping 102%. Accordingly, companies can make it less likely that executives will leave if they effectively " re - equilibrate " their compensation schemes by increasing their remaining employees' pay.

" Effects of Managerial Labor Market on Executive Compensation: Evidence From Job - Hopping ," by Huasheng Gao, Juan Luo, and Tilan Tang, appeared in the February 2015 issue of the Journal of Accounting and Economics .

PERFORMANCE MANAGEMENT MODELS CAN BE DESIGNED WITH DECISION-MAKERS' BIASES IN MIND

Many measurement and management systems intended to create strategic or operational advantages for organizations fail to live up to expectations. In their article, " Behavioral - Economic Nudges and Performance Measurement Models" ( Journal of Management Accounting Research , Spring 2015), Mary Malina and Frank Selto show how a balanced scorecard system in use for 15 years at one Fortune 500 company remained effective even though managers are, candidly, biased.

These researchers investigate the presence of four particular biases and how a successful balanced scorecard system can interact positively with the managers' decision processes. For example, some decision - makers anchor too much on an immediate opinion as soon as information starts arriving. Another bias is that decision - makers often believe that a business event is more (or less) important to the final decision based on how easily they can recall the same event happening in other situations, regardless of how relevant the information may actually be. Or a decision - maker who sees himself or herself as part of the organization will want to perform in a way that conforms to the organization's values or style. Finally, the choice to present information that highlights either the potential for gains or the potential for losses will affect the manager's approach to risk - taking .

The authors used interviews and a Fortune 500 company's balanced scorecard results from 1998 to 2013 to examine how a balanced scorecard system interacts with managers' biases and decision processes. Their research shows that a company's balanced scorecard system can be used to beneficially "nudge" managers into making decisions that align with organizational goals by taking into account their potential for particular biases. For example, the company studied by the authors took advantage of certain inherent biases by periodically publishing all of its distributors' results companywide. Distributors could then benchmark their performance against their peers' (an anchoring bias) and improve their performance if they felt they were not meeting company expectations (a conformity bias).

SHOULD A SINGLE BUDGET BE USED FOR PERFORMANCE EVALUATION AND PLANNING?

Budgets provide essential information for planning a business's operations and providing financial incentives for performance evaluation. In theory, companies should use a separate budget for these conflicting tasks since the motivation to incentivize employees with performance evaluation budget goals clashes with the need for accurate resource allocations in a planning budget. Yet evidence from practice reveals that typically only one budget is used.

However, authors Markus Arnold and Robert Gillenkirch find that there are advantages to using only one budget. Their article, "Using Negotiated Budgets for Planning and Performance Evaluation: An Experimental Study" ( Accounting, Organizations and Society , May 2015), explains the potential benefits of using a single budget for planning and performance evaluation.

To investigate budget effectiveness, the authors developed a computer simulation experiment covering three scenarios: use of separate budgets for planning and performance evaluations, use of a single budget for both purposes, and use of one budget for performance evaluation only. One hundred eighty participants were randomly grouped into manager - subordinate pairs. The subordinates completed a task that the managers then evaluated. The managers and subordinates were also asked to complete budget negotiations for the tasks. The authors explore how the choice to include the manager's planning task in the process of setting performance expectations affected subordinates' cooperation and performance in the budgeting process.

The authors determined that, even though using a single budget for planning and performance evaluation reduces flexibility, it enhances subordinates' performance and increases their cooperation during budget negotiations as well. This increased cooperation improves budget accuracy, providing a payoff for both the subordinate and the superior.

The Pathways Commission was created by the American Accounting Association and the AICPA to study the future structure of higher education for the accounting profession and develop recommendations to engage and retain the strongest possible community of students, academics, practitioners, and other knowledgeable leaders in the practice and study of accounting. Recommendation No. 1 of the Pathways Commission report was to "build a learned profession for the future by purposeful integration of accounting research, education, and practice for students, accounting practitioners, and educators." The dissemination of practice-related research to practitioners—as is done in this article—supports this recommendation.

Editor's note

This article is part of an occasional series that samples accounting research and distills key findings for busy practitioners and preparers. These summaries explain the implications of a wide range of research and give CPAs the opportunity to apply the results in day-to-day activities. Readers interested in more detail should review the full text of each article to explore the hypothesis, research process, statistical analysis, supporting theories, and conclusions.

About the author

Cynthia E. Bolt-Lee ( [email protected] ) is an associate professor of accounting in the School of Business at The Citadel in Charleston, S.C. Monte Swain ( [email protected] ) is the Deloitte Professor in the School of Accountancy at Brigham Young University in Provo, Utah.

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Strategic management accounting and performance implications: a literature review and research agenda

• Jafar Ojra 1 ,
• Abdullah Promise Opute   ORCID: orcid.org/0000-0001-6221-1856 2 , 3 &
• Mohammad Mobarak Alsolmi 4  

Future Business Journal volume  7 , Article number:  64 ( 2021 ) Cite this article

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The important role that management accounting plays in driving organisational performance has been reiterated in the literature. In line with that importance, the call for more effort to enhance knowledge on strategic management accounting has increased over the years. Responding to that call, this study utilised a qualitative approach that involved a systematic review to synthesise existing literature towards understanding the strategic management accounting foundation, contingency factors, and organisational performance impact. Based on the evidence in reviewed literature, we flag key directions for advancing this theoretical premise towards providing further insights that would enable practitioners strategically align their strategic management accounting practices for optimal organisational performance. The limitations of this study have been acknowledged.

Introduction

Successful managerial decisions enable organisational profitability and accounting aids effective managerial decisions [ 75 ]. Aimed at optimising the decision-enabling substance of accounting, management was criticised in 1980s as being too focused on internal operational issues that offer little to management from the point of strategy formulation and sustaining competitive advantage (CIMA Report Footnote 1 ). Recognising the importance for a broader impact of accounting on managerial decision-making, Simmonds [ 82 , p. 26] introduced and defined strategic management accounting (SMA) as “the provision and analysis of management accounting data about a business and its competitors, for use in developing and monitoring business strategy” .

Subsequently there has been increasing efforts that stress the importance for organisations to embrace strategic management accounting theory towards boosting strategic decision-making and organisational performance (e.g. [ 4 , 8 , 9 , 17 , 23 , 53 , 58 , 86 , 90 , 48 ], amongst others). As rightly noted by Turner et al. [ 86 ], organisations that aim to enhance their competitiveness and performance, must not only develop but also “implement internal policies and procedures such as strategic management accounting that are consistent with their business strategies and account for changing competitive demands” (p. 33). Doing that will enable the strategic management accounting tool to be effectively used to drive corporate success. This is the underlying argument in this study.

The task of profitably satisfying customers is becoming more challenging [ 61 , 65 , 67 ]. Meeting that challenge requires that organisations recognise the importance for effective decision-making. Accountants play a significant role in enabling effective decision-making in organisations (e.g. [ 21 , 23 , 27 ]). Accounting information enables the organisation determine the going concern [ 6 , 36 ]. Accounting provides the management with relevant information for ensuring and sustaining growth and profitability. The strategic management accounting foundation emphasises that in order to fully fulfil its management decision-making enabling function, accounting practices must not only focus on the internal but also on the external components relating to the organisation's operations. In other words, accounting should embrace a much broader and market-oriented approach and focus on costing (e.g. [ 8 , 17 , 58 , 78 ]); planning, control and performance measurement (e.g. [ 17 , 58 ]), strategic decision-making (e.g. [ 8 , 58 ]), customer accounting (e.g. [ 58 , 86 ]) and competitor accounting (e.g. [ 17 , 58 , 86 ]).

Given the importance of strategic management accounting to effective management decision-making and corporate success, there remains a growing interest in understanding the topic. Little wonder therefore that the advocacy for more research towards a better understanding of what strategic management accounting practices organisations adopt and what motivates their preference for one technique over the other (e.g. [ 4 , 53 , 58 , 86 , 90 ]) remains current. While embracing strategic management accounting is a critical path for enabling effective managerial decision-making and boosting organisational performance (e.g. [ 3 , 9 , 58 ]), the enablement outcome of strategic management accounting practice would hinge on the effectiveness of the organisation in tailoring its strategic management accounting practices to its strategy and environment [ 9 , 11 , 58 ].

Following that contingency logic, this research is a response to the aforementioned call and the aim in this study is to contribute to strategic management accounting discourse by critically analysing the body of knowledge towards enhancing the understanding of how knowledge has evolved in this theoretical domain and also to contribute to knowledge by flagging directions for further knowledge development. To achieve the aim of this study, the theoretical focus in this study is premised along three questions:

What strategic management accounting techniques can organisations use towards driving organisational performance?

What factors would influence strategic management accounting techniques usage and performance association? and

What future research gaps exist based on the explored literature?

Literature review

This study follows the theoretical foundation that strategic management accounting would aid effective management decision-making, and ultimately boost organisational performance. In line with the aim of this study, relevant literature is reviewed to explain the theoretical premise of this study. The literature review is organised along three core themes in strategic management accounting discourse, namely, strategic management accounting techniques, contingency factors of strategic management accounting usage, and the impact of strategic management accounting on organisational performance.

Strategic management accounting: definition and techniques

Management accounting is noted to involve the “generation, communication, and use of financial and non-financial information for managerial decision-making and control activities” ([ 28 ] p. 3). One major criticism of accounting in the 1980s relates to the fact that accountants have hardly taken a proactive role in the strategic management process [ 7 , 8 ]. According to Nixon and Burns [ 55 , p. 229], although strategic management has been variously defined, there is “broad consensus that the key activities are (1) development of a grand strategy, purpose or sense of direction, (2) formulation of strategic goals and plans to achieve them, (3) implementation of plans, and (4) monitoring, evaluation and corrective action”. The role of management accounting is to enable effective decision-making, and it involves typically information gathering and analysis, identifying options, implementation, monitoring and evaluation [ 16 ]. Thus, the focus in strategic management accounting, rephrased also as accounting for strategic positioning [ 73 , 74 ], is to embrace a broader approach that incorporates a strategic management focus into its dynamics towards effectively enabling management decision-making and organisational performance [ 8 , 80 ]).

Since the first attempt by Simmonds [ 82 , p. 26] who defined strategic management accounting as “the provision and analysis of management accounting data about a business and its competitors, for use in developing and monitoring business strategy” , there have been numerous attempts to enhance that definition and identify core techniques of strategic management accounting. For example, CIMA [ 16 ] describes strategic management accounting as a management accounting form that emphasises focusing on information relating to external factor of the entity and also on non-financial information as well as information that is generated internally. In a much earlier contribution, Bromwich [ 7 , p. 28] offers a description of strategic management accounting as involving “the provision and analysis of financial information on the organisation’s product markets and competitors’ costs and cost structures and the monitoring of the organisation’s strategies and those of its competitors in the market over a number of periods” (Cited in [ 56 , p. 14]).

In their 2008 study, Cadez and Guilding asked the question “what is strategic management accounting?” (p. 838). In that same study, they conclude, based on evidence from reviewed literature, that there are two perspectives of strategic management accounting. While one perspective focuses on strategically oriented accounting techniques, the other focuses on the actual involvement of accountants in the strategic decision-making process. Following the former perspective (e.g. [ 8 , 9 , 17 , 58 ]), existing literature distils sixteen (16) strategic management accounting techniques that are categorised under five SMA themes (e.g. [ 9 , 11 , 58 ]):

Strategic costing;

Strategic planning, control and performance measurement;

Strategic decision-making;

Competitor accounting; and

Customer accounting.

Strategic costing

According to literature (e.g. [ 8 , 11 , 23 ]), strategic and marketing information-based cost data can be leveraged by organisations to ensure effective strategies for achieving sustainable competitive advantage. Thus, organisations must recognise the importance of integrating cost strategies and undertake multiple strategic cost analyses. Literature distils five key costing techniques: attribute costing (e.g. Roslender and Hart 2003), life-cycle costing (e.g. [ 8 , 17 ]), quality costing (e.g. [ 17 ]), target costing (e.g. [ 8 , 17 ]) and value chain costing (e.g. [ 8 ]).

Strategic planning, control and performance measurement

Literature has also underlined the need for organisations to give due attention to planning, control and performance measurement features of the strategic management accounting, as doing that is important in the pro-active market orientation approach for competing effectively in the marketplace (e.g. [ 8 , 58 ], Chenhall 2005). Core components under the strategic planning, control and performance measurement tool includes benchmarking (e.g. [ 8 , 17 ]) and integrated performance management (Balanced Scorecard) (e.g. [ 8 , 17 ]).

Strategic decision-making

As a strategic management accounting tool, strategic decision-making is a critical tool for supporting strategic choice [ 11 ]. Core strategic decision-making options include strategic costing (e.g. [ 58 ]), strategic pricing (e.g. [ 11 , 58 ]) and brand valuation (e.g. [ 11 , 58 ]).

The importance of addressing strategic costing as a key strategic decision-making element has been emphasised in the literature (e.g. [ 58 , 78 , 79 ]). In this discourse, it is underlined that effectively driving competitive advantage requires cost analysis that explicitly considers strategic issues. In line with that viewpoint, Cadez and Guilding [ 8 ] note that strategic costing involves “the use of cost data based on strategic and marketing information to develop and identify superior strategies that will produce a sustainable competitive advantage” (p. 27).

In the literature too, strategic pricing is underlined as another core element the strategic decision-making typology of strategic management accounting (e.g. [ 8 , 58 ], Simmonds 1982). According to scholars, understanding market competition level, which as noted by Guilding et al. [ 29 , p. 120] entails the appraisal of the following factors: “competitor price reaction, price elasticity; projected market growth; and economies of scale and experience”, is important (e.g. [ 8 , 11 , 58 ]).

Within the strategic management accounting literature, brand valuation is the third element of the strategic decision-making technique. The brand valuation component “involves combining projected brand earnings (an accounting-orientated measure) with a multiple derived from the brand’s strength on strategic factors such as the nature of the brand’s market, its position in that market and its level of marketing support” [ 29 , p. 118]. In the view of Cescon et al. [ 11 ], brand valuation enables organisations to understand market reputation trends over time and potential implications for marketing executives and strategic accounting. Cescon et al. [ 11 ] contend that organisations would achieve a variable brand valuation that would provide a potential measure of marketing achievement when perceived quality and branded products are considered, while Guilding et al. [ 29 ] remind that achievable impact of brand valuation would hinge, amongst others, on the valuation method used.

Competitor accounting

According to Porter [ 72 ], strategy involves developing appropriate tools that enable a firm to analyse and determine its position in a competitive market. Thus, a firm selects suitable strategies that enables it compete more effectively over its rivals. To effectively do that, a firm needs to collect competitor accounting information. The importance of giving due attention to competitor accounting has been underlined in the literature (e.g. [ 11 , 17 , 58 ]). Three forms of competitor accounting tools are described in the literature, namely, competitor cost assessment (e.g. [ 11 , 17 , 58 ]), competitor position monitoring (e.g. [ 11 , 58 ]) and competitor performance appraisal (e.g. [ 11 , 17 , 58 ]).

Customer accounting

The fifth cluster of strategic management accounting techniques described in the literature relates to customer accounting (e.g. [ 49 , 58 ]). Customer accounting concerns practices aimed at appraising profit, sales or costs related to customers or customer segments [ 58 ]. Core customer accounting techniques include customer profitability analysis (e.g. [ 30 , 58 ]), lifetime customer profitability analysis (e.g. [ 58 ]) and valuation of customers as assets (e.g. [ 30 , 58 ]).

The contingency factors of strategic management accounting

According to management accounting discourse, when organisations carefully embrace appropriate strategic management accounting practices, they would ensure successful managerial decisions that would ultimately lead to optimising organisational performance (e.g. [ 48 , 53 , 56 , 58 ]). Thus, the extent of improved performance that an organisation would achieve would depend on its careful utilisation of appropriate strategic management techniques. As noted by Roslender and Hart (2003), p. 4 and further supported by subsequent literature (e.g. [ 34 , 58 ]), “the adoption of strategically oriented management accounting techniques and accountants’ participation in strategic management processes”, is a core research premise. In line with the carefulness notion mentioned above, the contingency perspective has been widely utilised in the effort to understand strategic management accounting practices and performance impact (e.g. [ 8 , 12 , 30 , 34 , 58 ]). The underlying foundation in the contingency perspective is based on the notion “that an organisation maximises its efficiency by matching between structure and environment” [ 22 , p. 49]. According to Otley [ 68 ]:

The contingency approach to management is based on the premise that there is no universally appropriate accounting system that applies equally to all organisations in all circumstances. Rather, it is suggested that particular features of an appropriate accounting system will depend on the specific circumstances in which an organisation finds itself. Thus, a contingency theory must identify specific aspects of an accounting system which are associated with certain defined circumstances and demonstrate an appropriate matching (p. 413).

Thus, the central foundation in the contingency perspective is that no one single accounting system is universally fit for all organisation in all circumstances (e.g. [ 41 ]). No one accounting control system can be seen as “best” for all situations; rather, the appropriateness of any control system would depend on the organisation's ability to adapt effectively to the environment surrounding its operations [ 41 , 58 , 86 ].

From reviewed literature, numerous researchers have flagged key contingency factors that should be considered in relation to strategic management accounting practice. Four factors were identified as critical contingency factors in the strategic management accounting systems design in Cadez and Guilding's [ 8 ] study, namely: business strategy, strategy formulation pattern, market orientation and firm size. On their part, Islam and Hu [ 41 ] identify core organisational effectiveness factors to include technology, environmental volatility, organisational structure, information system and size of the organisation.

Analysed together, the conceptualisation in the aforementioned studies [ 8 , 41 ] reflect perspectives that have been recognised in the 1980s. For example, Merchant [ 50 ] describe contingency factors to include firm size, product diversity, extent of decentralisation and budgetary information use. In their study of accounting information systems, Gordon and Narayanan [ 26 ] classify three core contingency factors to include perceived environmental uncertainty, information characteristics and organisational structure. Based on a study that examined the extent to which accountants were involved in the strategic management process, CIMA Footnote 2 reports three key contingency factors: “organisational influences, accountant led influences and practicalities” (p. 12). Exploring strategic management accounting practices in the Palestinian context, Ojra [ 58 ] conceptualised a comprehensive contingency perspective that considered (1) organisational structure (involving formalisation and decentralisation), (2) organisational size, (3) technology and (4) organisational strategy. In more recent literature, Pavlatos [ 70 ] suggests seven factors that affect strategic management accounting usage in the hospitality industry (hotels) in Greece, namely, “perceived environmental uncertainty, structure, quality of information systems, organisational life cycle stage, historical performance, strategy and size” (p. 756).

The contingency framing in this study draws from the theoretical guideline which suggests that both the internal and external environments of organisations should be considered in the effort to advance strategic management accounting literature (e.g. [ 58 , 70 ]). The conceptual framing in this study includes two external (perceived environmental uncertainty—competitive intensity, and market turbulence) and three internal (organisational structure—formalisation, and decentralisation, and organisational strategy) factors.

Perceived environmental uncertainty and strategic management accounting usage

From the perceptual lens, the environment could be viewed as certain or uncertain only to the extent that decision makers perceive it to be (e.g. [ 1 , 11 ]). Perceived environmental uncertainty is described as the absence of information relating to organisations, activities and happenings in the environment [ 20 ]. According to Cescon et al. [ 11 ], organisations must give due attention to their operational environment because engaging with environmental uncertainty factors would enable them identify key change drivers.

Prior literature has documented that perceived uncertainty significantly influences the extent to which firms would embrace strategic management accounting practices (e.g. [ 49 , 58 , 70 ]). According to that foundation, how firms respond from the point of strategic management accounting practices that they would endorse would depend on the nature of environmental uncertainties that surround their operational activities.

Studying the hotel property setting, Pavlatos [ 70 ] documents a positive correlation between the degree of environmental uncertainty and the use of strategic management accounting tools. In other words, the higher the perceived environmental uncertainty, the higher the need for use of strategic management accounting tools. Intensified use of strategic management accounting tools is essential because that will enable the hotels to manage the uncertainties, and be more effective in managerial decision-making, and ultimately improves organisational performance [ 70 ]. The notion of a significant influence of environmental uncertainty on strategic management accounting practices is supported by prior literature (e.g. [ 15 ]). According to them, managers who operate in highly uncertain environments would require information that is timely, current and frequent. Other scholars have also argued that environmental uncertainty would be associated with more pro-active and externally focused accounting systems (e.g. [ 32 , 38 ]).

In their study of Italian manufacturing companies, Cescon et al. [ 11 ] found a positive association of perceived environmental uncertainty and strategic pricing usage as a feature of the strategic decision-making SMA technique. In other words, the more the perceived environmental uncertainty, the higher the usage of the strategic pricing feature of the strategic decision-making SMA component.

In the perceived environmental uncertainty literature, two core dimensions have been distilled, namely competitive intensity and market turbulence (e.g. [ 30 , 58 ]). Market turbulence—a subset of environmental turbulence [ 47 ], is defined by Calantone et al. [ 10 ] as characterised by continuous changes in customers’ preference/demands, in price/cost structures and in the composition of competitors. In settings where there is high market turbulence, organizations would need to modify their products and approaches to the market more frequently [ 44 ]. On the other hand, the notion of competitive intensity relates to the logic that organisations compete for numerous resources, such as raw materials, selling and distribution channels, as well as quality, variety and price of products [ 26 , 46 ]. Achieving organisation-environment alignment in highly competitive environments requires that organisations have the capacity to effectively detect environmental signals and timely communicate environmental information (e.g. [ 88 ]).

Exploring Australian hospitality industry, McManus [ 49 ] examined the association of competition intensity and perceived environmental uncertainty on customer accounting techniques usage. The study suggests that competition intensity positively associates with customer accounting practices but also found that higher perceived environmental uncertainty would not lead to greater usage of customer accounting techniques in the explored hotels. In a much similar conceptualisation, Cescon et al. [ 11 ] examined the association of environmental uncertainty and competitive forces on strategic management accounting techniques usage in large Italian manufacturing firms. Empirically, that study found that external factors (environmental uncertainty and competitive forces) positively associate with SMA usage (strategic pricing, balanced scorecard, risk analysis, target costing, life-cycle costing). Based on the two-dimensional conceptualisation, Ojra [ 58 ] examined the relationship between perceived environmental uncertainty and SMA usage in Palestinian firms. Ojra [ 58 ] hypothesised a positive correlation of perceived environmental uncertainty (conceptualised to include competition intensity and market turbulence) but found no support. To the contrary, Ojra [ 58 ] documents a potential for negative influence of perceived environmental uncertainty on strategic management accounting techniques usage, however only significant for the market turbulence dimension. In other words, Ojra [ 58 ] suggests that market turbulence associates negatively with strategic management accounting techniques usage in medium Palestine firms.

Organisational structure (formalisation) and strategic management accounting usage

Across the various streams of management, formalisation has been mentioned as a key contingency factor in understanding the operational dynamics of organisations (e.g. [ 58 , 63 , 64 ]). With regard to strategic management accounting discourse, this notion has been numerously supported (e.g. [ 26 , 58 , 85 ]).

Studying the influence of formalisation in the functional relationship between the accounting and marketing departments, Opute et al. [ 64 ] suggest a positive association. In other words, they argue that the more formalised the processes in the firm, the higher the achieved integration between both functional areas. However, Opute et al. [ 64 ] note that whether this positive association is achieved would depend on the integration component (information sharing, unified effort and involvement) considered.

In the strategic management accounting domain, there is mixed evidence of the association of organisational structure on strategic management accounting usage. For example, Ojra [ 58 ] hypothesised that less formalised organisational structure would lead to higher use of strategic management accounting techniques in Palestinian firms but found no support for that hypothesis. In that study, no support was found for the notion that less formalised structures would lead to higher use of strategic management accounting techniques, both for total SMA as well as for all the dimensions of SMA. Thus, that study concludes that formalisation has no significant influence on strategic management accounting techniques usage in Palestinian firms. That conclusion supports the findings in Gordon and Narayanan [ 26 ], but contrast the view in Tuan Mat’s [ 85 ] exploration of management accounting practices.

Organisational structure (decentralisation) and strategic management accounting usage

Similar to formalisation, management scholars have noted decentralisation as a core organisational structure factor that should be given due attention in the drive to enhance the understanding of contingency theory (e.g. [ 58 , 62 , 63 ]). Organisational structure has been noted to influence the strategic management accounting practices of a firm (e.g. [ 58 , 70 ]). Within that foundation, decentralisation (or its opposite) has been flagged as a major factor. A contention that has been underlined numerously in the discourse is that strategic management accounting usage would be higher in organisations that embrace decentralised structure. Following that foundation, Pavlatos [ 70 ] hypothesised that SMA usage is higher in decentralised hotels than in centralised hotels in Greece. The results support the hypothesis: there is higher need for strategic management accounting practices in decentralised firms, as lower-level managers require more information to aid decision-making.

The above conclusion supports as well as contrasts prior literature, namely Chenhall [ 14 ] and Verbeeten [ 87 ], respectively. According to Chenhall [ 14 , p. 525], “strategic management accounting has characteristics related to aspects of horizontal organisation as they aim to connect strategy to the value chain and link activities across the organisation…”. Chenhall [ 14 ] adds that a typical approach in horizontal organisation is identifying customer-oriented strategic priorities and then exploiting process efficiency, continuous improvements, flattened structures and team empowerment, to initiate change, a conclusion that suggests that higher use of strategic management accounting practices would seem ideal in such decentralised organisational structure. The reason for that outcome is that in decentralised structure, lower-level managers can adapt their MACS as necessary to meet requirements [ 52 ], a logic that finds support in McManus [ 49 ] who found that customer accounting usage is higher in Australian hotels that are decentralised than those that are centralised. In contrast to that logic, Verbeeten [ 87 ] found decentralisation to associate negatively with major changes in the decision-influencing components of MACS.

Insight about the less developed context, namely about Palestinian firms lend support to, as well as contrast past literature. According to Ojra [ 58 ], decentralisation has a tendency to associate negatively with strategic management accounting usage. Therefore, although statistically insignificant, the results indicate that explored Palestinian firms that endorse decentralised decision-making process would seemingly have lesser need for strategic management accounting practices. On the evidence that decentralisation may have a negative influence on strategic management accounting usage, Ojra [ 58 ] supports Verbeeten [ 87 ] but contrasts Pavlatos [ 70 ].

Organisational strategy and strategic management accounting usage

An internal organisational factor that has been considered important in the understanding of contingency perspective of management accounting relates to organisational strategy (e.g. [ 8 , 17 , 58 ]). Hambrick [ 33 ] defined strategy as:

A pattern of important decisions that guides the organisation in its relationship with its environment; affects the internal structure and processes of the organisation; and centrally affects the organisation’s performance (p.567).

In the strategic management accounting discourse, organisational strategy has been mentioned as one of the key factors that would condition strategic management accounting practices of a firm (e.g. [ 9 , 58 , 70 , 86 ]). For example, Turner et al. [ 86 ] note that in hotel property setting, strategic management accounting use would hinge on the market orientation business strategy of the firm. Given the notion that strategic management accounting would aid management decision-making and lead ultimately to improved organisational performance, there is some legitimacy in expecting that organisations that align their strategic management accounting practices to the strategic orientation of the firm would achieve a higher organisational performance.

Following Miles and Snow’s [ 51 ] strategy typology (prospector, defender, analyser, and reactor), efforts to understand the association of strategy to strategic management accounting tools usage have also tried to understand how the various strategy typologies play out in this association. For example, Cadez and Guilding [ 9 ] considered the prospector, defender and analyser typologies in the Slovenian context, while Ojra [ 58 ] considered the prospector and defender typologies in the Palestinian contexts.

Cadez and Guilding [ 9 ] report that companies that endorse the analyser strategy, which is a deliberate strategy formulation approach, are not highly market oriented, but tend to show high usage of SMA techniques, except for competitor accounting technique. Further, they report that prospector strategy-oriented companies also pursue a deliberate strategy formulation approach, but are highly market oriented, and SMA techniques usage is fairly high (for competitor accounting) and averagely high (for strategic costing). For very high prospector-oriented companies, they are highly market oriented, have a strong strategy drive and a very high SMA techniques usage. For the defender strategy-type companies, they suggest that such companies are not only average in their market orientation, but also in their usage of SMA techniques.

In the study of Palestinian companies, Ojra [ 58 ] offers insights that resonate relatively with the findings in Cadez and Guilding [ 9 ]. Ojra [ 58 ] suggests that prospector companies have a higher usage of SMA techniques than defender-type companies. So, SMA technique usage is positively associated to prospector strategy (see also [ 8 ]. Elaborating the findings, Ojra [ 58 ] reports that prospector-type companies focused more on four SMA techniques (mean values reported), namely SMAU-Planning, Control and Performance Measurement (4.601), SMAU-Strategic Decision Making (4.712), SMAU-Competitor Accounting (4.689) and SMAU-Customer Accounting (4.734), statistical results that are significantly higher than the results for 'defender'-type companies. Cinquini and Tenucci [ 17 ] lend support to Ojra [ 58 ]: 'defender'-type companies give more attention to the Costing dimension of SMA.

Without emphasising the strategy typologies, Pavlakos (2015) comments that organisational strategy affects SMA usage in the Greek hotel industry.

Strategic management accounting and organisational performance

A central tenet in the strategic management accounting foundation is that management accounting would significantly aid organisations to achieve sustained competitiveness [ 7 , 82 ]. Implicitly, these scholars argue that in order to stay competitive in the marketplace, organisations should not only focus on cost-volume-profit issues, but rather embrace a broad externally focused management accounting approach that is strategically driven and provides financial information that enables management to effectively formulate and monitor the organisation's strategy. Thus, management accounting should also focus on competitor information as that will enable management effectively organise the firm's strategic structure.

Over the years, there is growing recognition of the importance of strategic management accounting to organisations, leading therefore to increasing research attention. One area that has received attention in the strategic management accounting discourse relates to the organisational performance enhancement notion (e.g. [ 23 , 56 , 58 , 77 , 86 ]).

Insights from Malaysia also add to the discourse on the impact of strategic management accounting usage on organisational performance. In their study of Malaysian electrical and electronic firms, Noordin et al. [ 56 ] examined the extent of usage of strategic management accounting and influence on the performance of the participating firms. The study found that in explored Malaysian companies, the extent of strategic management accounting usage was significantly related to organisation’s performance. That conclusion supports Cadez and Guilding [ 8 ] who contend that there is a positive association between strategic management accounting usage and organisational performance.

In a performance perspective that considers the ISO 9000 Quality Management System (QMS) aspect, Sedevich-Fons [ 77 ] examined the connection between strategic management accounting and quality management systems performance. The findings show that strategic management accounting and quality management are complementary and their effective implementation would enhance overall performance. Sedevich-Fons [ 77 ] notes further that when both are used in conjunction that would spread SMA techniques and enable full exploitation of Quality Management Systems.

Insights from the less developed economy context also associate organisational performance to the implementation of strategic management accounting practices (e.g. [ 3 , 57 , 58 ]). In a conceptual approach that aimed to address one major gap in previous literature, Ojra [ 58 ] examined both the financial and non-financial dimensions of organisational performance. According to Ojra [ 58 ], strategic management accounting usage does not impact the financial dimension of organisational performance but exerts significant positive impact on non-financial performance. That finding resonates with Perera et al. [ 71 ] conclusion that various forms of management accounting associate positively with the use of non-financial measures.

On their part, Oboh and Ajibolade [ 57 ], in their investigation of the association between strategic management accounting practices and strategic decision-making in Nigerian banks, found that explored Nigerian banks “practice SMA not as a concept, but as a principle of operation, and that SMA contributes significantly to strategic decision-making in the area of competitive advantage and increased market share” (p.119).

Alabdullah [ 3 ] offers evidence that adds support to the insights in the aforementioned studies [ 57 , 58 ]. In a study that explored the Jordanian service sector, Alabdullah [ 3 ] found that strategic management accounting enables performance in the service sector in Jordan. If strategic management accounting is effectively implemented, that will enable optimal strategic decision-making and ultimately improve organisational performance.

Research methodology

Research design.

Qualitative research method [ 18 , 76 ] is used in this study to achieve the objectives of this research. Following the methodological approach, as well as responding to the research call, in a past study on the contingency perspective of strategic management accounting [ 41 ], a study which was literature review-based, literature review-based qualitative research approach was deemed fit in this study.

A systematic review approach (e.g. [ 5 , 39 , 81 ]) is used in this research on the topic of strategic management accounting. Using the systematic review approach in this study is appropriate because it enables a systematic and transparent approach in identifying, selecting, and evaluating relevant published literature on a specific topic or question [ 42 , 83 ]. Furthermore, systematic review approach was deemed appropriate for this study as it has been documented to aid core research gaps identification and steering future research (e.g. [ 40 , 59 , 66 ]).

Alves et al. [ 5 ] forward a two-stage guideline for systematic review of literature: planning the review and conducting the review and analysis. As they noted, researchers should describe how the systematic approach was planned (in the former) and also describe the phases of the review and selection of literature (in the latter). In this research, effort was made to combine the best evidence: careful planning was used to determine literatures for inclusion or exclusion (e.g. [ 5 , 65 , 67 ]). The planning was focused at identifying relevant publications in various academic journals on the topic of strategic management accounting. First, the theoretical themes to be considered in the conceptual premise of this study were confirmed and academic resource for tracking relevant publications determined [ 5 , 66 , 83 ].

In the preliminary stage of the literature review, electronic search was carried out to identify relevant literature relating to strategic management accounting. Three steps were taken in the systematic review: we searched the literature, analysed and synthesised the literature, and wrote the review. Several databases were scanned using key search terms to capture relevant literature [ 81 ]. Core search terms were used, such as strategic management accounting, historical aspects of strategic management accounting, contingencies of strategic management accounting practices, strategic management accounting and organisational strategy, strategic management accounting and organisational performance, amongst others. Relevant publications were also found using data extraction tools such as Google Scholar, Emerald Insight and Research Gate.

Using the aforementioned methodological approach, a collection of relevant articles published in academic journals was identified. Identifying the relevant literature in this study followed methodological guideline [ 69 ]: criteria of language, relevance and type of research to identify relevant studies were embraced, and articles that contained non-English contents and also articles that did not fit closely to the thematic premise of this study were excluded. It is important to emphasise here that this study recognises that not all publications relating to the topic of strategic management accounting may have been considered in this research. However, for the scope of this piece of research, the body of literature covered in this study was deemed adequate for the conceptual framing.

Table 1 shows a sample of selected literature covered in this piece of research, pinpointing clearly the focus, context of the studies and findings from the studies.

The analysis

The interpretive approach of analysis was followed in processing the qualitative data to achieve reliable meaning in this study (e.g. [ 59 , 65 , 67 , 84 ]). Following that precedence, an iterative approach that involved reading reviewed literature back and forth, was used in this study. Using that approach, a synthesis of literature was undertaken to capture the core threads, debates and themes in the literature (e.g. [ 65 , 67 ]). Guided also by that methodological approach, relevant directions for future research have been flagged towards enhancing the knowledge about strategic management accounting and performance association.

Subjectivity is a major concern in qualitative researches (e.g. [ 18 , 76 ]). To address that concern, steps taken in this research to validate the articles incorporated into this research include rigor of conduct and strength of evidence by cross-referencing, as well as undertaking a duplicate check (e.g. [ 76 , 81 ]).

The findings

Prompted by the central threads that emerged from the analysis of the selected literature, the findings from this study are organised along three core themes: strategic management accounting techniques, contingencies of strategic management accounting techniques usage and the organisational performance implications of strategic management accounting usage.

The importance of management accounting, and in particular the strategic management accounting element as a tool for enabling top management to make effective decisions that enable organisation compete effectively in the marketplace, is gaining increasing mention in management discourse. In that discourse, five core categorisations of SMA techniques: strategic costing; strategic planning, control and performance measurement; strategic decision-making; competitor accounting; and customer accounting. While literature distils numerous forms of strategic management accounting techniques that organisations may embrace towards enabling effective management decision-making and organisational performance, evidence was found in reviewed literature that in some organisations, practitioners do not believe that strategic management accounting as a separate concept is a notion they subscribe to (e.g. CIMA Footnote 3 ; [ 48 , 55 ]). For example, CIMA Footnote 4 documents that participants unanimously do not subscribe to the notion, a conclusion which lends support to prior literature [ 48 , 55 ] that notes that strategic management accounting as a term, did not exist in the lexicon of accounting practitioners.

Grounded on the substance that effective use of the SMA techniques would improve organisational performance, immense research effort has focused on how organisations can effectively align the SMA usage towards achieving desired performance improvement. Premised in that theoretical domain, this study examined existing literature on the contingency factors of competitive intensity, market turbulence, formalisation, decentralisation and organisational strategy and SMA usage. Cumulative evidence obtained from the review of literature reinforces the need for organisations to pay particular attention to their operational environment in their use of SMA techniques. Reinforcing the fit principle, the cummulative evidence underlines that optimising the benefits of the strategic management accounting techniques in enabling effective customer orientation and boosting organisational performance is dependent on the organisation's ability to effectively align strategic management accounting practices to its operational environment. In other words, what works for an organisation would depend on the organisational dynamics, internal, as well as external. For example, formalisation may work for some but not for some, as decentralisation could work for some but not for some. Similarly, the utility of SMA techniques would hinge on the competitive intensity and market turbulence features of an organisation. Thus, aligning SMA practices to the internal and external features of an organisation is essential to enable them adapt effectively to their circumstances, make rational decisions and optimise their performance. So, alignment is critical because there is no one-size fits all approach for achieving customer orientation and organisational performance goals.

The third focal point of this study relates to the association of SMA techniques usage to organisational performance. Reviewed literature shows that organisations are achieving higher performance through the use of SMA techniques. In other words, effective use of SMA techniques would improve organisational performance. The plausibility in that performance outcome lies in the fact that organisations are able to utilise appropriate SMA measures to ensure effective, customer, competitor, strategic decision-making, costing, and planning and control orientation in their operational activities. Further on the performance point, literature also suggests that management control systems (MCS)–performance relationship is mediated by business strategy (e.g. [ 2 ]). Also, that study documents that the impacts (both indirect and total) of MCS on performance are stronger for family businesses than non-family businesses.

Conclusions

Conclusions and implications.

One of the major challenges that organisations are facing in today's dynamic marketplace is to steer their organisations in a way that they can stay competitive. In the contemporary world, where globalisation and technological evolution have expanded the options that customers have (e.g. [ 31 , 61 , 65 , 67 ]), organisations must strive hard to win the loyalty of customers. For organisations wishing to achieve that, strategic management accounting practices offer a strategic pathway. Organisations must embrace strategic management accounting practices that would enable them understand the market, their competitors, and the customers and leverage the intelligence from that knowledge to organise their operations towards profitably satisfying the customer. To effectively do that, organisations must avoid the mistake of focusing only on the internal issues; rather, their effort must be tailored towards embracing strategic management accounting practices that would enable them to be fully informed of the market trends, customer dynamics and competitor trends. Thus, organisations must ensure that good costing, planning, control and performance measurement; strategic decision-making, customer accounting and competitor accounting measures are embraced to enable them compete effectively.

Furthermore, in that drive to compete effectively in the market and profitably satisfy customers, organisations would not only need to embrace appropriate strategic management accounting techniques but also do that bearing in mind the environments that surround the operational activities. In other words, organisations must give due attention to the contingencies of their operational setting. Organisations must ensure a good blend of critical factors that would enable their optimal operation. Due attention must be given to organisational structure (centralisation or decentralisation of decision-making process), external environment (dynamism and turbulence), technological development, strategic approach, size of the organisation, amongst others. Doing that is critical for corporate success because there is no one size fits all approach—the outcome achieved would depend significantly on the dynamics surrounding the operational activities of the firm.

Thirty-three months on after Covid 19 was documented, Footnote 5 the pandemic is still ever present and has remained a daunting global challenge. Competing effectively in the dynamic marketplace is a major challenge for organisations, and with the Corona pandemic exerting unprecedent effects on organisations globally, most organisations are facing a more daunting challenge to survive (e.g. [ 65 , 67 ]). Organisations must strive to strategically orientate their management accounting practices to enable them find ways to effectively navigate the daunting challenges they face in this Corona era.

Implications of this study

The implications of this study are organised along managerial and theoretical implications.

Managerial Implications —Managers are reminded that optimal use of strategic management accounting techniques would boost organisational performance. Achieving high levels of organisational performance would however hinge on an organisation's ability to effectively align its SMA techniques usage to its internal and external dynamics. In other words, managers must bear in mind that there is no one-size fits all approach; therefore, they should endorse SMA techniques usage that fits their operational dynamics.

Theoretical Implications —In line with the central objective of this paper to sensitise the need for enhancing the understanding of the contingency perspective of strategic management accounting, the theoretical implications of this study are tailored towards specifying core gaps in the reviewed literature.

Overall, evidence from reviewed literature underlines the criticality of SMA techniques usage to organisational performance. Thus, if organisations strategically align SMA techniques usage to their operational setting, this would positively impact organisational performance. Within the goal of enhancing the literature on how to optimise the performance impact, much gaps still exist from the point off illuminating how differences in marketing and national culture differentiate SMA acceptance, usage, contingencies and performance impact.

Finally, on the point of performance, reviewed literature documents an obvious gap in the literature from the point of illuminating SMA techniques usage impact along the performance dimensions. As noted by Ojra [ 58 ], for some societies (especially ones that are Islamic cultured), non-financial performance is of central importance. Theoretical development from the point of SMA techniques usage, contingencies and non-financial performance impact is scanty.

Limitations of the study

Based on systematic review approach, this study aimed to drive further knowledge development on the contingency perspective of strategic management accounting, drawing on the evidence from reviewed literature to understand the core debates in the literature and pinpoint directions for future research. Two core limitations of this research relate to the conceptual framework and volume of literature reviewed.

The conceptual framing of this study embraced only three themes in the SMA discourse, namely perceived environmental uncertainty, organisational structure and organisational strategy. Elaborated, the contingency premise considered in this study relates to perceived environmental uncertainty (competitive intensity, and market turbulence), organisational structure (formalisation and decentralisation), and organisational strategy. This study recognises that there are other contingencies of strategic management accounting practices that have not been included in the conceptual framing of this study.

To capture the central debates in the SMA discourse, extant literature was reviewed. It is however important to acknowledge that this study may have ignored some literature relevant to the conceptual premise of this study. Finally, although efforts were made by the researchers to ensure validity in this research by adopting an analytical approach that involved thorough reading of literature to ensure valid meaning in the interpretation, it must be reminded that subjectivity is a concern in every qualitative research.

Future research directions

In explaining the theoretical implications of this study, core gaps in the literature were underlined (Section “ Implications of this study ”), while the limitations of this study were acknowledged in Section “ Limitations of the study ”. Building on these, this Section “ Future research directions ” extends the contribution of this study by specifying core directions for further knowledge development on the contingency perspective of strategic management accounting.

No doubt, this study has limitations, amongst which are the conceptual framework and the literature review scope. In their study, Naranjo-Gil et al. [ 54 , p. 688] note that “future research is needed to examine other factors to add a more comprehensive view of management accounting”. Given the conceptual limitation of this study, this study reinforces the research call by Naranjo-Gil et al. [ 54 ]. Future research could expand the work done in this research and knowledge development by incorporating contingency factors that have not been considered in the conceptual framing of this study. More research is required in that regard, both from the point of a systematic literature review approach, as well as from the point of empirical investigations that seek to illuminate the contextual (industrial sectors and geographical settings) differentiators to the contingency impacts on the use of strategic management accounting techniques.

Furthermore, more research effort is required from the point of gaining deeper understanding of the various strategic management accounting techniques. Marketing dynamics (e.g. [ 62 ]) and national culture [ 35 , 60 ] differ from one setting to another, therefore exploring the nature of strategic management accounting techniques that organisations endorse and why are core premises for research.

As flagged in the findings, there is a growing support of the notion that accounting practitioners do not subscribe to the use of the term strategic management accounting (e.g. CIMA Footnote 6 ; [ 48 , 55 ]). Further research could help to shed more light not only on why practitioners may not subscribe to the use of the term strategic management accounting, but also on the understanding of how practitioners would prefer to describe the management accounting practices that they embrace, and also why the specific practices are prioritised.

Furthermore, on the point of the content of strategic management accounting, researchers have also noted that not much effort is given to highlighting clearly the accounting information that organisations should give much attention to towards boosting organisational performance (e.g. [ 53 , 89 ]). Future research should aim to fill this gap. Doing that is critical to fully optimising the performance benefits of strategic management accounting [ 56 ].

Reviewed literature has documented that the extent to which strategic management accounting practices would aid management decision-making and organisational performance would depend on the contingency dynamics of the organisation (e.g. [ 11 , 58 ]). Understanding the contingency premise of strategic management accounting utility in driving effective management decision-making and organisational performance is a critical research premise, and future research should aim to shed more light on that. No one size fits all approach that works for all organisations in all contexts. Therefore, future research should seek to enhance the 'fit' foundation of strategic management accounting relevance and performance outcome. In that regard, future research should seek to illuminate further how perceived environmental uncertainty, decentralisation, formalisation, strategy and other contingency factors not considered in this study, would influence strategic management accounting techniques usage and organisational performance impact. In the particular case of perceived environmental uncertainty, more research is not only required from the point of understanding the influence of the construct, but also clarifying the competitive intensity and market turbulence associations.

An insight that emerged from the reviewed literature relates to the fact that majority of efforts to improve strategic management accounting discourse have considered mainly financial aspects of organisational performance (e.g. [ 58 , 86 ]). Focusing only on financial performance is inadequate as the customer perspective of performance is neglected [ 45 , 58 ]. The importance of focusing on customer performance has been re-echoed in further literature: organisational-level customer satisfaction associates positively to financial performance (e.g. [ 24 , 86 ]), and customer performance enables business strategy and an organisation's ability to deliver value to its shareholders as well as customers [ 25 ]. Supporting prior research (e.g. [ 49 , 58 , 86 ]), this study underlines the need for more studies that illuminate non-financial performance aspects and strategic management accounting association.

Finally, the Corona pandemic, which remains a global crisis, has exerted unprecedent global economic damage. Organisations are facing daunting challenges as a result of the Corona pandemic and are still seeking ways to successfully navigate these challenges. Future research should illuminate what strategic management accounting practices organisations are endorsing in the effort to effectively navigate the Corona-crisis-induced challenges.

Availability of data and materials

This study is based on the review of literature.

Management Accounting in support of the strategic management process. https://www.cimaglobal.com/Documents/Thought_leadership_docs/Management%20and%20financial%20accounting/Academic-Research-Report-Strategic-Management-Process.pdf .

January 9—WHO Announces Mysterious Coronavirus-Related Pneumonia in Wuhan, China.

Abbreviations

• Strategic management accounting

Strategic management accounting usage

Chartered Institute of Management Accountants

Management accounting and control system

Management control systems

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Ojra, J., Opute, A.P. & Alsolmi, M.M. Strategic management accounting and performance implications: a literature review and research agenda. Futur Bus J 7 , 64 (2021). https://doi.org/10.1186/s43093-021-00109-1

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This indicator counts the number of citations received by documents from a journal and divides them by the total number of documents published in that journal. The chart shows the evolution of the average number of times documents published in a journal in the past two, three and four years have been cited in the current year. The two years line is equivalent to journal impact factor ™ (Thomson Reuters) metric.

Evolution of the total number of citations and journal's self-citations received by a journal's published documents during the three previous years. Journal Self-citation is defined as the number of citation from a journal citing article to articles published by the same journal.

Evolution of the number of total citation per document and external citation per document (i.e. journal self-citations removed) received by a journal's published documents during the three previous years. External citations are calculated by subtracting the number of self-citations from the total number of citations received by the journal’s documents.

International Collaboration accounts for the articles that have been produced by researchers from several countries. The chart shows the ratio of a journal's documents signed by researchers from more than one country; that is including more than one country address.

Not every article in a journal is considered primary research and therefore "citable", this chart shows the ratio of a journal's articles including substantial research (research articles, conference papers and reviews) in three year windows vs. those documents other than research articles, reviews and conference papers.

Ratio of a journal's items, grouped in three years windows, that have been cited at least once vs. those not cited during the following year.

Evolution of the percentage of female authors.

Evolution of the number of documents cited by public policy documents according to Overton database.

Evoution of the number of documents related to Sustainable Development Goals defined by United Nations. Available from 2018 onwards.

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Advances in Management Accounting

ISBN : 978-0-76231-118-7 , eISBN : 978-1-84950-281-8

Publication date: 21 July 2004

Although the “new economy” once again resembles the old economy, the drivers of success for many firms continue to be intangible or service-related assets. These changes in the economic basis of business are leading to changes in practice which are creating exciting new opportunities for research. Management accounting still is concerned with internal uses of and demands for operating and performance information by organizations, their managers, and their employees. However, current demand for internal information and analysis most likely reflects current decision making needs, which have changed rapidly to meet economic and environmental conditions. Many management accounting research articles reflect traditional research topics that might not conform to current practice concerns. Some accounting academics may desire to pursue research topics that reflect current problems of practice to inform, influence, or understand practice or influence accounting education.

This study analyzes attributes of nearly 2,000 research and professional articles published during the years 1996–2000 and finds numerous, relatively unexamined research questions that can expand the scope of current management accounting research. Analyses of theories, methods, and sources of data used by published management accounting research also describe publication opportunities in major research journals.

Selto, F.H. and Widener, S.K. (2004), "NEW DIRECTIONS IN MANAGEMENT ACCOUNTING RESEARCH: INSIGHTS FROM PRACTICE", Advances in Management Accounting ( Advances in Management Accounting, Vol. 12 ), Emerald Group Publishing Limited, Leeds, pp. 1-35. https://doi.org/10.1016/S1474-7871(04)12001-7

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Psychology in management accounting and control research: an overview of the recent literature

• Original Paper
• Open access
• Published: 21 July 2020
• Volume 31 , pages 275–328, ( 2020 )

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• Lisa-Marie Wibbeke   ORCID: orcid.org/0000-0003-1314-7995 1 &
• Maik Lachmann   ORCID: orcid.org/0000-0002-5900-0895 1  

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For decades, management accounting and control (MAC) researchers have employed a diverse set of source disciplines to predict and examine behavior, and psychology is among the most frequently drawn upon. Although the literature confirms that psychological theories are highly relevant to MAC research, the existing knowledge on this field remains fragmented. Given this background, we examine recent MAC research through a systematic review of the different subfields of psychology to investigate the development of this stream of research. To do so, we collect 125 relevant articles from nine leading accounting journals between 2000 and 2019 and analyze their contents. On this basis, we provide a detailed overview of the use of psychological theories in recent literature and identify links between specific theories and MAC topics. We find that the quantity and proportion of psychology-based MAC research and the diversity of psychology subfields all increase during our investigation period, especially between 2015 and the first half of 2019. Overall, most studies address performance measurement and evaluation topics, and social psychology concepts are the most frequently applied. However, we find considerable differences in the application of psychological theories across different MAC topics. Our review provides insights into the content of this research stream and, thus, serves as a valuable source for researchers seeking an overview of previous investigations drawing on different subfields of psychology.

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1 Introduction

For decades, management accounting and control (MAC) researchers have employed a diverse set of economic theories and sociological or organizational approaches to predict and examine behavior and decision-making (Hesford et al. 2007 ; Hopper and Bui 2016 ; Lachmann et al. 2017 ). Previous literature studies illuminate applications of specific subfields of psychology in MAC research. These studies identify cognitive, motivational, and social psychological theories frequently used in prior research (Birnberg et al. 2007 ) and examine research analyzing subjective decision-making in MAC contexts (Luft and Shields 2009 ). Further, a recent study by Kaplan et al. ( 2018b ) discusses four social psychological theories that have been or could be applied to behavioral accounting. Taken together, these studies indicate that psychology is highly relevant to contemporary MAC research and spark further interest in its contents and characteristics. Although the aforementioned studies discuss psychological theories and, especially, the use of social psychology in MAC research, the literature lacks a recent comprehensive review of applications of theories and concepts beyond social psychology in MAC studies. The prior studies are limited to particular psychology subfields or were conducted several years ago, leaving more recently published research unanalyzed. Prior research, therefore, remains fragmented, impeding the aggregation of knowledge on how psychological theories may complement economic or organizational theories in MAC studies and a deeper understanding of how MAC practices influence behavior and decision-making. Recent trends in psychology-based MAC research, such as the application of personality psychology (Holderness et al. 2017 ; Nichol 2019 ), make a comprehensive review of this topic especially valuable.

Given this background, we investigate recent MAC research employing theories and concepts from the field of psychology through a systematic literature review. Our review aims to explore the main foci of the use of psychological theories in MAC research and intends to examine the links between psychological theories and certain MAC topics. Our review follows a multistep approach in which every step of the systematic literature review process is based on a synthesis of approved review methods (e.g., Cooper 1984 , 1988 ; Grant and Booth 2009 ; Booth et al. 2012 ; Fink 2014 ; Mayring 2014 ). We identify the relevant research through a comprehensive, structured material collection process involving the development and establishment of several selection and inclusion criteria. This material collection process identifies 125 relevant articles out of a total of 5247 articles from nine leading accounting journals between 2000 and 2019. All of these articles are subject to in-depth content analysis that identifies the specific research topics, methods, and psychology subfields drawn upon and the psychological constructs and main findings of each relevant research study. Furthermore, we provide a comprehensive synthesis of the topics examined by the relevant studies and aim to present implications for future research.

Regarding recent developments, we confirm the trends indicated by prior studies (e.g., Hesford et al. 2007 ; Hopper and Bui 2016 ; Lachmann et al. 2017 ) and find that the number and share of psychology-based MAC studies increased over the investigation period, especially between 2015 and the first half of 2019. Additionally, we find that the diversity in psychology subfields increases over the investigation period and that this diversity is especially high between 2015 and the first half of 2019. Both findings indicate a growing interest in employing psychological theories and concepts to foster a better understanding of the consequences and effects of MAC practices on behavior. Regarding MAC topics, most articles examine aspects of performance measurement and evaluation, followed by aspects of compensation, rewards, and incentives and aspects of budgeting. Specifically, subjective performance evaluations and subjective measures (e.g., Kunz 2015 ; Bol and Leiby 2018 ), incentive contract framing and compensation contract selection questions (e.g., Tafkov 2013 ; Reichert and Woods 2017 ), and budgetary slack and honesty in budgeting (e.g., Brown et al. 2014 ; Blay et al. 2019 ) are very frequently investigated using psychology-based theoretical perspectives. Further, we find that social psychology is the predominant subfield of psychology applied to MAC research.

Our findings and syntheses contribute to the literature in several ways. We complement and extend existing discussions of psychology-based studies (e.g., Birnberg et al. 2007 ; Luft and Shields 2009 ; Kaplan et al. 2018b ) by including articles that draw upon theories and concepts from four distinctive subfields of psychology. This includes articles employing theories or concepts from social psychology, cognitive psychology and motivation theory. Furthermore, we significantly extend the scope of prior studies by including articles that draw upon personality psychology, multiple subfields and several smaller subfields. Moreover, we provide a very detailed analysis of the use of psychological theories and concepts in a multitude of MAC subtopics, which allows us to evaluate the developments regarding specific subtopics and topics, as well as psychology-based MAC research as a whole. To our knowledge, this review is the first to systematically collect, analyze, and synthesize such a broad spectrum of psychology-based research from the selected journals to illuminate the characteristics and knowledge generation of this research stream during this time period. Further, our review draws a picture of an evolving research landscape and suggests several future research opportunities, as well as emerging new facets in psychology-based MAC research.

Moreover, our synthesis and contextualization show, there are specific domains, where reactions to implemented MAC practices are significantly affected by psychological aspects. Among others, reactions to, e.g., PME systems, compensation, rewards or incentives benefit from psychology-based explanations of behavioral patterns. For instance, designers of PME systems should be aware that personality traits like psychological entitlement can affect one’s behavioral response to performance feedback (Holderness et al. 2017 ) or that compensation contract selection may be affected by one’s need for achievement (Fehrenbacher et al. 2017 ). Thus, our review advocates the consideration of such aspects, and we provide relevant insights on these mechanisms for academics, practitioners, and designers of MAC practices and systems.

The remaining sections of this review are structured as follows. Section  2 provides a brief overview of predominant psychology subfields in and the history of psychology-based MAC research, as well as previous studies regarding this research stream. Next, Sect.  3 describes our research methods and explains our systematic collection and review of the relevant research. The categorization process and the coding scheme developed for this purpose are also introduced in Sect.  3 . Subsequently, our findings are presented in Sect.  4 . In Sect.  5 our findings are synthesized and discussed regarding possible implications of the recent developments and future research avenues. We conclude by reflecting on the contributions and limitations of our systematic review.

2 Psychology in MAC research

2.1 brief overview of predominant subfields.

Owing to its role in facilitating and influencing decisions, MAC has a “behavioral function” (Caplan 1966, p . 496). It seems intuitive that some of the behavioral effects and impacts of MAC practices can only be predicted, examined, and eventually understood if researchers incorporate assumptions regarding the intrinsic processes and psychological aspects determining behavior into the research. Footnote 1 In the domain of psychology, the existence of individual differences in people’s personalities, intelligence levels, and cognitive functions, such as perception or memory, is believed to manifest in behavioral differences (e.g., Anastasi 1971 ; Boyle 2004 ; Chamorro-Premuzic and Furhnam 2006 ; Roberson 2016 ). The field of psychology is therefore described as “the scientific investigation of mental processes (thinking, remembering, feeling, etc.) and behavior” (Westen 2002, p . 2). Thus, psychology focuses on subjective phenomena, such as emotional affective reactions, motivations, or mental representations of information (Birnberg et al. 2007 ; Luft and Shields 2009 ). This indicates a great number of possibly relevant subfields of psychology for researchers to draw upon. Prior research by Birnberg et al. (2007) finds that cognitive, motivational, and social psychological theories are frequently used. They conclude that MAC researchers employ a variety of different psychological theories from these subfields and that these theories are commonly applied to explain the motivational (e.g., effects on the willingness to exert effort) and informational effects (e.g., influences on judgments and decisions) of MAC practices (Birnberg et al. 2007 ). We describe these three subfields in the following paragraph.

Social psychology addresses the interactions of individual psychology with group phenomena by examining “the influence of real or imagined others on the way people behave.” (Westen 2002, p . 24). This subfield, therefore, aims to understand the effects of social influences, such as attitudes, social interactions, and relationships, on individual behavior (Birnberg et al. 2007 ). Cognitive psychology, in contrast, attempts to understand human cognition by observing individual behavior when performing various cognitive tasks and processes, such as attention, judgments, decisions, or learning (Birnberg et al. 2007 ; Eysenck and Keane 2010 ). In motivation psychology , an individual’s motivation may be described as a set of reasons, needs, and goals initiating and directing individual behavior (Maslow 1943 ; Deci and Ryan 1985 ). Motivation theories in psychology are therefore plentiful and range from drive theories, which argue that a number of physiological drives determine behavior, to theories of intrinsic motivation and self-determination, which focus more on psychologically-based motives (Deci and Ryan 1985 ). Birnberg et al. (2007) further describe motivation theory as the investigation of arousal, direction, intensity, and persistence of effort, four behaviors that influence psychological processes. In addition to these three subfields, our review identifies personality psychology as a subfield that has recently drawn more attention from MAC researchers. In contrast to the other subfields, personality psychology “examines people’s enduring ways of responding in different kinds of situations and the ways individuals differ in the ways they tend to think, feel and behave” (Westen 2002, p . 24). Personality psychology, therefore, studies human universals, individual differences, and individual uniqueness (Cervone and Pervin 2013 ). Table  1 provides a brief overview and lists a selection of the theories within these subfields. Footnote 2

2.2 Origins and development

The employment of psychological theories is not new to MAC research; it may be traced back to the 1950s and the seminal work by Argyris (1952) (Birnberg et al. 2007 ; Hall 2016 ). In his study, Argyris (1952) employs concepts of human relations and group dynamics to examine the influence of budgets and the budgeting process on employee’s minds, behavior, motivations, and interpersonal relations in a social context. Footnote 3 His findings come from interviews with operating and finance supervisors at four production plants, highlight the influence of budgets on employees’ motivations and social relations, and, thus, are the first to emphasize the importance of integrating psychological factors into MAC research. According to Birnberg et al. (2007) , early research conducted after Argyris’s (1952) seminal work further strengthens the relevance of psychological explanations to understanding MAC practices’ effects on behavior and decision-making. Early studies (e.g., Stedry 1960 ; Barefield 1972 ; Hopwood 1972 ; Mock et al. 1972 ) focus on incorporating concepts from motivational theory and social and cognitive psychology into the MAC research domain (Birnberg et al. 2007 ).

Several studies find that psychology is one of the most common source disciplines employed by researchers to describe the effects of MAC practices (Hesford et al. 2007 ; Hopper and Bui 2016 ; Lachmann et al. 2017 ). In 2007, Hesford et al. (2007) conducted a bibliographic study investigating expansions in terms of new research topics, methods, and theoretical perspectives in MAC research since the 1980s. They find that although more studies draw on economic or sociological perspectives, psychology is among the most frequently used source disciplines employed in MAC research studies between 1981 and 2000 (Hesford et al. 2007 ). More recent studies confirm this result for the period from 1980 to 2012; Lachmann et al. (2017) assess the development and state of positivist MAC research regarding diversity and validity and find that researchers between 1980 and 2012 most frequently relied on economic theories, psychological theories, and theories of organizational behavior. Furthermore, their findings provide evidence that the share and number of publications drawing on psychological theories increased during the 2000s and 2010s. Examining contributions to the journal Management Accounting Research (MAR) over the last 25 years, Hopper and Bui (2016) also find an increase in the adoption of psychological theories in articles published in MAR between 2000 and 2014.

As noted in Sect.  2.1 , there are prior review studies that provide an introduction to the psychological theories that have been frequently used in MAC research (e.g., Birnberg et al. 2007 ; Luft and Shields 2009 ). In comparison to the review by Birnberg et al. ( 2007 ) mentioned above, the review by Luft and Shields (2009) examines psychology-based research describing and analyzing subjective decision-making in MAC contexts. They find that studies published from the 1970s to the 2000s concentrate on the influence of subjective cognitive phenomena on the performance of subjective decisions. Newer studies incorporate more social concepts, such as preferences, individual valuations of (non-monetary) payoffs, and emotional reactions (Luft and Shields 2009 ). A similar recent study focuses on behavioral accounting. Kaplan et al. ( 2018b ) discuss four social psychological theories that have been or could be applied to behavioral accounting. They provide an overview of the findings of selected behavioral accounting studies that encompass interpersonal affect, accountability, attribution, and social comparison, and they expect that social psychological theories, in particular, will continue to inspire behavioral accounting research.

Taken together, the findings of prior studies by Birnberg et al. (2007) , Luft and Shields (2009) , and Kaplan et al. ( 2018b ) show a great diversity in the use of psychological theories and psychology subfields in behavioral accounting and, specifically, MAC research. They also provide evidence that psychology is employed in a variety of MAC contexts to foster a better understanding of the behavioral consequences of MAC practices. However, the aforementioned studies are either limited to a particular subfield of psychology or were conducted several years ago. Thus, despite the seemingly increasing importance of behavioral aspects, the MAC literature lacks a systematic review of applications of psychological theories and concepts in recent MAC studies. Consequently, research results remain fragmented, impeding the aggregation of knowledge of psychology’s ability to contribute to addressing recent challenges and emerging topics in MAC research.

Based on this reasoning, our study addresses the research questions of which psychological theories and concepts are most intensively applied in recent MAC research and which trends in the use of psychological theories and concepts are observable. Therefore, we conduct a systematic review following a multistep approach based on approved review methods (e.g., Cooper 1984 , 1988 ; Grant and Booth 2009 ; Booth et al. 2012 ; Fink 2014 ; Mayring 2014 ). The following section explains our review scope, the structured material collection, and the descriptive and content analysis.

3.1 Review scope, material collection and article selection

We limit our review scope to psychology-based MAC research articles published between 2000 and the first half of 2019 by a selection of leading accounting journals. First, we define psychology-based articles as articles that employ either psychological theories or theories that originate from psychology ( e.g., role theory in social psychology ) or that concentrate on single phenomena within psychological theories ( e.g., the phenomenon of role ambiguity within role theory ). We do so because MAC researchers may develop theoretical models by employing entire theories or a specific single phenomenon associated with a psychological theory.

Second, the period after 2000 is believed to be characterized by a broad spectrum of MAC research methods and theoretical perspectives, as well as an increase in publications drawing on psychology as a subdiscipline (Scapens 2006 ; Hopper and Bui 2016 ; Lachmann et al. 2017 ). As enumerated above, prior reviews examined selected articles, earlier years of this period, or are limited to a particular subfield of psychology (e.g., Birnberg et al. 2007 ; Luft and Shields 2009 ; Kaplan et al. 2018b ). However, much of the knowledge generated by research studies published after Birnberg et al. (2007) or Luft and Shields (2009) has remained fragmented. Thus, to foster the aggregation of knowledge, we include articles published between 2000 and the first half of 2019. Further, we extend the scope of previous studies by analyzing articles that employ psychological theories and concepts from a multitude of subfields. We include research drawing upon social and cognitive psychology, motivation theory, personality psychology, multiple subfields, and several smaller subfields.

Third, we follow prior literature studies (e.g., Hesford et al. 2007 ; Lachmann et al. 2017 ) in selecting some of the most influential publication outlets. Thus, our journal selection reflects leading accounting journals according to accounting faculty surveys and journal rankings as well as diverse outlets in terms of origins, publishing authors, and topics. Footnote 4 Our selection includes the following nine journals (in alphabetical order): Accounting, Organizations and Society (AOS), Behavioral Research in Accounting (BRIA), Contemporary Accounting Research (CAR), European Accounting Review (EAR), Journal of Accounting and Economics (JAE), Journal of Accounting Research (JAR), Journal of Management Accounting Research (JMAR), Management Accounting Research (MAR), and The Accounting Review (TAR).

Following the literature on efficient material collection (e.g., Fink 2014 ), we consecutively perform the initial and final inclusion steps. The initial inclusion step aims to identify potentially relevant articles by examining titles, keywords, and abstracts (Booth et al. 2012 ). The following criteria for relevant articles are established to operationalize the scope of our review:

Must cover MAC topics.

Must be an original research article.

Must employ an empirical research method. Footnote 5

Must indicate the use of psychological theories or related constructs in the title, abstract, or keywords.

Consequently, we individually examine all the articles published in the nine selected journals during the investigation period by visiting the journals’ or corresponding journal publishers’ websites and browsing their article archives starting in 2000. Table  2 provides an overview of the number of articles retrieved after each material collection step.

First, we read and screened the titles, keywords, and abstracts of all 5247 articles for indications of nonoriginal research articles, research methods used, and references to MAC topics. Then, we screened the titles, keywords, and abstracts of all the identified empirical original research articles addressing MAC topics a second time to detect indications of the use of psychological theories or constructs. This second screening procedure aims to identify terminology associated with psychology in general, such as “cognitive,” “attribution,” or “motivation,” and it deems articles that use this terminology as potentially relevant. The initial inclusion step identified 204 potentially relevant articles to be further examined in the final inclusion step. In the final inclusion step, we subjected the full texts of all 204 potentially relevant articles to an extended screening procedure that verified the employment of theories or concepts from psychology subfields. This final step, however, requires the authors of articles to explicitly refer to psychological theories or constructs in developing their studies’ theoretical backgrounds or hypotheses. Footnote 6 Owing to the diversity in research strategies and the different foci of the articles, references to psychology are not necessarily equally evident. For most articles, inclusion eligibility is rather clear owing to the wording and explicit mentioning of theories related to psychology subfields. Footnote 7 The final inclusion check identifies 125 relevant articles to be analyzed in the following sections of this review.

3.2 Process and methods of analysis

All 125 included articles were subject to content analysis. According to Mayring (2014) , content analysis is a mixed-methods approach that combines the assignment of categories to essential text points and the additional quantitative analysis of the frequency of those categories. Thus, following prior research (e.g., Shields 1997 ; Scandura and Williams 2000 ; Hesford et al. 2007 ; Lachmann et al. 2017 ), we perform descriptive analyses and examine the frequency of categories and subcategories in our data set to identify certain patterns in the article contents. Moreover, we apply linear time-based regressions (Scandura and Williams 2000 ) to identify trends in the use of the different psychology subfields in MAC research to complement our frequency analysis. Furthermore, to examine the diversity in the applied psychology subfields over time and in certain content areas, we calculate “heterogeneity indices” (Scandura and Williams 2000 ; Harrison and Klein 2007 ). These indices show that homogeneity is greater when, for instance, a large proportion of articles employ a particular psychology subfield as opposed to a more equal application of a variety of subfields (Scandura and Williams 2000 ).

In assigning the categories, we focus on determining MAC topics, psychology background, and research methods for each article. Thus, we (re)examine the titles, abstracts, keywords, and full texts. Most of the content analysis is conducted during the initial and final inclusion stages of the structured material collection. This approach allows us to efficiently collect all the relevant information but also minimize the number of individual (re)examinations of each article. Initially, we record the topics, psychological theories and concepts, and research methods of all 125 articles using each article’s terminology. In a second step, these records are harmonized (e.g., the terms performance evaluation, performance assessment, and performance appraisal are summarized by the term performance evaluation ) to allow for precise and consistent categorization. To synthesize and contextualize the articles, we design a category scheme based on frameworks employed in prior literature reviews (e.g., Shields 1997 ; Scandura and Williams 2000 ; Hesford et al. 2007 ; Lachmann et al. 2017 ). However, these frameworks are extensively modified to reflect the contents of our included articles. The category scheme consists of the three coding dimensions (codes 1–3) outlined in Tables  3 and 4 . Each coding dimension consists of several categories that may be further divided into the subcategories. The categories represent the topics examined, the relevant psychology subfields, and the research methods employed.

The code 1 categories refer to the subfield of MAC that the primarily examined topics can be assigned to. The topic categories are developed based on the categories employed in prior studies (e.g., Shields 1997 ; Hesford et al. 2007 ; Lachmann et al. 2017 ) and the results of our content analysis. Table  3 depicts the nine categories of topics used in this review. To describe the subjects in greater detail, the topics of the included articles were recorded in detail during content analysis and harmonized afterward. Thereby, the identified topics have been summarized under several generic terms to further classify the articles into the respective categories.

The budgeting category comprises articles focusing on, for example, budgetary slack, participative budgeting, or budget reporting. Articles in the compensation, rewards, and incentives category concentrate on the design of compensation contracts or choices regarding reward types and incentives. The third category, costing systems , comprises articles on participation in costing system design or the effects of costing systems. Articles covering factors that influence decision-making and decision quality are assigned to the decision - making category. Next, the organizational control category features articles that mainly deal with project controls, creativity controls, and other internal control systems not covered by the other categories of this review. The performance measurement and evaluation category comprises articles that focus on the evaluation process and its outcomes (e.g., the effects of subjectivity in weighting performance measures on employee performance) or on performance measurement system design (e.g., the choice of performance measures). Articles on perceptions of the role of management accountants are assigned to the roles in management control systems category. Lastly, the strategic MAC category includes articles focusing on strategic performance measurement systems. In order to contextualize the findings of our content analysis, the code 1-categories are further subdivided by subcategories that allow us to present frequently examined topics and applied psychological theories and concepts in Sect.  4.2 .

The code 2 categories shown in Table  4 refer to the subfield of psychology that the employed psychological theories and concepts originated from. The concepts and theories were identified in the titles, keywords, abstract or full text of the respective article. The basic framework for code 2 relies on the often-researched psychological theories and constructs from Birnberg et al. (2007) ’s comprehensive overview. As enumerated above, we added the personality category because we identify this subfield in several of the 125 included articles. Further, the multiple category is used for studies employing at least two theories or concepts from different subfields of psychology (e.g., a combination of social and cognitive concepts). Lastly, the code 3 categories are derived from the research method categorization scheme developed by Lachmann et al. (2017) , who use a modified version of Hesford et al.’s (2007) categorization scheme. In line with this research, we distinguish between surveys, experiments, archival studies, case studies, and field studies. We also distinguish between laboratory and field experiments. Footnote 8 This scheme is extended by the multiple category to allow for precise categorizations of articles employing more than one empirical research method.

To ensure as few deviations as possible in the coding of included articles, a sample of articles was precoded. Subsequently, the categories and corresponding definitions were further clarified and then reapplied to all included articles. The records of all 125 articles constitute the data set for our analyses.

4.1 Descriptive analysis

We find that eight of the nine selected journals published articles employing psychological theories and concepts during our investigation period. AOS published the most articles fulfilling all the inclusion criteria (22), followed by TAR (21), MAR (17), CAR (16), JMAR (15), BRIA (15), EAR (10), and JAR (9). Figure  1 shows the distribution of articles over the investigation period. We identified between three to five articles in each year between 2000 and 2005, but we could not find any articles eligible for inclusion in 2006.

Frequency of publication year

The number of included articles increased from zero to five in 2007 and eventually reached its first peak (13) in 2012. These thirteen articles account for 15.7% of all MAC-themed articles identified in 2012. The years 2013 through 2015 contain fewer included publications (eight, seven, and four articles, respectively), and the thirteen and twelve articles published in 2017 and 2018, respectively, comprise a second peak. These articles constitute 16.8% and 14.6%, respectively, of MAC-themed articles. Interestingly, we identify nine articles employing psychological theories and concepts in the first half of 2019, comprising 18% of all MAC-themed articles in this year. A time-based regression analysis reveals a significant increase in the number and share of psychology-based articles over time (both p  < 0.01), indicating that psychological theories and concepts are more frequently applied in MAC studies in recent years. Footnote 9

Psychology-based MAC articles may address several different topics. However, they most frequently examine performance measurement and evaluation (39), followed by aspects of compensation, rewards, and incentives (36); budgeting (17); and organizational control (12). Table  5 provides an overview of the frequencies of all topic categories. Most of the studies conduct experiments (83), especially laboratory experiments (76). Footnote 10

Table  6 presents the frequencies of psychology subfields across the topic categories. Most articles rely on concepts from a single subfield (94) (i.e., the social, cognitive, motivation, or personality categories) rather than employing concepts from multiple subfields simultaneously (31). Social psychology (44) is the most utilized subfield, followed by cognitive psychology (27). Most of the articles drawing on social psychology build their theoretical foundations using social comparison theory (e.g., Hannan et al. 2013 ; Tafkov 2013 ; Knauer et al. 2017 ), social norms (e.g., Fisher et al. 2000 ; Maas and van Rinsum 2013 ; Blay et al. 2019 ), attribution theory (e.g., Coletti et al. 2005 ; Hartmann and Slapničar 2009 ), or social identity theory (e.g., Towry 2003 ; Hiller et al. 2014 ; Tian et al. 2016 ).

Prospect theory (e.g., Church et al. 2008 ; Oblak et al. 2018 ), mental models (e.g., Kadous and Sedor 2003 ; Hall 2011 ), and cognitive biases (e.g., Libby et al. 2004 ; Fehrenbacher et al. 2018 ) are concepts from cognitive psychology that are frequently employed. Footnote 11 Fewer studies are built on motivation concepts (15) and personality psychology (8) alone. When examining motivational issues, studies are often built on self-determination theory (e.g., Kunz and Linder 2012 ; Groen et al. 2017 ), followed by concepts of intrinsic motivation (e.g., Wong-On-Wing et al. 2010 ; Christ et al. 2012 ). We identify a rather diverse set of concepts from personality psychology in the included articles, but the concepts of tolerance for ambiguity (e.g., Hartmann and Slapničar 2012 ) and psychological entitlement (e.g., Nichol 2019 ) are both employed by several studies.

The 31 articles employing concepts from multiple subfields simultaneously mostly rely on a combination of motivation and social psychology concepts (8), followed by a combination of cognitive and social psychology concepts (5). Footnote 12 Thus, social psychology is also the prevalent theoretical foundation when multiple subfields are applied simultaneously. Interestingly, personality psychology is used more often in combination (10) with the other psychology subfields (i.e., the social, cognitive, or motivation subfields), than as a single subfield (8). Footnote 13 The remaining studies that draw upon multiple subfields also incorporate concepts from industrial and organizational psychology (e.g., Maas and Matějka 2009 ), neuropsychology (e.g., Farrell et al. 2014 ), or positive psychology (e.g., Burney and Widener 2013 ).

To foster our understanding, we calculate heterogeneity indices to measure the diversity of applications of psychology subfields within our topic categories. We find that the diversity of psychology subfields is relatively high for most topic categories. The heterogeneity index is especially high within the costing systems ( h  = 0.750) and performance measurement and evaluation categories ( h  = 0.747) and is rather low in the roles in management control systems category ( h  = 0.375). Footnote 14 Nevertheless, the specific psychology subfields and the extent to which they are employed both differ across topic categories and subtopics. For example, on the one hand, studies that examine aspects of performance measurement and evaluation predominantly employ cognitive concepts (14), followed by concepts from multiple subfields (10) and social (8), motivation (4), and personality (3) concepts. On the other hand, studies of issues regarding compensation, rewards, and incentives mostly rely on social psychology (14), followed by concepts from multiple subfields (11) and cognitive (5), motivation (3), and personality (3) concepts. According to our analysis, the use of personality psychology, even in combination with other subfields, is restricted to certain MAC topics and subtopics. We do not identify articles employing personality concepts to examine strategic MAC aspects, costing systems, or roles in management control systems.

The temporal distribution depicted in Fig.  2 illustrates that the range of subfields used in MAC research has increased over the years.

Frequency of psychology subfields by year

Whereas studies drew upon four subfields in 2000, they drew on only one to three subfields in the years between 2001 and 2005. We find that the use of psychological theories and concepts was more diverse between 2015 and 2019. From 2015 to the first half of 2019, we identify articles employing concepts from social, cognitive, and motivation psychology and multiple subfields simultaneously. Furthermore, five out of the seven articles employing personality psychology were published in 2017 and 2019 (Fehrenbacher et al. 2017 ; Holderness et al. 2017 ; Wang 2017 ; Davidson 2019 ; Nichol 2019 ). Moreover, three articles that rely on a combination of personality psychology and other subfields were published in 2017, 2018, and 2019 (Reichert and Woods 2017 ; Kaplan et al. 2018a ; Chong and Wang 2019 ). The heterogeneity index for psychology subfields is very high at the end of the examined time span, indicating that researchers have tended to apply a greater diversity of subfields in more recent years ( h 2015–2019  ≥ 0.722). Footnote 15 The time-based regression analyses provide further evidence that social ( p  = 0.013), motivational ( p  = 0.076), and personality concepts ( p  = 0.039) increase in importance over time, whereas the use of cognitive concepts remains relatively stable over the examined time span ( p  = 0.209). The number of articles that apply more than one psychological theory or concept also significantly increases between 2000 and 2019 ( p  = 0.014).

To further illuminate these developments, we contextualize selected articles that allow us to present frequently examined topics and applied psychological theories and concepts in the following section.

4.2 Content analysis

4.2.1 performance measurement and evaluation.

Subjective performance evaluation and subjective measures The research stream shown in Table  7 addresses subjective elements in performance evaluations. We find that cognitive psychology, particularly the effects of heuristics (e.g., Bailey et al. 2011 ; Dai et al. 2018 ) and biases (e.g., Bol and Smith 2011 ; Fehrenbacher et al. 2018 ), is a focal point of this research.

Although heuristic reasoning may simplify complex cognitive judgment tasks, it is associated with systematic judgment errors referred to as biases (Kahneman and Tversky 1982 ). Subjective performance evaluations are often based on a starting point, such as a specific performance measure or information in a report. Different starting points may result in different outcomes, and the cognitive anchoring heuristic describes a decision being biased towards this starting point (Kahneman and Tversky 1982 ). Bailey et al. (2011) investigate this phenomenon and find evidence for anchoring in the presence of contractible and non-contractible information. Their results suggest that anchoring eventually leads to less incorporation of non-contractible information in supervisors’ bonus pool allocation decisions, and, thus, such allocations may be biased (Bailey et al. 2011 ). Newer research examines heuristic reasoning in performance measure weighting and finds measures that are perceived as more scientific influence evaluation decisions more strongly (Dai et al. 2018 ).

Additionally, cognitive psychology is used to illuminate the tendency to overweight the implications of specific performance measures in performance evaluations, a bias referred to as the outcome effect (Ghosh and Lusch 2000 ; Ittner et al. 2003 ). Under the outcome effect, evaluators tend to evaluate positive outcomes positively and negative outcomes negatively, ignoring whether the actions that led to the outcomes were appropriate (Mitchell and Kalb 1981 ; Ghosh and Lusch 2000 ; Ittner et al. 2003 ). Ghosh and Lusch’s (2000) field study provides evidence for the outcome effect in subjective performance evaluations of retail store managers. They find that these evaluations are impacted by the outcome effect, as failing to meet a store’s target leads to a less positive evaluation of a manager. A similar study provides evidence that the subjective weighting of performance measures allows supervisors to ignore many of them and overweight financial outcome measures (Ittner et al. 2003 ). Furthermore, researchers address spillover effects, a bias that potentially arises through knowledge about (prior) evaluation outcomes or ambiguous performance information (Murphy et al. 1985 ; Huber et al. 1987 ; Bol and Smith 2011 ). Bol and Smith (2011) use this term to describe knowledge about performance on one task influencing a supervisor’s subjective evaluations of an employee’s performance on a separate task. They show that subjective evaluations are directionally influenced, indicating spillover effects between performance on different tasks (Bol and Smith 2011 ). A similar laboratory experiment finds that spillovers between subjective and objective measures also exist by showing that subjective performance evaluations are directionally biased towards the valence of objective performance measures (Fehrenbacher et al. 2018 ).

Provision of relative performance information and relative performance evaluation Another stream of research considers the provision of relative performance information (RPI) and relative performance evaluation (RPE). An overview of this research is provided in Table  8 . Our analysis shows that some the psychology-based research on RPI and RPE draws upon social comparison theory (e.g., Hannan et al. 2013 ; Eyring and Narayanan 2018 ; Hartmann and Schreck 2018 ). Social comparison theory is based on the assumption that individuals evaluate their abilities by comparing themselves to others, a process that eventually influences their self-image and behavior (Festinger 1954 ; Hannan et al. 2013 ). The studies that we examine provide evidence that RPI induces comparison processes and, thus, has both effort motivation and effort distortion effects and may trigger positive or negative affective reactions (Hannan et al. 2013 ; Mahlendorf et al. 2014 ; Eyring and Narayanan 2018 ; Hartmann and Schreck 2018 ).

When not drawing upon social comparison theory, researchers incorporate aspects of personality into their research, such as the three personality traits of Machiavellianism, narcissism, and psychopathy, which are also referred to as the Dark Triad of personality traits (Paulhus and Williams 2002 ; Wang 2017 ). All three are rather negative character traits that are associated with strategic manipulation, a sense of superiority, high impulsiveness, or low empathy (Wang 2017 ). In the context of recognition programs, Wang’s (2017) laboratory experiment examines the Dark Triad of personality traits and suggests that the provision of RPI can have productive or counterproductive effects depending on an individual’s score on those traits. A second social and personality construct examined in this research is negativity bias. Negativity bias refers to an individual’s tendency to place more weight on negative information than on neutral or positive information (Baumeister et al. 2001 ; Kaplan et al. 2012 ). Two studies in our sample investigate this bias. First, Kaplan et al. (2012) conduct two laboratory experiments on RPE. They find that evaluators exhibit negativity bias and, thus, tend to weight measures with negative performance differences more than those with positive performance differences (Kaplan et al. 2012 ). Kaplan et al. ( 2018a ) not only replicate these findings in another laboratory experiment but also find that the negativity bias is enhanced when negative performance differences exist for strategically linked measures. Furthermore, they find that relative self-assessments are also prone to negativity bias.

Other influences on performance evaluations and evaluation outcomes We identify nine articles investigating influences on performance evaluations not addressed by the preceding subtopics. Table  9 provides an overview of these articles.

We find that personality characteristics and social phenomena seem to be especially relevant for these topics. For example, Liedtka et al. (2008) and Ding and Beaulieu (2011) both identify the effects of balanced scorecard (BSC) design on performance evaluation using social concepts and a combination of personality and cognitive concepts. Incorporating prospect theory, Liedtka et al. (2008) examine how an evaluator’s tolerance for ambiguity influences evaluation outcomes. According to prospect theory, individuals exhibit different risk behaviors when facing gain and loss situations (Tversky and Kahneman 1979 ; Liedtka et al. 2008 ). The personality trait of tolerance for ambiguity refers to individuals’ tolerances for different levels of ambiguity in the information they receive, and individuals make judgments according to those tolerances (Budner 1962 ; Liedtka et al. 2008 ). They find that this trait applies to evaluations based on BSCs and that variation between measures within BSC categories can affect the evaluation outcomes of ambiguity-intolerant individuals. Furthermore, Ding and Beaulieu’s (2011) laboratory experiment results suggest that the occurrence of affective reactions and mood congruency biases are associated with BSC complexity. When such biases occur, judgments and decisions relate to the evaluator’s mood and may not be hindered even by the implementation of incentives to avoid such behavior (Ding and Beaulieu 2011 ). Moreover, personality traits, such as tolerance for ambiguity (Hartmann and Slapničar 2012 ), and social concepts, such as leadership style (Hartmann and Maas 2010 ), are found to be associated with an individual’s perceived fairness of evaluations. Interestingly, reactions to performance feedback are also affected by personality characteristics. For example, the effect of feedback on individual performance depends on the degree of the recipient’s personality trait of psychological entitlement, which is a sense of deserving more than others (Campbell et al. 2004 ; Holderness et al. 2017 ).

Performance measurement system design Choices regarding performance measurement system (PMS) design are addressed by seven articles, as shown in Table  10 . Our analysis indicates that psychology-based research on PMS design is primarily influenced by cognitive psychology.

For instance, mental models are employed in the investigations of performance measure diversity by Hall ( 2008 , 2011 ). Mental models are subjective, cognitive representations of concepts or relations that can be drawn upon to make judgments and decisions (Markman 1999 ; Birnberg et al. 2007 ; Hall 2008 , 2011 ). Hall (2008) provides evidence that comprehensive PMSs influence social-psychological aspects, cognition, and motivation, which, in turn, are linked to managerial performance. Furthermore, comprehensive PMSs support the cognitive processes of forming new mental models and confirming existing mental models, which both positively affect performance (Hall 2011 ). Furthermore, decision-makers’ behavioral heuristics or cognitive biases are affected by PMS design. For example, as the findings of a field study suggest, the incorporation of behavioral nudges into performance measurement models can serve to exploit or mitigate managers’ heuristics or cognitive biases (Malina and Selto 2015 ). Recent research employs cognitive psychology to investigate the decision-facilitating role of PMSs using the concept of cognitive conflict (Bedford et al. 2019 ). Bedford et al. ( 2019 ) explain that cognitive conflict is triggered by the perception of differences in opinions or judgments of appropriate actions or procedures to achieve an objective. They find that firms choose performance measures that induce cognitive conflict, allowing them to translate ambidextrous strategies into innovation.

Participation in PMS design Five articles on participation in PMS design are depicted in Table  11 . We find that researchers highlight the motivational effects of this participation.

One theory used in this regard is self-determination theory (e.g., Groen et al. 2017 ; Groen 2018 ). This theory distinguishes between autonomous and controlled motivation (Ryan and Deci 2000 ; Gagné and Deci 2005 ; Groen et al. 2017 ). Autonomously motivated individuals feel that they may choose to act and behave to satisfy their personal needs, whereas, under controlled motivation, individuals feel rather pressured to take actions that satisfy external demands (Gagné and Deci 2005 ; Groen et al. 2017 ). Groen et al. (2017) employ the self-determination theory to investigate the effects of employee participation in developing performance measures. Although they do not directly measure motivation, they find an indirect effect of this participation on employee performance when managers use the co-developed performance measures for subsequent evaluations (Groen et al. 2017 ). Groen’s (2018) survey extends this knowledge on the effects of participation. She complements the self-determination theory with the social exchange and goal-setting theory. Social exchange theory focuses on the social phenomenon of offering some benefit for reciprocation (Blau 1964 ; Groen 2018 ). Conversely, goal-setting theory relates to defining effective goals in work settings and posits that goals affect motivation and performance (Locke and Latham 2002 ). Groen (2018) finds a relation between participation and goal coherence and provides evidence that perceptions of fairness mediate the relation between participation and goal commitment. The relation between participation and goal coherence is further confirmed by combining goal-setting theory and mental models theory (de Haas and Algera 2002 ).

4.2.2 Compensation, rewards, and incentives

Incentive contract framing and compensation contract selection Table  12 provides information about the articles that address contract framing and contract selection topics. Our analysis reveals a focus on cognitive psychological theories, especially prospect theory and related concepts (e.g., Church et al. 2008 ; Hales and Williamson 2010 ; Hirsch et al. 2017 ; Oblak et al. 2018 ). As previously explained, prospect theory deals with decision-making under risk (Tversky and Kahneman 1979 ). We find that researchers employ prospect theory to, for example, investigate the effects of implicit employment contracts on firm productivity (Hales and Williamson 2010 ) or to examine the effects of clawback provisions on information processing and investment behavior (Hirsch et al. 2017 ).

Moreover, two studies also use prospect theory to examine the influence of contract framing on work effort (Church et al. 2008 ; Oblak et al. 2018 ). Church et al. (2008) compare the effects of budget-based incentive contracts framed in terms of bonuses and penalties. Consistent with prospect theory, they find that individuals exert more effort to avoid penalties than to receive bonus payments. Furthermore, prospect theory is applied to compare the effects of fair and unfair outcome distributions in differently framed contracts. Oblak et al. (2018) extend Church et al.’s (2008) findings by showing that when the distribution is unfair, risk-taking behavior and effort are the same for bonus and penalty contracts. When payment is fair, however, penalty contracts have strong positive effects on individual risk-taking and effort (Oblak et al. 2018 ).

There are interactions between personality factors and incentive contract design choices (e.g., Fehrenbacher et al. 2017 ; Reichert and Woods 2017 ). Fehrenbacher et al. ( 2017 ) investigate the effects of task-related skills, risk preferences, and personality traits on employees’ compensation contract selections. Specifically, they examine the personality traits of need for achievement and locus of control. The personality trait of need for achievement can be subsumed within an urge to continually improve, whereas locus of control refers to whether individuals believe that they can control events (Rotter 1966 ; Fehrenbacher et al. 2017 ). Fehrenbacher et al.’s ( 2017 ) findings indicate that choosing a performance-based contract is not only associated with an individual’s skill level and risk preferences but also with that individual’s need for achievement and locus of control.

Provision of feedback and reward types As shown in Table  13 , the motivational aspects of the provision of feedback and rewards are strongly emphasized. Research on these topics mostly employs self-determination theory (e.g., Drake et al. 2007 ; Stone et al. 2010 ; Kunz and Linder 2012 ). These studies extend the use of self-determination theory to, for example, examine the reliability of financial incentives (Stone et al. 2010 ) or illuminate the effects of non-monetary rewards relative to those of financial rewards (Kunz and Linder 2012 ). Drake et al. (2007) combine aspects of self-determination theory with the social concept of psychological empowerment.

Drake et al. (2007) examine the impacts of performance-based reward types and types of performance feedback on psychological empowerment, a multidimensional concept that can be split into the dimensions of perceived impact and competence and self-determination (Drake et al. 2007 ; Spreitzer 1995 ). They provide evidence that the types of feedback and rewards affect different dimensions of the empowerment construct. Furthermore, financial feedback is positively associated with perceived impact, whereas performance-based rewards negatively impact self-determination and perceived competence (Drake et al. 2007 ). Other researchers use goal-setting and goal conflict theory to study the effects of reward types. For instance, Presslee et al. (2013) find differences in goal setting, goal commitment, and performance across tangible and cash rewards. Receiving tangible rewards is associated with the selection of less challenging goals and more commitment to achieving self-selected goals. However, average performance is better when receiving cash rewards owing to the selection of more challenging goals (Presslee et al. 2013 ). Christ et al. (2016) , in contrast, draw upon goal conflict theory in the context of multidimensional tasks. Goal conflict theory suggests that individuals have difficulty responding to multiple and conflicting goals at the same time (Kehr 2003 ; Christ et al. 2016 ). Christ et al. (2016) incorporate this theory and find that compensation on multiple task dimensions decreases overall performance, as employees commit to multiple goals and divide their attention between these goals. The conflict can be reduced through a combination of compensation and (non-monetary) feedback on different task dimensions.

Tournament incentive schemes The seven articles depicted in Table  14 address tournament incentive schemes. We find that this research is predominantly based on social comparison theory (e.g., Hannan et al. 2008 ; Knauer et al. 2017 ; Berger et al. 2018 ).

For instance, social comparison theory is employed to explore whether and how the proportion of tournament winners and tournament horizons influence employee effort (Knauer et al. 2017 ; Berger et al. 2018 ). Knauer et al. (2017) find positive effects of higher proportions of tournament winners on effort and suggest that psychological aspects have a decisive impact, as participants exert more effort not only to earn money but also to preserve a positive self-image. Berger et al. (2018) find that higher proportions of winners are more effective at sustaining effort in repeated tournaments and that longer tournament horizons result in better performance owing to more engagement in social comparison processes. The effect of the proportion of winners on tournament performance is also examined based on the theories of group identity and psychological costs (Kelly and Presslee 2017 ). Other researchers investigate the effects of reward types in tournaments based on mental accounting theory (Kelly et al. 2017 ). Two studies integrate social comparison theory and goal-setting theory (Hannan et al. 2008 ; Newman and Tafkov 2014 ). Hannan et al. (2008) research the combination of tournament incentive schemes and RPI provision. Their laboratory experiment is designed to examine the effects of the presence and content of RPI and compensation based on a tournament or individual incentive scheme on individual performance. They find that RPI provision has opposite effects under the two incentive schemes. RPI provision increases performance under an individual incentive scheme but decreases performance under a tournament incentive scheme (Hannan et al. 2008 ). Newman and Tafkov (2014) extend Hannan et al.’s (2008) findings by examining whether the tournament’s prize structure has an influence on the identified performance effect. The provision of RPI has a detrimental effect on performance in reward tournaments, but it has a positive effect on performance when the tournament’s prize structure is based on rewards and punishments (Newman and Tafkov 2014 ).

Incentive system design choices in teams We identify six studies on the effects of incentive system design choices on behavior in teams. Table  15 presents an overview. Our analysis reveals that this subtopic is predominantly investigated using social psychology.

We find that social identity theory is employed particularly frequently (e.g., Towry 2003 ; Sedatole et al. 2016 ; Tian et al. 2016 ). Social identity theory considers the psychological processes behind an individual’s identification with a team, intergroup relations, and team identity (Tajfel and Turner 1986 ; Towry 2003 ). Towry (2003) examines the differences between mutual monitoring in vertical and horizontal incentive systems and their influence on effort. She finds that the effectiveness of such systems depends on team identity. Her findings indicate that a strong team identity is associated with greater coordination among members. A horizontal incentive scheme, in which members directly control each other’s actions, is more effective for effort in this context (Towry 2003 ).

Sedatole et al.’s ( 2016 ) study considers a similar setting and provides additional information on horizontal monitoring. Their findings suggest that horizontal monitoring and team member dependence provide strong enough implicit incentives to motivate individual performance to reduce free-riding without the implementation of team rewards (Sedatole et al. 2016 ). Similar studies based on social identity theory suggest that team incentives have a greater positive effect on effort than individual incentives have when the potential conflict level in a group is high (Tian et al. 2016 ). Other studies indicate that personality and cognitive aspects should not be neglected. Upton (2009) draws upon the personality concept of social value orientation, that is, the extent to which an individual is concerned about how his or her actions influence the outcomes of independent others. According to these findings, an individual’s social value orientation affects group performance.

Additionally, group performance is affected by a team’s predominant cognitive orientation (Naranjo-Gil et al. 2012 ).

Effects of incentive system design choices on misreporting, honesty, and whistleblowing Studies also consider the psychological aspects of honesty, misreporting, and whistleblowing in incentive system design. As our analysis reveals, this subtopic is primarily based on the concept of social norms (e.g., Chen and Sandino 2012 ; Maas and van Rinsum 2013 ; Cardinaels and Yin 2015 ; Chen et al. 2017 ). Table  16 provides information on the articles about this subtopic.

Social norms represent behavioral regularities that are based on shared beliefs regarding appropriate behavior. The violation of such social norms can lead to social sanctions or psychological discomfort (Fehr and Gächter 2000 ; Chen and Sandino 2012 ). Social norms are used to investigate the effects of compensation levels on employee theft (Chen and Sandino 2012 ) or the design of incentive systems to encourage internal whistleblowing (Chen et al. 2017 ), among other topics. Maas and van Rinsum ( 2013 ) set up a laboratory experiment in a setting in which managers receive monetary benefits from overstating their performance. They provide evidence that managers experience disutility if their misreporting violates social norms or results in unfair outcomes for their peers. Furthermore, managers’ misreporting is influenced by whether it decreases or increases their peers’ gains and whether their performance reports are made public (Maas and van Rinsum 2013 ). Further research indicates that misreporting increases when the choices of compensation contracts suggest that behaving dishonestly is a social norm (Cardinaels and Yin 2015 ). Other studies suggest that personality aspects also affect misreporting (e.g., Chong and Wang 2019 ; Nichol 2019 ). Nichol (2019) investigates the effects of incentive contract framing on misreporting and the personality trait of psychological entitlement. Psychological entitlement can be seen as believing that one has a right to receive something (Major 1995 ; Nichol 2019 ). Nichol’s (2019) results suggest that misreporting is higher under a penalty contract and occurs owing to a feeling of entitlement to monetary payoffs.

4.2.3 Budgeting

Budgeting and the use of budgets Five articles in our dataset consider budgeting and the use of budgets, and three of them address the effects of participation in the budgeting process. All five articles are presented in Table  17 . Social psychology is the predominant subfield, but no one theory or concept predominates. Studies of the benefits of participating in the budgeting process (e.g., Wong-On-Wing et al. 2010 ; Venkatesh and Blaskovich 2012 ) also rely on motivation and positive psychology. Footnote 16

Wong-On-Wing et al.’s (2010) study employs self-determination theory in a participative budgeting setting. Their findings are similar to those of studies of participation in PMS design (e.g., Groen et al. 2017 ). Wong-On-Wing et al. (2010) provide evidence that intrinsic and autonomous extrinsic motivations for participative budgeting positively influence individual performance. They also suggest that controlled extrinsic motivation is negatively associated with individual performance.

Venkatesh and Blaskovich (2012) study participation in the budgeting process from a different perspective. Their survey focuses on the relation between participation, psychological capital, and individual performance. Psychological capital thereby represents a positive stage of psychological development that can be characterized by an individual’s levels of hope, efficacy, optimism, and resiliency. They provide evidence that participation positively affects psychological capital, which, in turn, positively affects individual performance (Venkatesh and Blaskovich 2012 ). Other psychology-based studies suggest that budgets have positive effects on job experience (Marginson and Ogden 2005 ) or team effectiveness (Chong and Mahama 2014 ).

Budgetary slack and honesty The twelve articles presented in Table  18 address the phenomena of budgetary slack or honesty. Most articles on these subtopics investigate participative budgeting settings and were published after 2010; three were published as recently as the first half of 2019. We find a strong focus on social psychology and the concept of social norms therein (e.g., Fisher et al. 2000 ; Stevens 2002 ; Brown et al. 2017 ; Blay et al. 2019 ).

Social norms are used to provide evidence that the aspects of the participative budgeting process (Fisher et al. 2000 ), reputation and feelings of ethical responsibility (Stevens 2002 ), preferences for honesty (Blay et al. 2019 ) and the choice of who sets the budget (Brown et al. 2017 ) reduce slack or positively influence performance.

Additionally, honesty is examined based on a variety of theories and concepts (e.g., Church et al. 2012 ; Brown et al. 2014 ; Church et al. 2019 ). These findings suggest that factors such as managers’ profits from dishonesty (Church et al. 2019 ) and the provision of rankings (Brown et al. 2014 ) affect the creation of slack.

Interestingly, personality aspects are addressed rather frequently in these studies (e.g., Hartmann and Maas 2010 ; Hobson et al. 2011 ; Davidson 2019 ). Hartmann and Maas (2010) also consider social pressure and Machiavellianism in the examination of slack. Machiavellianism refers to an individual’s tendency to act based on self-profit and refrain from ethical considerations (Schepers 2003 ; Hartmann and Maas 2010 ). Hartmann and Mass ( 2010 ) suggest that high levels of Machiavellianism may lead to a higher likelihood of giving into management pressure to create slack. Hobson et al. (2011) also investigate ethical considerations regarding slack in participative budgeting. Their findings indicate that personalities reflecting high levels of traditional values and empathy are more likely to consider slack unethical. However, although they find that participants judge slack to be unethical on average, they show that participants still create slack under a slack-inducing pay scheme, although they do not do so under a truth-inducing pay scheme (Hobson et al. 2011 ). Furthermore, evidence suggests that social-value orientation affects honesty. Davidson (2019) examines the influence of personality on managerial reporting behavior in the context of hiring choices and budget signing requirements. He distinguishes between two types of social value orientation and shows that these types also exhibit differences in honesty.

4.2.4 Organizational control

Use of formal and informal controls in organizational control systems The eight articles shown in Table  19 focus on the use of formal and informal controls in organizational control systems. Our analysis shows that social psychological theories and concepts (e.g., Coletti et al. 2005 ; Anderson et al. 2017 ) are predominantly employed by these studies.

Additionally, formal and informal controls are studied in terms of their potential effects on motivation and creativity (Christ et al. 2012 ; Grabner and Speckbacher 2016 ; Pfister and Lukka 2019 ). Regarding the use of social psychology, some researchers rely on social norms to provide evidence that formal controls influence people’s perceptions of appropriate behavior (Tayler and Bloomfield 2011 ). Other researchers show that the way that formal controls are imposed determines their effects on employee effort (Christ 2013 ). Moreover, research based on social psychology suggests that emotional signals, such as anger or satisfaction, affect accounting-based transfer pricing decisions (Bhattacharjee and Moreno 2017 ). Attribution theory is also used in the context of formal controls (e.g., Coletti et al. 2005 ; Anderson et al. 2017 ). According to attribution theory, individuals try to make causal attributions about other individuals’ behavior to eventually understand their motivations (Coletti et al. 2005 ; Anderson et al. 2017 ). Coletti et al. (2005) employ this theory in a setting with collaboration between divisions. They find that strong initially present formal control systems induce cooperation between divisions, thereby improve trust between collaborators. Interestingly, Anderson et al. (2017) provide evidence that initial trust decreases expenditures on formal controls and simultaneously increases investment in the cooperation in new interfirm relationships. Trust seems to help with causal attributions about behavior and, thus, helps to intensify cooperation.

Project controls, internal control systems, interfirm transactions, and revisions Table  20 provides information on articles that address organizational controls in terms of project controls, internal control systems, interfirm transactions, and system revisions. These subtopics are examined using cognitive and personality psychology and motivation theory. For instance, psychology-based research uses the cognitive concept of mental representation in a study of recommendations to continue a project (e.g., Kadous and Sedor 2003 ).

Birnberg and Zhang (2011) focus on the effects of economic conditions and psychological factors on a principal’s internal control system choices. They investigate the impact of betrayal aversion, a tendency to experience disutility from potentially being exploited by others, and the concept of loss aversion, taken from prospect theory. Their findings indicate that both factors influence decisions (Birnberg and Zhang 2011 ). Ylinen and Gullkvist ( 2012 ) adapt the personality concept of tolerance for ambiguity to examine the use of project controls. Their findings suggest that tolerance for ambiguity is an important factor in the use of project controls, as managers choose project controls based on their tolerance for ambiguity.

Additionally, the motivational goal priming theory is used to examine ways to motivate individual effort in management accounting system revisions (Thomas 2016 ).

4.2.5 Decision-making

Capital investment decisions The articles shown in Table  21 address capital investment decisions. All three experimental studies incorporate a form of affect, a concept derived from social psychology.

Kida et al. (2001) show that affective reactions (i.e., emotional reactions, such as anger) influence capital investment decisions. Furthermore, their findings indicate that managers tend to reject alternatives that elicit negative emotional reactions even if they have higher expected financial utility (Kida et al. 2001 ). Moreno et al. (2002) demonstrate similar behavioral responses in a subsequent field experiment. Building on prospect theory, they find that negative and positive affective reactions change risk-taking behavior. This behavior is expressed by managers’ tendency to choose decisions that elicit positive affect and, thus, exhibit greater risk-taking behavior. (Moreno et al. 2002 ). Additionally, negative affect should be considered in the context of difficult decisions, as it is associated with the tendency to avoid choices (Sawers 2005 ).

Decision - making quality Table  22 provides an overview of articles on decision-making quality and the use of psychological theories in studies of decision-making. Our analysis reveals a focus on cognitive psychology.

Chang et al. (2002) show that cognitive theories, such as prospect theory, fuzzy-trace theory, and probabilistic mental models, can be used to explain framing effects in a decision-making context. Although they posit that the fuzzy-trace theory best depicts the effects of framing on behavior in an accounting context (Chang et al. 2002 ), we do not identify other articles building on this theory. Recent articles build on mental models to find that causal linkages and time delay information in strategy maps affect decision-making quality and, thus, long-term profit performance (Humphreys et al. 2016 ). A similar study examines the effects of different forms of accountability and causal chain framing on information search processes and decision-making quality. Dalla Via et al.’s ( 2019 ) eye-tracking laboratory experiment reveals that, on the one hand, the provision of a causal chain is paramount to achieve high decision quality under outcome accountability. On the other hand, providing such a causal chain reduces information search effort and does not improve decision-making quality under process accountability (Dalla Via et al. 2019 ). Furthermore, studies examine the effects of personality traits on decision quality. Specifically, the Myers-Briggs type indicator is used to classify subjects according to their preferred cognitive styles (Cheng et al. 2003 ).

4.2.6 Strategic MAC

In total, we analyze six articles on strategic MAC. Three of them illuminate the relations between strategic performance measurement systems (SPMSs) and behavioral responses (i.e., commitment to goals, individual performance, or psychological factors, such as role stress). The other three investigate the evaluation of strategies using SPMS and managers’ use of strategic performance measures and their characteristics. Although SPMS seem to affect motivational factors, such as goal commitment (e.g., Webb 2004 ), we find a pronounced use of social and cognitive theories. Table  23 provides an overview of these articles.

The social concepts and theories used by these studies range from role theory (Burney and Widener 2007 ) to exchange theory (Burney and Widener 2013 ) and motivated reasoning (Tayler 2010 ). Tayler (2010) examines ways to mitigate motivated reasoning, that is, a manager’s preference for arriving at a certain conclusion. He finds that a combination of involving managers in the selection of BSC measures and simultaneously framing them as a causal chain can reduce motivated reasoning in strategy assessments (Tayler 2010 ). Two studies investigate the consequences of strategies that have been translated into performance measures. When managers are not fully aware that such measures only represent strategic constructs, they may treat representative measures as constructs of interest, a phenomenon explained by attribute substitution theory (Kahneman and Frederick 2008 ; Choi et al. 2012 ). Choi et al. ( 2012 , 2013 ) refer to this phenomenon as strategy surrogation. These studies show that compensating managers based on a single measure of a strategic construct increases the propensity to use that specific measure as a surrogate for the strategic construct and, thus, incur potential costs (Choi et al. 2012 ). However, involvement in strategy selection mitigates this strategy surrogation effect (Choi et al. 2013 ).

4.2.7 Costing systems

We identify four articles on costing system subtopics. These articles employ concepts from social, cognitive, and motivation psychology to examine either the use and usefulness of costing systems or the effects of participating in costing system design. Table  24 provides an overview.

For instance, cognitive psychology-based research provides evidence that cognitive adaptions to changes in costing methods are rather unusual for most individuals (Dearman and Shields 2005 ). Additionally, this research employs cognitive dissonance theory, which posits that individuals aim to ensure that their behavior is consistent with their attitudes towards certain events and therefore appears reasonable to themselves and others (Festinger 1957 ; Jermias 2001 ). Jermias (2001) provides evidence that commitment to a costing system influences the perceived usefulness of this system. Mahama and Cheng (2013) provide similar implications based on psychological empowerment and self-determination theory. They find that when managers perceive a costing system as more enabling, they use it more intensely. Complementing other research on participation (e.g., Wong-On-Wing et al. 2010 ; Groen et al. 2017 ), Hoozée and Ngo (2018) build on self-determination theory in the context of costing systems. Their findings indicate similar positive effects on autonomous motivation as well as effects on the perceived usefulness of cost information and the perceived contributions to process improvements.

4.2.8 Roles in management control systems

Four studies describe the consequences of role expectations within management control systems and, thus, predominantly rely on role theory. Table  25 provides additional information.

Role theory considers role expectations in organizations. It posits that central organizational roles are determined by the expectations of other members of the organization (Kahn et al. 1964 ; Byrne and Pierce 2007 ). These expectations can cause role ambiguity, role conflict, and role stress, which eventually affect performance negatively (Kahn et al. 1964 ; Marginson and Bui 2009 ).

Byrne and Pierce (2007) build on role theory and find that interactions between management accountants and operating managers may be subject to contingencies and conflicts. Furthermore, adopting a “business partner” role seems conditional and uncertain. Research based on this theory further suggests that the need to fulfill expectations for multiple roles may lead to higher levels of role conflict and role ambiguity for management accountants and other organizational members (Maas and Matějka 2009 ; Marginson and Bui 2009 ).

In addition to diverse role expectations, a management accountant’s occupational prestige may also determine specific conflicts between organizational and professional demands. Beyond role theory, Hiller et al. (2014) provide evidence that aspects of social identity may decrease conflict and turnover intentions.

5 Discussion and avenues for future research

Our findings indicate a great diversity regarding topics, psychological theories, and concepts employed. In the following, we discuss implications and avenues for future research. From the eight broader topics presented in this review, aspects of performance measurement and evaluation are examined most frequently. We find evidence that the use of psychological theories differs across performance measurement and evaluation subtopics. For instance, both subtopics subjectivity in performance evaluations and PMS design are strongly influenced by cognitive theories (e.g., Dai et al. 2018 ; Fehrenbacher et al. 2018 ; Bedford et al. 2019 ). Psychology-based research on the provision of RPI instead illuminates social aspects using social comparison theory (e.g., Hartmann and Schreck 2018 ) or incorporates negative personality aspects, such as the Dark Triad or negativity bias (e.g., Wang 2017 ; Kaplan et al. 2018a ). Other effects of evaluation processes and outcomes are addressed by considering personality traits, such as tolerance for ambiguity or psychological entitlement (e.g., Holderness et al. 2017 ), and social phenomena, such as affective reactions (e.g., Ding and Beaulieu 2011 ). Conversely, motivational aspects, specifically self-determination theory, are relevant when investigating the effects of participation in PMS design. Our findings indicate that more recent research may particularly shift its focus to cognitive and personality theories to illuminate phenomena that are not yet understood. Prior research has discovered many cognitive heuristics and biases, and their negative consequences. Future research could, therefore, address ways to mitigate the negative consequences of the design of PMS or evaluation processes, for example, to support the present heuristic reasoning in a positive way. Furthermore, researchers could incorporate positive psychological traits, such as empathy or humility, to illuminate their influences on evaluation decisions and outcomes.

Aspects of compensation, rewards, and incentives are second-most often examined. Overall, our analysis reveals a stronger emphasis on social aspects in this research stream, than, for example, in the performance measurement and evaluation stream. Specifically, social comparison theory (e.g., Hannan et al. 2008 ; Knauer et al. 2017 ), social norms (e.g., Maas and van Rinsum 2013 ; Chen et al. 2017 ) and social identity theory (e.g., Sedatole et al. 2016 ; Tian et al. 2016 ) are frequently drawn upon. However, researchers also selectively focus on cognitive theories, especially prospect theory and related concepts (e.g., Hirsch et al. 2017 ; Oblak et al. 2018 ), to investigate incentive contract design effects. In contrast, earlier research on the provision of feedback and rewards is described based on the motivational theory of self-determination (e.g., Drake et al. 2007 ; Stone et al. 2010 ; Kunz and Linder 2012 ). Although personality aspects were less frequently incorporated in this research in the past, they have been more frequently examined in recent years. Personality traits, such as the need for achievement or psychological entitlement (e.g., Fehrenbacher et al. 2017 ; Nichol 2019 ), may offer opportunities to explain behavioral patterns regarding compensation, rewards or incentives that are not yet understood, especially in contexts prone to misreporting and honesty issues. Further research may also benefit from incorporating personality aspects, e.g., psychological entitlement, in areas based mainly on social concepts, such as the effects of tournament incentive schemes. The reactions to tournaments and thereby induced pressure are likely to be contingent on an individual’s personality traits and coping mechanisms and, thus, are worth looking into.

Psychological theories are also employed in research concentrating on budgeting, organizational control matters, and decision-making processes. Many psychology-based budgeting studies were published very recently, indicating a recent interest in the psychological aspects of budgeting. Notably, participation is a particularly common research topic in this context. Prior research provides evidence that the psychological reactions induced by participation influence performance and reporting behavior (e.g., Brown et al. 2017 ; Blay et al. 2019 ) and should, therefore, be further investigated by future research. However, most research in this field deals with budgetary slack and honesty, two concepts that seem deeply interwoven with psychology. We find a strong focus on social psychology, and the concept of social norms therein, in both older and more recent budgeting research (e.g., Fisher et al. c 2000 ; Stevens 2002 ; Brown et al. 2017 ; Blay et al. 2019 ). Interestingly, personality aspects are addressed rather often with regard to slack creation and honesty issues (e.g., Hartmann and Maas 2010 ; Hobson et al. 2011 ; Davidson 2019 ). An essential difference from the performance measurement and evaluation literature, which also shows tendencies towards personality psychology, is the consideration of more positive character traits. Interestingly, very few studies in this area draw upon cognitive or motivation psychology. However, we assume that future budgeting research could benefit from the stronger incorporation of theories of heuristics, framing, or motivation, as they may also prove to be relevant for explaining negative behavior (e.g., slack creation or misreporting) and its potential mitigation.

Further, our analysis indicates that although social psychological theories and concepts have a stronger influence on organizational control research, this area also incorporates several motivation theories. This research stream most frequently employs the social concepts of social norms and attribution theory, motivational aspects used include intrinsic motivation and self-determination constructs. Cognitive psychology is only drawn on in organizational control studies published before 2012, and tolerance for ambiguity is the only personality trait incorporated in research on this topic. These findings suggest avenues for future research. Although there is a strong focus on social psychology, some areas may additionally benefit from the incorporation of social aspects. Particularly in the context of project controls and interfirm transactions, individuals’ social and personal behavior significantly influences their judgments and, thus, their outcomes. Nevertheless, we did not identify any research that addresses social aspects in this field. Thus, researchers could draw on concepts from, e.g., social identity theory or even role theory, to examine potential dysfunctional behaviors or coordination difficulties between project or transaction parties. Interestingly, research on formal and informal organizational controls does not incorporate cognitive psychology. However, cognitive theories and concepts, such as prospect theory, may provide additional explanations for individual behavior when formal or informal controls are present. Organizational control research also may benefit from determining the influences of a more diverse set of personality traits on behavior. For example, researchers could investigate how a set of traits like, e.g., honesty, agreeableness and conscientiousness, affect transactions or the use of and reaction to informal and formal controls.

Regarding decision-making research, our findings indicate a focus on cognitive psychology and affective reactions. Similar to other subtopics (e.g., performance measurement and evaluation), researchers examine rather negative implications of affect. Future research could, therefore, examine the effects of positive affective reactions in this context and ways to elicit and use them for the benefit of organizations. More recent research incorporates new experimental methods, such as eye-tracking, to examine decision quality. Future research in this field could also combine cognitive and social or personality psychology to identify the effects of character traits (e.g., social value orientation) or existing social norms on decision quality.

Our analysis also reveals implications for psychology-based strategic MAC and costing system research. For instance, we did not identify psychology-based strategic MAC articles published after 2013. Although researchers have shown that psychological aspects are in fact influential, this outcome may suggest that interest in psychological explanations has decreased in this field. We find that psychology-based SPMS research relies mainly on social concepts, followed by cognitive and motivation theories. Interestingly, we do not identify studies that incorporate personality aspects into their examinations of the effects of SPMS even though these aspects have been proven to impact behavior in the context of other MAC subtopics. Thus, future research regarding strategic MAC could investigate how, for example, the commitment to strategic goals or the effectiveness of the translation of strategy into performance measures is contingent on personality traits like, e.g., the dark triad or one’s social value orientation.

The small number of analyzed costing system articles provide evidence that social, cognitive, and motivational factors influence perceptions of usefulness and the use of cost information. Further, studies that show the effects of participation in the design process seem to be affected by motivational aspects. However, based on other articles in this review, participation elicits social phenomena as well. Thus, future costing system research may benefit from considering the effects of, e.g., existing social norms. Additionally, researchers could examine potential effects of phenomena like cognitive dissonance, which may be evoked by contradictory beliefs or ideas and actual presented costing information and costing system design. Further, future research could examine whether and how the perceived usefulness and the use of cost information may also be affected by personal characteristics, e.g., one’s tolerance for ambiguity.

Besides the aforementioned, researchers use psychology to shed light on the roles of actors in management control systems. We find that psychology-based investigations of role expectations seemingly prompt the use of role theory. However, individuals’ methods of coping with expectations and their behavior under stress and ambiguous expectations may also be determined by other factors. We, therefore, believe that the role perceptions of individuals in control systems may relate to positive and negative personality traits, e.g., the dark triad or social value orientation. Furthermore, an individual’s cognitive orientation or perceptions of accountability may impact the fulfillment of these roles.

Overall, our results confirm the developments indicated by previous studies (e.g., Hesford et al. 2007 ; Hopper and Bui 2016 ; Lachmann et al. 2017 ): The quantity and proportion of psychology-based MAC research both increased over the investigation period, especially between 2015 and the first half of 2019. Further, we find that the variety of psychology subfields used by MAC studies increases over the investigation period and that this diversity is especially high between 2015 and the first half of 2019. Both findings indicate a growing interest in employing psychological theories and concepts to foster a better understanding of the consequences and effects of MAC practices on behavior. We show that social psychology is the most frequently utilized subfield. We believe this is the case because the research that we examined in this review investigates contexts in which social interactions between individuals are mandatory (e.g., performance evaluations or participative budgeting). Thus, focusing on and observing social psychological phenomena, such as affective reactions or social comparison processes, offers additional valuable explanations for behavior that may contradict the predictions of traditional economic theory in some cases. Interestingly, many studies rely on more than one psychology subfield to derive theoretical foundations. One possible explanation for this finding may be that psychological processes are so complex that multiple psychological theories are necessary to capture, predict, and examine the effects of specific behavioral phenomena and their facets.

Some psychological theories and concepts within the respective subfields have been employed by researchers more frequently than others have. For example, articles drawing on social psychology build theoretical foundations on social comparison theory (e.g., Hannan et al. 2013 ; Tafkov 2013 ; Knauer et al. 2017 ) or social norms (e.g., Fisher et al. 2000 ; Maas and van Rinsum 2013 ; Blay et al. 2019 ). Prospect theory (e.g., Church et al. 2008 ; Oblak et al. 2018 ) and mental models (e.g., Kadous and Sedor 2003 ; Hall 2011 ) are among the most frequently employed concepts from cognitive psychology. When examining motivational issues, articles most often build on self-determination theory (e.g., Kunz and Linder 2012 ; Groen et al. 2017 ), followed by concepts of intrinsic motivation (e.g., Wong-On-Wing et al. 2010 ; Christ et al. 2012 ). We find that personality psychology seems to be of growing interest to researchers. Interestingly, personality psychology is not addressed by previous literature studies (e.g., Birnberg et al. 2007 ). We identified a rather diverse set of concepts from personality psychology. The concepts of tolerance for ambiguity (e.g., Hartmann and Slapničar 2012 ) and psychological entitlement (e.g., Nichol 2019 ) are both employed by several studies. However, according to our analysis, the use of personality psychology, even in combination with other subfields, is restricted to certain MAC topics and subtopics. For example, we do not identify articles employing personality concepts to examine strategic MAC aspects, costing systems, or roles in management control systems.

Regarding research methods, many studies use laboratory experiments. The external validity of such experiments is often questioned owing to concerns regarding the representativeness and generalizability of their results (Sprinkle 2003 ). Interestingly, we identified very few field experiments, which offer higher generalizability and, thus, higher external validity (Harrison and List 2004 ). Psychology-based MAC research can, therefore, benefit from researchers venturing into the field. Field experiments can provide additional knowledge and verify existing knowledge under more natural conditions but offer the additional benefits of experimental manipulations ( 2004 ; Floyd and List 2016 ).

Within the MAC topics discussed above, we identified several subtopics that are of greater interest based on the number of articles addressing them. Specifically, subjective performance evaluations and subjective measures (e.g., Kunz 2015 ; Bol and Leiby 2018 ), incentive contract framing and compensation contract selection (e.g., Tafkov 2013 ; Reichert and Woods 2017 ), and budgetary slack and honesty in budgeting (e.g., Brown et al. 2014 ; Blay et al. 2019 ) are very frequently investigated using psychology-based theories. The outcomes and consequences of these studies are deeply influenced by individual judgments and behaviors and, thus, benefit from the incorporation of theories that offer additional explanations beyond pure economic reasoning. Beyond that, our analysis shows an increase in publications in specific topic categories in recent years. This may be explained by the general increase in the number and share of psychology-based MAC research articles; however, it may also indicate a growing interest in some specific subtopics. The increase is especially pronounced for research on budgetary slack and honesty. Six of the twelve articles on these subtopics were published in or after 2015, and three were even published in the first half of 2019. Further, more than half of all articles included in our review with a background of personality psychology were published between 2016 and 2019. We first identified personality concepts in articles published in 2003 (Cheng et al. 2003 ). The newer articles focus on a variety of personality aspects, such as psychological entitlement (Holderness et al. 2017 ; Nichol 2019 ), social value orientation (Davidson 2019 ), and responsibility rationalization (Chong and Wang 2019 ). Although personality traits and their effects on actions do not play a significant role in the economic theory underlying MAC, considering these factors offer an opportunity to provide further insight into the potential effects and influences of MAC practices. The insights of this review into recent MAC research imply that researchers have only begun to incorporate personality aspects, and this incorporation may be accelerating. Conversely, some subtopics have not received much attention in recent years. For instance, the most recent article in the strategic MAC category was published in 2013. Researchers can, therefore, address these thematic fields using new technologies, tested theories, and more recent knowledge to answer unanswered research questions.

Interestingly, there is an overarching theme that evoked psychology-based research across multiple categories. Specifically, we found seventeen articles on participation in different contexts. For instance, we identified articles on participation in PMS design, budget setting, costing system design, and strategic MAC. Interestingly, the concept of participation is already examined by the seminal work of Argyris (1952) . Articles on participation incorporate social psychological and motivation theories with almost equal frequency. This offers the opportunity to benefit from already existing psychology-based knowledge. For example, future research on the effects of participation in MAC contexts may use already tested theories and recent knowledge from one setting to find explanations for research questions in other participation-based research settings. Specifically, researchers could, e.g., benefit from the knowledge that participation affects factors like goal commitment and individual performance, and derive research questions regarding the effects of participation in costing system design and use. Further, even though we did not find any personality psychology-based participation research, we believe that such research in PMS design, or costing system design could lead to a better understanding of why such systems may or may not work in practice.

In summary, psychology-based MAC research is diverse regarding its topics, and psychological theories and concepts employed. Based on our review, there are several potentially fruitful avenues for future research in the eight topic categories discussed. Particularly, personality characteristics are likely to influence many MAC-related aspects, but their effects are yet to be examined. Beyond personality characteristics, there are many more already tested psychological theories and concepts from related fields, that could prove relevant to MAC research. For instance, the concept of accountability, which is examined in, e.g., auditing research or organizational sciences, could also be applied in MAC research. Despite the known influences of accountability in these fields, little MAC research (e.g., Fehrenbacher et al. 2020 ) has asked and answered accountability related questions. Nevertheless, although there is a seemingly endless variety in promising psychological theories or concepts to draw from, MAC researchers should exercise caution in picking theories and concepts that are reasonably applicable in the MAC context. Therefore, we believe psychology-based MAC research would especially benefit from interdisciplinary exchange, interdisciplinary research teams, and potentially even interdisciplinary education in university courses, in order to continue to deepen our understanding of the effects of MAC practices on behavior.

6 Conclusion

We conclude by reflecting on the contributions and limitations of our systematic literature review. Our work investigates the main foci of and developments in recent psychology-based MAC research. We shed light on which MAC topics are investigated, which research methods are applied in these investigations, and which theories and concepts are used to generate knowledge on the effects of MAC practices from a psychological perspective. We achieved this through a structured material collection and a subsequent in-depth content analysis of relevant articles published between 2000 and 2019. We thereby identified 125 relevant articles out of a total of 5247 articles from nine leading accounting journals. In our subsequent content analysis, we focused on determining the theoretical perspectives, research methods, and main findings of each included article. Additionally, all 125 articles were categorized in terms of MAC topics, research methods, and psychology subfields, and we discussed possible implications of the recent developments. Thereby, our overview offers a variety of insights into the use of psychology in recent MAC research to further develop the current understanding of the effects of MAC practices. We complement and extend existing discussions of psychology-based studies (e.g., Birnberg et al. 2007 ; Luft and Shields 2009 ; Kaplan et al. 2018b ) by including articles that draw upon theories and concepts from four bigger subfields of psychology. Therefore, we discuss articles employing theories or concepts from the previously examined subfields of social psychology, cognitive psychology and motivation theory. In addition, we significantly extend the scope of prior studies by including articles that draw upon personality psychology, multiple subfields, and several smaller subfields. To our knowledge, this review is the first to systematically collect, analyze, and synthesize such a broad spectrum of psychology-based research from the selected journals to illuminate the characteristics and knowledge generation of this research stream during this time period. Further, we draw a picture of an evolving research landscape, with several future research opportunities, as well as emerging new facets, e.g., the growing influence of personality psychology or participation in various MAC contexts. Moreover, by synthesizing and contextualizing 125 articles, we show that there are specific domains, where reactions to implemented MAC practices are significantly affected by psychological aspects. Among others, reactions to, e.g., PME systems, compensation, rewards or incentives benefit from psychology-based explanations of behavioral patterns. For instance, following basic economic theory, incentivizing should motivate favorable behavior; however, there may be, e.g., social aspects like existing social norms, that reinforce or aggravate the assumed behavioral reactions. Thus, our findings advocate the consideration of such aspects and may provide food for thought for practitioners, and the design and implementation of MAC practices beyond common economics-based recommendations.

Nevertheless, we recognize that our systematic review is subject to some limitations. The selection criteria and the selection process itself are designed to include only a fraction of recent MAC research. Especially owing to the restrictions on journals and the publication period, potentially relevant articles that do not meet the proposed criteria are excluded a priori. Moreover, the journal selection, which is based on leading accounting journals and prior research (e.g., Hesford et al. 2007 ; Lachmann et al. 2017 ), is not exhaustive and may be adjusted by future reviews. The article selection was conducted using the best of our knowledge, but it nevertheless relies on our subjective judgments of inclusion eligibility. Furthermore, our analysis relies on the simultaneous investigation of MAC topics, psychological concepts, and the research methods employed, which generates a comprehensive overview of the trends and main themes in this stream of research but may also hinder more detailed investigations of specific topics or concepts. Future research may complement our work with more specific reviews, potentially focusing, for instance, on experimental studies employing social or cognitive concepts.

Regardless of these limitations, we believe that our review is a valuable resource for researchers and practitioners seeking an overview of the knowledge in the MAC field that has been generated by drawing on different subfields of psychology. By offering insights into this stream of MAC research, this review may encourage researchers to investigate future developments in this field or even to conduct psychology-based MAC research themselves.

A subdiscipline of MAC, referred to as behavioral management accounting, is substantially influenced by sociological perspectives and psychology (e.g., Hofstedt and Kinard 1970 ; Dunk 2001 ; Birnberg 2011 ; Hopper and Bui 2016 ; Charifzadeh and Taschner 2017 ). It addresses such topics as the (unintended) effects of incentives, selected goals, and targets or appropriate design parameters of control systems in organizations (Charifzadeh and Taschner 2017 ). However, this review is not limited to research that refers to itself as behavioral management accounting but rather focuses on developing a holistic picture of any MAC research with a psychology background.

In some cases, our assignment of psychological theories to specific subfields may differ from prior studies (e.g., Birnberg et al. 2007 ). However, these assignments do not contradict the prior literature, as they are determined by consulting the psychology literature (e.g., Kanfer 1990 ; Westen 2002 ; Taylor et al. 2006 ; Eysenck and Keane 2010 ; Cervone and Pervin 2013 ) and represent another perspective on subfields that are not mutually exclusive.

In the 1920 s and early 1930 s, human relations was a research approach focusing on investigating morale, motivation, productivity, job satisfaction and group processes, and leadership or power in organizations ( Birnberg et al. 2007 ).

All selected journals are ranked with a status ranging from A + to B according to the VHB-JOURQUAL 3 of the German Academic Association for Business Research (Verband der Hochschullehrer für Betriebswirtschaft e.V . 2015 ) and have high impact factors according to several international journal rankings.

Empirical research methods are assumed to offer instruments of choice to acquire an in-depth understanding of decision-influencing and decision-facilitating effects on people (Sprinkle 2003 ), which, in turn, may be associated with the employment of concepts from subfields of psychology.

Simply stating that the research draws on psychology, without naming a specific theory or related construct, does not qualify an article for final inclusion.

Four concepts that are recurrently used in the MAC literature are excluded from this review: trust, justice, honesty, and fairness. These specific concepts may be applied in several ways and with various underlying assumptions from a number of different theoretical perspectives. These concepts may be used within subfields of psychology, but they may also be employed for research that does not refer to itself as related to psychology. However, if these constructs are used along with or in addition to concepts from psychology subfields (e.g., as additional variables in an experimental setting) the article is eligible for final inclusion (e.g., Hartmann and Slapničar 2009 ; Brown et al. 2016 ).

Laboratory experiments are conducted under standardized conditions in a laboratory with a standard subject pool (i.e., students). Harrison and List (2004) identify six factors that can be used to distinguish between laboratory and field experiments: the subject pool, the information the subjects bring to the experimental task, the nature of the commodity, the nature of the experimental task, the nature of the stakes, and the nature of the experimental environment (Floyd and List 2016 ). We follow the classification scheme of Harrison and List (2004) and the remarks of Floyd and List (2016) and refer to experiments with, for example, managers in an organization as field experiments for this review. Online experiments with standard or not further classified subject pools are categorized as laboratory experiments. The term “field study” is not the same as field experiments. We use “field studies” to refer to investigations of more than one organization employing such techniques as interviews, observations, and internal documents (Birnberg and Shields 1990 ; Hesford et al. 2007 ; Lachmann et al. 2017 ).

The time-based regression analysis uses the year as the independent variable and the number of identified articles in a year as the dependent variable ( Scandura and Williams 2000 ).

These results are not tabulated. This and the following untabulated results are available from the corresponding author on reasonable request.

These results are not tabulated.

The maximum value of the heterogeneity index in this case is 0.8 ( h max  = 1- 1/n). The heterogeneity indices regarding the application of psychology subfields for the remaining categories are calculated as follows: strategic MAC ( h  = 0.722); compensation, rewards, and incentives ( h  = 0.722); organizational control ( h  = 0.681); decision-making ( h  = 0.653); and budgeting ( h  = 0.616).

The maximum value of the heterogeneity index in this case is 0.8. .

Essentially, positive psychology focuses on subjective experiences, such as well-being or hope; positive individual traits, such as courage or forgiveness; and moving individuals towards better citizenship ( Seligman and Csikszentmihalyi 2000 ).

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Appendix 1: Overview of coding dimensions, categories and subcategories

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Wibbeke, LM., Lachmann, M. Psychology in management accounting and control research: an overview of the recent literature. J Manag Control 31 , 275–328 (2020). https://doi.org/10.1007/s00187-020-00302-3

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