Description
The results of a survey appraising the frequency and perceived helpfulness of competitor-focused accounting (CFA)
practices are reported. Given the limited attention aorded the subject in the management accounting literature, CFA
usage has been found to be higher than what might have been reasonably anticipated. Three factors have been found to
play statistically signi®cant contingent roles in connection with CFA usage and perceived helpfulness: company size,
competitive strategy and strategic mission.
Competitor-focused accounting: an exploratory note
Chris Guilding
School of Accounting and Finance, Grith University, Faculty of Commerce and Management, Gold Coast Campus, PMB 50,
Queensland 4217, Australia
Abstract
The results of a survey appraising the frequency and perceived helpfulness of competitor-focused accounting (CFA)
practices are reported. Given the limited attention a?orded the subject in the management accounting literature, CFA
usage has been found to be higher than what might have been reasonably anticipated. Three factors have been found to
play statistically signi®cant contingent roles in connection with CFA usage and perceived helpfulness: company size,
competitive strategy and strategic mission. Little evidence of any systematic relationship between industry type and
CFA has been found. #1999 Elsevier Science Ltd. All rights reserved.
There appears to be a burgeoning interest in
competitor analysis amongst strategy commenta-
tors and management practitioners.
1
This interest
is typi®ed by Porter's in¯uential writings (Porter,
1980, 1985) which suggest that competitor analysis
is fundamental to the pursuit of competitive
advantage. He argues that the importance of this
analysis warrants companies maintaining ``. . .an
organized mechanismÐsome sort of competitor
intelligence systemÐto insure that the process
is ecient'' (Porter, 1980, p. 72). There is currently
the beginning of a management accounting lit-
erature on competitor-focused accounting (CFA).
Despite this development, no study concerned
with appraising CFA adoption rates or related
contingent factors has been found in the literature.
The exploratory study reported herein was con-
ducted in light of this apparent gap in prior
research. The study's objectives are:
(1) to appraise CFA adoption rates;
(2) to assess practitioners' perceptions of the
extent to which CFA could be helpful to
their organization; and
(3) to develop and test propositions concerned
with contingent factors that might a?ect
CFA adoption rates as well as perceptions
of CFA's helpfulness.
The paper is structured as follows. In the con-
text of a review of what practices comprise CFA,
the next section provides a synthesis of the most
pertinent literature. This is followed by a section
0361-3682/99/$ - see front matter # 1999 Elsevier Science Ltd. All rights reserved.
PI I : S0361- 3682( 99) 00007- 0
Accounting, Organizations and Society 24 (1999) 583±595
www.elsevier.com/locate/aos
1
Information Data Search (1985) reports that in 1985, more
than a third of Fortune 500 companies were spending over $US
1 million a year on competitor analysis. Ghoshal and Westney
(1991) report that the Society of Computer Intelligence profes-
sionals, a new US professional forum, held its ®rst annual
meeting in 1986, and its 1988 meeting was attended by repre-
sentatives from over 200 large corporations and over 40 con-
sulting ®rms.
that develops a theoretical framework concerned
with factors that might a?ect CFA adoption rates
as well as perceptions of CFA's helpfulness. Sub-
sequent sections address, in turn, the research
method employed, the survey's results and a con-
clusion that discusses the study's ®ndings as well
as its limitations.
1. What practices comprise competitor-focused
accounting?
No attempt to synthesise CFA practices was
found in the literature. For this reason, the devel-
opment of a listing of CFA practices is bound to
be exploratory. In an attempt to delimit this pro-
blem, signi®cant emphasis has been attached to
the way CFA practices have been described in the
literature. Only those CFA practices described in a
manner highlighting a distinction from other CFA
practices are included. The following ®ve CFA
practices have been drawn from the literature and
are now described in turn:
(1) competitor cost assessment;
(2) competitive position monitoring;
(3) competitor appraisal based on published
®nancial statements;
(4) strategic costing;
(5) strategic pricing.
Competitor cost assessment is probably the
most widely-referred to CFA practice. Amongst
its advocates are Bromwich (1990), Jones (1988),
Porter (1985), Simmonds (1981) and Ward (1992).
The signi®cant attention commanded by compe-
titor cost assessment may result partially from
the growing sophistication in technologically-
advanced investments. Jones (1988) provides a
persuasive case that the long-term commitment
associated with such investment and the implied
pursuit of improved competitive position, height-
ens the need for awareness of competitors' costs.
He outlines a systematic approach to competitor
cost assessment that involves, inter alia, appraising
competitors' manufacturing facilities, economies
of scale, governmental relationships, and technol-
ogy-product design. Further to these approaches,
Ward (1992) describes ``indirect sources'' of
competitor information which include: physical
observation, mutual suppliers, mutual customers,
and employees (particularly ex-employees of com-
petitors). Competitor cost assessment is de®ned in
this study as the provision of a regularly updated
estimate of a competitor's unit cost.
Competitive position monitoring, as advocated
by Simmonds (1986), represents a more holistic
mode of CFA than competitor cost assessment. It
broadens the analysis to include appraising major
competitors' sales, market share, volume, unit
costs and sales. Simmonds notes that an increase
in a competitor's cost per unit may initially appear
favourable. If this increase has resulted from
advertising devoted to brand strength develop-
ment or from investment in new product develop-
ment, however, the changed cost structure may be
more suggestive of the competitor securing a
stronger rather than a weaker competitive position.
Simmonds argues that extending management
accounting's measures beyond their conventional
internally-focused domain can strengthen apprai-
sals of competitor strategy. Competitive position
monitoring is de®ned in this study as the analysis
of competitor positions within the industry by
assessing and monitoring trends in competitor
sales, market share, volume, unit costs, and return
on sales. This information can provide a basis for
the assessment of a competitor's strategy.
Moon and Bates (1993) describe an approach to
competitor appraisal which is based on published
®nancial statement interpretation. The speci®c
nature of the approach to data collection evident
in this mode of CFA has given rise to its separate
consideration here. The signi®cance of this speci-
®city is underlined by the fact that, unlike the
approaches already considered, published ®nan-
cial statement interpretation involves techniques
that are familiar to traditionally-trained accoun-
tants. Moon and Bates outline an analytical fra-
mework that can be applied to a competitor's
published statements as part of an appraisal of key
sources of competitive advantage. This analysis
can include monitoring trends in sales and pro®t
levels as well as asset and liability movements.
Moon and Bates claim that strategically signi®cant
insights can be derived from an appropriately
584 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
conducted analysis of a competitor's published
statements.
2
Competitor appraisal based on
published ®nancial statements is de®ned in this
study as the numerical analysis of a competitor's
published statements as part of an assessment
of a competitor's key sources of competitive
advantage.
Strategic costing is a widely-used term in many
of Shank and Govindarajan's (1988, 1991, 1992,
1993) publications. They believe that in order for
cost analysis to support the pursuit of competitive
advantage, it must explicitly consider strategic
issues. Their 1988 study uses a case analysis to
demonstrate the sub-optimal decision that can
result from using a conventional costing approach
(i.e. an analysis conducted from a ``relevant'' cost,
short-run perspective). Employing an analysis that
considers strategic issues and draws on concepts
articulated in the marketing and competitive
strategy literatures (e.g. product positioning and
market penetration), Shank and Govindarajan
show how a preferred solution to the case can be
derived. Strategic costing is de®ned in this study as
the use of cost data based on strategic and mar-
keting information to develop and identify super-
ior strategies that will produce a sustainable
competitive advantage.
Strategic pricing is discussed in the context of
case studies by Jones (1988) and Simmonds
(1982). The more extensive consideration is pro-
vided by Simmonds who demonstrates how sub-
optimality can result from a pricing decision
informed by a conventional accounting analysis
based on internally-orientated, historically-based
information. He claims that strategic pricing
which uses competitively-orientated analysis will
result in a better-informed pricing decision. Inclu-
ded in the factors that might be appraised in such
an analysis are competitor price reaction, price
elasticity, projected market growth, economies of
scale and experience. Foster and Gupta's (1994)
survey ®nding that accounting information's
greatest potential use is perceived by marketing
executives to be in connection with pricing deci-
sions underlines the importance of separate con-
sideration applied to this mode of CFA. Strategic
pricing is de®ned in this study as the analysis of
strategic factors in the pricing decision process.
These factors may include: competitor price reac-
tion, price elasticity, market growth, economies of
scale, and experience.
2. Towards a contingency theory of competitor-
focused accounting
Propositions concerning four contingent fac-
tors that might a?ect CFA adoption rates as well
as perceptions of CFA's helpfulness are devel-
oped in this section. Following calls for research
into the role strategy might play in accounting
system design (Chapman, 1997; Dent, 1990;
Lang®eld-Smith, 1997; Otley, 1980; Simons, 1990),
and, more especially, the prima facie relevance
of strategy to CFA, the implications of two
strategy dimensions are considered. These two
dimensions are strategic mission and competitive
strategy. In addition, the potentially contingent
roles played by company size and industry are
explored.
2.1. Strategic mission
Strategic mission relates to the nature of the
strategic goal pursued. One example of the oper-
ationalisation of strategic mission is Govindarajan
and Gupta's (1985) ``build/harvest'' measure. This
measure is designed to determine where a business
lies on the spectrum ranging from pursuit of high
market share (build) to the pursuit of short-term
pro®t (harvest).
Porter (1980) believes that the desire to pre-empt
competitors in deliberations on capacity expan-
sion is one of the clearest examples of organiza-
tional decision making where competitor
information can play an invaluable role. In a
similar vein, Zajac and Bazerman (1991) see a
need for competitor analysis when considering
capacity expansion. These views suggest that
2
See Palepu, Bernard and Healy (1995) and Stickney (1990)
for further elaboration of a competitor focus in ®nancial state-
ment analysis.
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 585
``build'' ®rms will have a greater call for compe-
titor information.
Proposition 1a. CFA usage rates are higher in
companies pursuing a build strategic mission than in
companies pursuing a harvest strategic mission.
Proposition 1b. CFA's perceived helpfulness is
greater in companies pursuing a build strategic
mission than in companies pursuing a harvest stra-
tegic mission.
2.2. Competitive strategy
Competitive strategy relates to how business
units compete. This dimension of strategy has
been operationalised in prior accounting studies
(Abernethy & Guthrie, 1994; Simons, 1987)
using Snow and Hrebiniak's (1980) measure which
is based on Miles and Snow's (1978) four strategic
archetypes: ``prospector'', ``analyser'', ``reactor''
and ``defender''. Snow and Hrebiniak oper-
ationalised the ``prospector'' archetype using
terms such as ``values being `®rst in' in new pro-
duct and market areas'', and ``responds rapidly to
early signals concerning areas of opportunity, and
these responses often lead to a new round of
competitive actions'' (Snow & Hrebiniaky, 1980,
p. 336). At the other extreme, the ``defender''
archetype has more inwardly-focused character-
istics, i.e. ``trying to protect its domain by o?ering
higher quality, superior service, lower prices, and
so forth'', and ``it tends to ignore industry chan-
ges.... and concentrates instead on doing the best
job possible in a limited area'' (p. 336). These
characterisations highlight contrasting internal/
external foci, leading to the expectation that CFA
will be more compatible with ®rms that exhibit a
``prospector'' (more externally-orientated) strat-
egy. Further support for this expectation arises
from Zajac and Bazerman's (1991) description of
the importance of competitor analysis in the new
market entry decision.
Proposition 2a. CFA usage rates are higher in
``prospector'' companies than in companies employ-
ing other competitive strategies.
Proposition 2b. CFA's perceived helpfulness is
greater in ``prospector'' companies than in compa-
nies employing other competitive strategies.
2.3. Company size
Company size is expected to be positively rela-
ted to CFA adoption. This expectation derives
from the ability of larger ®rms to reap the bene®ts
of lower CFA costs per sale and per employee, as
well as the well-documented ®nding that size is
positively related to greater accounting sophisti-
cation (Bruns & Waterhouse, 1975; Merchant,
1981). A further factor supporting this expected
relationship stems from the earlier discussion of
how employee knowledge can be a signi®cant
source of competitor information (Ghoshal &
Westney, 1991; Ward, 1992). As the depth of this
information source is a function of company
size (more company employees signi®es a greater
font of competitor information), it is expected
that larger ®rms will have a greater capacity to
generate CFA information. Large ®rm's greater
capacity to generate quality CFA data also is
expected to positively impact on CFA's perceived
helpfulness.
Proposition 3a. CFA usage rates are higher in lar-
ger companies.
Proposition 3b. CFA's perceived helpfulness is
greater in larger companies.
2.4. Industry
Jones (1988) sees a greater role for CFA in high
technology and highly competitive industries.
Foster and Gupta's (1994) study concerned with
the use of accounting information in marketing
decision-making also attaches signi®cance to the
role played by industry factors. The potential for
industry to be a signi®cant factor a?ecting CFA's
usage and perceived helpfulness motivates Propo-
sitions 4a and 4b.
Proposition 4a. There is signi®cant cross-industry
variation in CFA usage rates.
586 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
Proposition 4b. There is signi®cant cross-industry
variation in CFA's perceived helpfulness.
3. Method and variable measurement
3.1. Sampling procedures
A mailed questionnaire survey was employed.
The sample was drawn from the Deloitte Touche
Tohmatsu (1994) listing of New Zealand's 230
largest companies: 200 public and private compa-
nies (measured by sales), and 30 ®nancial institu-
tions (measured by assets). Thirteen companies
where no ®nancial accounts could be obtained or
no published contact address was found were
deleted from the sample, providing a ®nal sample
size of 217 companies.
Questionnaires together with a cover letter, a
pre-paid return envelope and a glossary de®ning
each of the CFA terms, together with references to
the literature were mailed to the Chief Accountant
in each company sampled. Two mailings resulted
in 124 responses. Of these, 12 indicated an unwill-
ingness to participate in the study (the most
widely-cited reason being company policy). The
112 completed questionnaires represent a usable
response rate of 51%.
Two investigations for non-response bias were
undertaken. Firstly, ten of the non-respondents
were contacted by phone. Four non-respondents
indicated the most widely-cited ``too busy'' or
``not enough time'' reasons for their non-response.
One non-respondent cited ``lack of interest
because the practices referred to in the ques-
tionnaire are irrelevant to my organization''. This
gives cause for some concern, as other non-
respondents may have had a similar view. The
second test of non-response bias involved
comparing data provided by ``®rst mailing''
respondents with data provided by ``second mail-
ing'' respondents. None of the variables under
investigation reveal any statistically signi®cant
association with the timing of the returns of com-
pleted questionnaires. While this suggests non-
response bias is not a signi®cant threat to the
study's validity, the potential of the collected data
being biased towards the views of accountants
who are positively disposed to CFA (more likely
to respond), rather than those negatively disposed
towards CFA (less likely to respond), should be
borne in mind.
3.2. Variable measurement
3.2.1. CFA usage
Following the question, ``To what extent does
your organization use the following practices?'',
the ®ve CFA practices were listed. Next to each
one, a Likert scale ranging from ``1'' (not at all), to
``7'' (to a great extent) was provided. To aid
interpretation of CFA terminology, a glossary
outlining the CFA de®nitions presented earlier
was enclosed in the mailing.
3.2.2. Perceived helpfulness of CFA
Similar to the format employed to measure CFA
usage, following the question, ``To what extent do
you consider the following practices could be
helpful to your organization?'', the ®ve CFA
practices and the same seven point Likert scales
were provided.
3.2.3. Strategic mission
Strategic mission was measured using Govin-
darajan and Gupta's (1985) measure. This mea-
sure asks respondents to record the percentage of
their business unit's sales that relate most closely
to four speci®c strategies re¯ective of the trade-o?
between market share and short-term pro®tability
objectives. Govindarajan and Gupta referred to
these four strategic mission archetypes as ``build'',
``hold'', ``harvest'' and ``divest''. These four stra-
tegic archetypes were operationalised in the mea-
sure in the following manner. The build strategy
was operationalised as ``Increase sales and market
share, be willing to accept low returns on invest-
ment in the short-to-medium term if necessary''.
The hold strategy was operationalised as ``Main-
tain market share and obtain a reasonable return
on investment''. The harvest strategy was oper-
ationalised as ``Maximise pro®tability and cash
¯ow in the short-to-medium term, be willing to
sacri®ce market share if necessary''. The divest
strategy was operationalised as ``Prepare for sale
or liquidation''. In addition, respondents could
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 587
indicate ``none of the above''. No respondent
selected this ®nal option. From the data collected,
Govindarajan and Gupta generated a continuous
variable by multiplying the percentage of sales
associated with the build strategy by ``+1'', mul-
tiplying the sales percentage recorded for the hold
strategy by ``0'', multiplying the sales percentage
recorded for the harvest strategy by ``À1'', multi-
plying the sales percentage recorded for the divest
strategy by ``À2'', and then summing the four
products. In the current study, this variable had a
mean of À0.12 and a distribution of values across
the full range of +1 to À2 (one company recor-
ded 100% in connection with ``divest'', i.e., a
score of À2).
3.2.4. Competitive strategy
The ``prospector/defender'' measure derived
from Miles and Snow's (1978) strategic typology
was employed. This measure has been subjected to
considerable psychometric assessment (Hambrick,
1983; Shortell & Zajac, 1990; Snow & Hrebiniak,
1980). Respondents were presented with a brief
description of a ``defender'', ``prospector'', ``ana-
lyser'' and ``reactor'' ®rm and asked to select
which description best represented their organiza-
tion. Twenty-one (19%) respondents identi®ed
their companies as ``defenders'', 44 (41%) as
``prospectors'', 33 (31%) as ``reactors'', and 10
(9%) as ``analysers'' (four respondents failed to
complete this question).
3.2.5. Size
Company size was measured using the Deloitte
Touche Tohmatsu (1994) measure of assets. This
measure excludes goodwill and identi®able intan-
gibles such as patents, trademarks, mastheads, set
up and exploration costs.
3.2.6. Industry
Each respondent's company was identi®ed with
one of the 16 industries referred to in the Deloitte
Touche Tohmatsu (1994) industrial classi®cation.
The industries represented in the sample are: oil,
gas, minerals and electricity (23 companies), pri-
mary producers (14 companies), manufacturing
(15 companies), insurance (10 companies), pro-
cessed food and beverage (8 companies) and retail,
wholesale and distribution (8 companies). Ten of
the industrial categories were represented by ®ve
or less companies. These have been collapsed as
one miscellaneous category for the purposes of the
statistical analysis reported below.
4. Results
Table 1 presents descriptive statistics for the ®ve
CFA usage rate variables. The practices are pre-
sented in descending order of usage, with means
ranging from 4.95 (competitive position monitor-
ing) to 3.41 (strategic costing). For each practice
appraised, actual scores ranged across the full
theoretical range. Using the paired t-test, each
practice was found to be used statistically sig-
ni®cantly more than the next highest ranking
practice.
3
Table 2 presents descriptive statistics concerned
with the perceived helpfulness of each of the ®ve
CFA practices. Mean scores ranged from 5.69
(competitive position monitoring) to 4.86 (strate-
gic costing). This signi®es that mean scores of all
®ve variables were above the mid-point of the
range. Again, values across the entire theoretical
range were observed for each CFA practice.
With the exception of a reversal of the compe-
titor appraisal based on published ®nancial
statements and competitor cost assessment rank-
ings, the rankings in Tables 1 and 2 were the
same.
Table 3 presents Pearson correlations for usage
rates of the ®ve CFA practices. The statistically
signi®cant positive correlations ( p < 0:01 for all
combinations) signify that a company with a rela-
tively high usage of one CFA practice was likely
also to use the other practices. Table 4 presents
Pearson correlations for perceived helpfulness of
the ®ve CFA practices. The perceived helpfulness
3
Competitive position monitoring was used signi®cantly
more than strategic pricing ( p < 0:05), strategic pricing was
used more than competitor appraisal based on published
®nancial statements ( p < 0:05), competitor appraisal based on
published ®nancial statements was used more than competitor
cost assessment ( p < 0:1), and competitor cost assessment was
used more than strategic costing ( p < 0:01).
588 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
Table 1
Descriptive statistics for the CFA usage rate variables
Theoretical range Actual range
Variable Mean SD Min. Max. Min. Max. n
Competitive position monitoring 4.95 1.66 1 7 1 7 109
Strategic pricing 4.63 1.70 1 7 1 7 100
Competitor appraisal based on published ®nancial statements 4.17 1.79 1 7 1 7 109
Competitor cost assessment 3.91 1.83 1 7 1 7 108
Strategic coasting 3.41 1.78 1 7 1 7 98
Table 2
Descriptive statistics for the perceived CFA helpfulness variables
Theoretical range Actual range
Variable Mean SD Min. Max. Min. Max. n
Competitive position monitoring 5.69 1.31 1 7 1 7 104
Strategic pricing 5.32 1.58 1 7 1 7 95
Competitor cost assessment 5.16 1.58 1 7 1 7 104
Competitor appraisal based on published ®nancial statements 5.05 1.59 1 7 1 7 104
Strategic costing 4.86 1.84 1 7 1 7 96
Table 3
Matrix of Pearson product moment correlation coecients for the ®ve CFA usage variables
a
Competitor cost
assessment
Competitive
position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Competitive position monitoring 0.56
Competitor appraisal based on published
®nancial statements
0.65 0.63
Strategic costing 0.43 0.29 0.32
Strategic pricing 0.35 0.41 0.31 0.46
a
All correlation coecients are statistically signi®cant ( p < 0:01).
Table 4
Matrix of Pearson product moment correlation coecients for the ®ve CFA perceived helpfulness variables
a
Competitor cost
assessment
Competitive position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Competitive position monitoring 0.71
Competitor appraisal based on published
®nancial statements
0.73 0.66
Strategic costing 0.45 0.28 0.37
Strategic pricing 0.44 0.45 0.33 0.66
a
All correlation coecients are statistically signi®cant ( p < 0:01).
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 589
of the ®ve CFA variables were also highly inter-
correlated ( p < 0:01 for all combinations).
4
To test the propositions posited in the study, the
data for each of the ®ve CFA usage rate variables
and each of the ®ve perceived CFA helpfulness
variables were separately ®tted to the following
equation:
Y ? b
1
?b
2
MISSION?b
3
COMPSTRAT
?b
4
SIZE ?b
5
OIL ?b
6
PRIME ?b
7
MANU
?b
8
FOOD?b
8
RETAIL ?b
9
INSURE
where:
Y =CFA usage rate, or perceived
CFA helpfulness;
MISSION =strategic mission;
COMPSTRAT=competitive strategy;
dummy variable set equal to
one (1) if prospector, otherwise
zero (0);
SIZE =$ value of assets;
OIL =oil industry; dummy variable
set equal to one (1) if company
is in oil, gas, minerals and
electricity industry, otherwise
zero (0);
PRIME =primary producer industry;
dummy variable set equal to one
(1) if company is in primary
producer industry, otherwise
zero (0);
MANU =manufacturing industry; dummy
variable set equal to one (1) if
company is in manufacturing
industry, otherwise zero (0);
FOOD =processed food and beverage
industry; dummy variable set
equal to one (1) if company is
in processed food and beverage
industry, otherwise zero (0);
RETAIL =retail, wholesale and distribution
industry; dummy variable set
equal to one (1) if company is
in retail, wholesale and
distribution industry, otherwise
zero (0);
INSURE =insurance industry; dummy
variable set equal to one (1)
if company is in insurance
industry, otherwise zero (0).
Table 5 presents the results of the regression
analyses where usage of the ®ve CFA practices are
the dependent variables, and Table 6 presents the
regression results where perceptions of the help-
fulness of the ®ve CFA practices are the depen-
dent variables. The ®nal columns of the two tables
present the range of variable in¯ation factors
(VIF) observed in the regression formulations.
The relatively low VIFs signify that multi-colli-
nearity did not represent a signi®cant threat to the
stability of the estimated parameters.
5
Recall that Proposition 1a posited a positive
relationship between companies pursuing a build
strategic mission and CFA usage, and Proposition
1b posited a positive relationship between compa-
nies pursuing a build strategic mission and CFA's
4
These ®ndings provide preliminary support for the propo-
sitions. As it was proposed the four contingencies under study
impact on usage and also perceived helpfulness of all ®ve CFA
practices, we would expect the usage rates and also the per-
ceived helpfulness of the ®ve practices to be positively inter-
correlated. Exploratory factor analysis of the ®ve CFA usage
rate variables yielded a one factor result (56% total variance
explained). Factor analysis of the perceived helpfulness CFA
variables yielded a two factor result (61% and 21% total var-
iance explained), with strategic pricing and strategic costing
representing the second factor. In light of the exploratory nat-
ure of the study, rather than using the factor analytic outputs in
the examination of the proposed contingency relationships, it
was believed greater insight derives from treating the CFA
variables independently.
5
Due to some missing values for the dependent variables,
the VIFs exhibited a small degree of variation across each of
the regression equations formulated. Across all 10 regression
equations, the highest VIF (1.52) was yielded by ``oil industry''
where ``strategic costing usage'' is the dependent variable. The
presence of negligible multi-collinearity was also evident from
relatively low condition indices yielded by the independent
variables. Where ``strategic costing usage'' is the dependent
variable, the 10 condition indices were 1.00, 1.50, 1.59, 1.61,
1.62, 1.62, 1.68, 1.88, 2.24, 4.96.
590 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
perceived helpfulness. Table 5 provides some sup-
port for Proposition 1a as the coecient for stra-
tegic mission was positive and statistically
signi®cant in connection with strategic costing
( p < 0:1) and strategic pricing ( p < 0:05). Stronger
support for Proposition 1b is apparent from Table
6 as the coecient for strategic mission was posi-
tive and statistically signi®cant in connection with
competitor cost assessment ( p < 0:1), competitive
position monitoring ( p < 0:1), strategic costing
( p < 0:01) and strategic pricing ( p < 0:01).
6
Proposition 2a posited a positive relationship
between companies pursuing a ``prospector''
Table 5
CFA adoption rates regression analysis
a
Competitor
cost
assessment
Competitive
position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Strategic
pricing
Variable
in¯ation
factor range
b
Constant 3.02*** 4.26*** 3.56*** 3.10*** 4.29***
(8.03) (12.97) (9.58) (7.22) (11.07)
Strategic mission À0.01 0.09 0.01 0.14* 0.18** 1.07±1.13
(À0.11) (0.92) (0.07) (1.36) (1.76)
Competitive strategy 0.17* 0.37*** 0.22** 0.11 0.08 1.07±1.11
(1.62) (3.75) (2.19) (1.02) (0.71)
Size 0.21** 0.13* 0.22** 0.21** 0.13 1.15±1.27
(0.08) (1.36) (2.17) (1.85 (1.15)
Oil, gas, mineral and electricity industry 0.25** 0.10 0.09 0.10 À0.05 1.38±1.52
(2.20) (0.94) (0.87) (0.78) (À0.39)
Primary producer industry 0.17 À0.03 0.11 À0.04 0.01 1.27±1.37
(1.56) (À0.27) (1.06) (À0.35) (0.06)
Manufacturing industry 0.00 À0.03 À0.02 0.00 0.07 1.32±1.45
(0.03) (À0.30) (À0.18 (0.03) (0.61)
Processed food and beverage industry 0.12 0.13 À0.01 0.05 0.18 1.18±1.26
(1.17) (1.30) (À0.08) (0.47) (1.64)
Retail, wholesale and distribution industry 0.07 0.02 0.0 À0.05 0.15 1.19±1.24
(0.72) (0.17) (0.18) (À0.40) (1.37)
Insurance industry 0.07 0.03 À0.05 0.02 0.03 1.21±1.23
(0.65) (0.35) (À0.47) (0.18) (0.31)
Adjusted R
2
0.03 0.12 0.04 0.00 0.03
F 1.42 2.63 1.44 0.95 1.29
p 0.19 0.00 0.18 0.48 0.25
n 108 109 109 98 100
a
Each cell reports the standardized regression coecient followed by t-statistic in parentheses. For competitive strategy, strategic
mission and size, one-tailed tests of statistical sign®cance were employed. For the industry variables, two-tailed tests of statistical sig-
ni®cance were employed.
b
Due to some missing values for the dependent variables, the variable in¯ation factors (VIFs) exhibit a small degree of variation across
the ®ve regression equations formulated. The range of VIFs observed are reported.
* p < 0:10; **p < 0:05; ***p < 0:01.
6
The sensitivity of these results to the way the Govindarajan
and Gupta measure was calculated has been investigated by com-
puting an alternative measure for strategic mission. Under this
alternative method, ``+1'' has been recorded if the respondent
reported the highest percentage of sales as associated with the
``build'' mission, ``0'' is scored where ``hold'' ranks highest, ``À1''
is scored where ``harvest'' ranks highest and ``À2'' is scored
where ``divest'' ranks highest. The 10 regression equations were
reformulated using this alternative measure of strategic mission.
The alternative measure was signi®cantly positively related to the
use of two CFA practices (competitor position monitoring,
p < 0:1; strategic pricing, p < 0:1), and perceived helpfulness of
three practices (competitor position monitoring, p < 0:1; strategic
pricing, p < 0:05; strategic costing, p < 0:05). These results pro-
vided further corroborating support for Propositions 1a and 1b.
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 591
competitive strategy and CFA usage, and Propo-
sition 2b posited a positive relationship between
companies pursuing a ``prospector'' competitive
strategy and CFA's perceived helpfulness. Support
for Proposition 2a is provided in Table 5 as the
coecient for competitive strategy was positive
and statistically signi®cant in connection with
competitor cost assessment ( p < 0:1), competitive
position monitoring ( p < 0:01) and competitor
appraisal based on published ®nancial statements
( p < 0:05). Support for Proposition 2b is apparent
from Table 6 as the coecient for competitive
strategy was positive and statistically signi®cant in
connection with competitor cost assessment
( p < 0:1), competitive position monitoring
( p < 0:05) and competitor appraisal based on
published ®nancial statements ( p < 0:05).
Strong support was found for Propositions 3a
and 3b which posited a positive relationship
between company size and CFA usage and CFA's
perceived helpfulness. Size was found to play a
statistically signi®cant predictive role in nine of
the ten regression equations formulated. From
Table 5 it can be seen that size was statistically
Table 6
Perceived CFA helpfulness regression analysis
a
Competitor
cost
assessment
Competitive
position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Strategic
pricing
Variable
in¯ation
factor range
b
Constant 4.44*** 5.07*** 5.49*** 4.55*** 5.02***
(13.74) (19.23) (13.60) (11.12) (14.68)
Strategic mission 0.13* 0.13* 0.10 0.26*** 0.26*** 1.07±1.08
(1.30) (1.36) (0.95) (2.55) (2.53)
Competitive strategy 0.15* 0.18** 0.22** 0.07 0.03 1.08±1.10
(1.46) (1.71) (2.07) (0.66) (0.30)
Size 0.19** 0.18** 0.15* 0.21** 0.22** 1.15±1.18
(1.87) (1.80) (1.46) (1.94) 92.01)
Oil, gas, mineral and electricity industry 0.26** 0.21* 0.16 0.16 0.11 1.33±1.45
(2.32) (1.89) (1.37) (1.31) 90.94)
Primary producer industry 0.12 0.05 0.03 0.04 À0.02 1.24±1.32
(1.09) (0.43) (0.23) (0.40) (À0.19)
Manufacturing industry 0.04 0.10 À0.05 À0.10 À0.03 1.27±1.40
(0.41) (0.95) (À0.43) (À0.90) (À0.27)
Processed food and beverage industry (0.19* 0.22** 0.05 0.18 0.18 1.18±1.26
(1.87) (2.15) (0.52) 91.68) (1.65)
Retail, wholesale and distribution industry 0.01 0.11 À0.08 À0.05 0.01 1.18±1.26
(0.06) (1.08) (À0.74) (À0.45) (0.06)
Insurance industry 0.14 0.13 0.04 0.60 0.15 1.19±1.27
(1.37) (1.24) (0.38) (0.54) (1.35)
Adjusted R
2
0.06 0.07 0.03 0.10 0.07
F 1.70 1.79 1.29 2.11 1.74
p 0.09 0.08 0.25 0.04 0.09
n 104 104 104 96 95
a
Each cell reports the standardized regression coecient followed by t-statistic in parentheses. For competitive strategy, strategic
mission and size, one-tailed tests of statistical sign®cance were employed. For the industry variables, two-tailed tests of statistical sig-
ni®cance were employed.
b
Due to some missing values for the dependent variables, the variable in¯ation factors (VIFs) exhibit a small degree of variation across
the ®ve regression equations formulated. The range of VIFs observed are reported.
* p < 0:10; **p < 0:05; ***p < 0:01.
592 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
signi®cantly positively related to the use of com-
petitor cost assessment ( p < 0:05), competitive
position monitoring ( p < 0:1), competitor apprai-
sal based on published ®nancial statements
( p < 0:05) and strategic costing ( p < 0:05). From
Table 6 it can be seen that size was statistically
signi®cantly positively related to the perceived
helpfulness of competitor cost assessment
( p < 0:05), competitive position monitoring
( p < 0:05), competitor appraisal based on pub-
lished ®nancial statements ( p < 0:01), strategic
costing ( p < 0:05) and strategic pricing ( p < 0:05).
Negligible support was provided for propositions
4a and 4b which concern a relationship between
industry and CFA use and CFA's perceived
helpfulness. From Table 5 it can be seen that of
the 30 relationships examined between industry
and CFA usage, only one revealed a statistically
signi®cant association (the oil, gas, mineral and
electricity industry was found to be signi®cantly
positively related to competitor cost assessment
use, p < 0:05). From Table 6 it can be seen that of
the 30 relationships examined between industry
and CFA's perceived helpfulness, only four
revealed statistically signi®cant associations. A
signi®cant positive relationship was found
between the oil, gas, mineral and electricity indus-
try and perceived helpfulness of competitor cost
assessment ( p < 0:05) and competitive position
monitoring ( p < 0:1). A signi®cant positive rela-
tionship was also found between the processed
food and beverage industry and perceived help-
fulness of competitor cost assessment ( p < 0:1)
and competitive position monitoring ( p < 0:05).
7
5. Summary and conclusions
Three main ®ndings can be distilled from this
study. First, given the limited research of CFA in
the management accounting literature, CFA usage
has been found to be higher than what might have
been reasonably anticipated. For three of the ®ve
CFA practices appraised, the mean usage was
above the mid-point of a scale ranging from ``not
at all'' to ``to a great extent''. There would, how-
ever, appear to be a potential for still greater use
of these practices. This observation stems from the
®nding that the mean scores for the perceived
helpfulness of all ®ve practices surpassed the mid-
point of the measurement scale. These relatively
high mean scores for perceived helpfulness would
also appear to provide some corroborative evi-
dence for Ghoshal and Westney's (1991) reported
gap between what is needed and what is supplied
by competitor analysis systems.
A second ®nding relates to the relative use and
perceived helpfulness of each CFA practice
appraised. Competitive position monitoring has
been found to be the most widely-used CFA
practice and is also perceived to be of the greatest
help. The de®nition of competitive position mon-
itoring provided in the survey questionnaire's
glossary included a reference to monitoring com-
petitor sales and market share. As this type of
information is widely available in many industries,
one might have reasonably expected a relatively
high ranking to be accorded to competitive posi-
tion monitoring. Competitor cost assessment and
strategic costing rank lowest in terms of usage and
below the mid-point of the measurement scale.
These observations are noteworthy as, relative to
the other CFA practices, there appears to be more
discussion of competitor cost assessment and
strategic costing in the accounting literature.
The third ®nding relates to the study's con-
tingency framework and the signi®cant relation-
ships found to exist between CFA and competitive
strategy, strategic mission and company size.
Extending prior work concerned with the rela-
tionship between accounting system design and
competitive strategy archetypes (Abernethy &
Guthrie, 1994; Simons, 1987) evidence uncovered
here suggests that, relative to other ®rms, prospector
7
Due to the limited signi®cance of the industry variables in
the analysis, the impact of excluding them from the regression
formulations was also investigated. When the industry vari-
ables were omitted, only two of the 10 equations failed to
achieve signi®cance at the 10% con®dence limit (i.e. where
competitor cost assessment usage and strategic pricing usage
were the dependent variables). The following three changes in
the remaining independent variables' levels of signi®cance were
also noted in the modi®ed regression formulations: competitive
strategy was not statistically signi®cant where competitor cost
assessment usage and also perceived helpfulness were the
dependent variables, and size recorded a lower level of statis-
tical signi®cance where competitive position monitoring help-
fulness was the dependent variable ( p < 0:1).
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 593
®rms make greater use of, and perceive greater
helpfulness in, CFA practices. The results also
provide an extension to Govindarajan and Gup-
ta's (1985) work which found greater reliance on
long-run performance to be more appropriate in
``build'' ®rms than in ``harvest'' ®rms. In this
study it has been found that ®rms pursuing a
``build'' strategic mission have a greater pro-
pensity to use strategic pricing and strategic cost-
ing and perceive greater helpfulness in four of the
®ve CFA practices appraised. Finally, extending
prior work suggesting a positive relationship
between company size and accounting system
sophistication (e.g. Bruns & Waterhouse, 1975;
Merchant, 1981), strong support has been pro-
vided for the view that size is positively related to
greater use of, and greater perceived helpfulness
in, CFA.
Little evidence of any systematic relationship
between industry type and CFA has been found.
Further work in this area might bene®t from
measuring any underlying constructs giving rise to
an anticipated industry e?ect. This approach
would circumvent two problems: the problem of
the generic and under-de®ned nature of industrial
classi®cation schemes (i.e. classi®cation based on
product type might result in a breadth of produc-
tion technologies, governance and capital struc-
tures, market types and other key constructs
associated with a particular industrial category),
and the problem arising when a ®rm classi®ed in
one industrial group exhibits key characteristics
that are atypical of its group. Instead of attempt-
ing to relate CFA to industry, a more productive
research design might involve focusing on speci®c
variables (which might, albeit, display some rela-
tionship to industry classi®cations), such as type
or degree of competition (see Khandwalla, 1972),
technology of production, etc.
The study's ®ndings should be interpreted in
light of several limitations. In addition to gen-
erally acknowledged limitations of survey
research, a signi®cant problem revolves around
de®ning and operationalising the CFA constructs
that lie at the heart of the study. The ®ve CFA
practices considered were drawn from the litera-
ture. While this supports their credibility as
accounting practices worthy of consideration, it
does not preclude the possibility of overlapping
practices. While due consideration was given to
this problem in the course of generating the ®ve
CFA practices, it is an issue that is bound to per-
sist in any attempt to itemise management
accounting practices. The constructs were oper-
ationalised using, wherever possible, terminology
and de®nitions that have been most widely-
applied in the literature. De®nitions of the terms
used in the questionnaire were provided to man-
agers participating in the study. Others, however,
may have chosen to de®ne the terms slightly dif-
ferently. In connection with these problems of
de®nition and demarcation, it should be recog-
nised that CFA has received little attention in
professional and tertiary accounting education.
Standardisation of terminology used in connection
with any CFA practices employed can therefore be
expected to be minimal. In fact where CFA is
employed, it may well be described in terms that
are fairly company speci®c. While attention
should be drawn to these limitations, in a study
concerned with socially under-de®ned constructs,
there is little that the researcher can do to counter
such problems.
A potentially fruitful research initiative that
builds on the current study could employ a case
study design. Close involvement in one or more
organizations may be the most appropriate means
to further our understanding of the variety of
forms that CFA can assume. Amongst the many
insights that might stem from such a research
initiative, we could anticipate the emergence of
more sharply-de®ned CFA variable measures, a
more complete appreciation of organisational fac-
tors a?ecting the adoption of CFA as well as an
improved understanding of the di?erent uses that
may be made of CFA. An alternative research
initiative could focus on the performance and
competitiveness e?ects of CFA, as these e?ects
may be seen as the acid test of CFA's ecacy.
Acknowledgements
This paper has bene®ted fromcomments provided
by participants at the July 1996 Australian and New
Zealand Accounting Association Conference, and
594 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
seminar attendees at Grith University, the Uni-
versity of Auckland, and the University of Otago.
The author is especially grateful to two anony-
mous referees for their very helpful comments.
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doc_200256200.pdf
The results of a survey appraising the frequency and perceived helpfulness of competitor-focused accounting (CFA)
practices are reported. Given the limited attention aorded the subject in the management accounting literature, CFA
usage has been found to be higher than what might have been reasonably anticipated. Three factors have been found to
play statistically signi®cant contingent roles in connection with CFA usage and perceived helpfulness: company size,
competitive strategy and strategic mission.
Competitor-focused accounting: an exploratory note
Chris Guilding
School of Accounting and Finance, Grith University, Faculty of Commerce and Management, Gold Coast Campus, PMB 50,
Queensland 4217, Australia
Abstract
The results of a survey appraising the frequency and perceived helpfulness of competitor-focused accounting (CFA)
practices are reported. Given the limited attention a?orded the subject in the management accounting literature, CFA
usage has been found to be higher than what might have been reasonably anticipated. Three factors have been found to
play statistically signi®cant contingent roles in connection with CFA usage and perceived helpfulness: company size,
competitive strategy and strategic mission. Little evidence of any systematic relationship between industry type and
CFA has been found. #1999 Elsevier Science Ltd. All rights reserved.
There appears to be a burgeoning interest in
competitor analysis amongst strategy commenta-
tors and management practitioners.
1
This interest
is typi®ed by Porter's in¯uential writings (Porter,
1980, 1985) which suggest that competitor analysis
is fundamental to the pursuit of competitive
advantage. He argues that the importance of this
analysis warrants companies maintaining ``. . .an
organized mechanismÐsome sort of competitor
intelligence systemÐto insure that the process
is ecient'' (Porter, 1980, p. 72). There is currently
the beginning of a management accounting lit-
erature on competitor-focused accounting (CFA).
Despite this development, no study concerned
with appraising CFA adoption rates or related
contingent factors has been found in the literature.
The exploratory study reported herein was con-
ducted in light of this apparent gap in prior
research. The study's objectives are:
(1) to appraise CFA adoption rates;
(2) to assess practitioners' perceptions of the
extent to which CFA could be helpful to
their organization; and
(3) to develop and test propositions concerned
with contingent factors that might a?ect
CFA adoption rates as well as perceptions
of CFA's helpfulness.
The paper is structured as follows. In the con-
text of a review of what practices comprise CFA,
the next section provides a synthesis of the most
pertinent literature. This is followed by a section
0361-3682/99/$ - see front matter # 1999 Elsevier Science Ltd. All rights reserved.
PI I : S0361- 3682( 99) 00007- 0
Accounting, Organizations and Society 24 (1999) 583±595
www.elsevier.com/locate/aos
1
Information Data Search (1985) reports that in 1985, more
than a third of Fortune 500 companies were spending over $US
1 million a year on competitor analysis. Ghoshal and Westney
(1991) report that the Society of Computer Intelligence profes-
sionals, a new US professional forum, held its ®rst annual
meeting in 1986, and its 1988 meeting was attended by repre-
sentatives from over 200 large corporations and over 40 con-
sulting ®rms.
that develops a theoretical framework concerned
with factors that might a?ect CFA adoption rates
as well as perceptions of CFA's helpfulness. Sub-
sequent sections address, in turn, the research
method employed, the survey's results and a con-
clusion that discusses the study's ®ndings as well
as its limitations.
1. What practices comprise competitor-focused
accounting?
No attempt to synthesise CFA practices was
found in the literature. For this reason, the devel-
opment of a listing of CFA practices is bound to
be exploratory. In an attempt to delimit this pro-
blem, signi®cant emphasis has been attached to
the way CFA practices have been described in the
literature. Only those CFA practices described in a
manner highlighting a distinction from other CFA
practices are included. The following ®ve CFA
practices have been drawn from the literature and
are now described in turn:
(1) competitor cost assessment;
(2) competitive position monitoring;
(3) competitor appraisal based on published
®nancial statements;
(4) strategic costing;
(5) strategic pricing.
Competitor cost assessment is probably the
most widely-referred to CFA practice. Amongst
its advocates are Bromwich (1990), Jones (1988),
Porter (1985), Simmonds (1981) and Ward (1992).
The signi®cant attention commanded by compe-
titor cost assessment may result partially from
the growing sophistication in technologically-
advanced investments. Jones (1988) provides a
persuasive case that the long-term commitment
associated with such investment and the implied
pursuit of improved competitive position, height-
ens the need for awareness of competitors' costs.
He outlines a systematic approach to competitor
cost assessment that involves, inter alia, appraising
competitors' manufacturing facilities, economies
of scale, governmental relationships, and technol-
ogy-product design. Further to these approaches,
Ward (1992) describes ``indirect sources'' of
competitor information which include: physical
observation, mutual suppliers, mutual customers,
and employees (particularly ex-employees of com-
petitors). Competitor cost assessment is de®ned in
this study as the provision of a regularly updated
estimate of a competitor's unit cost.
Competitive position monitoring, as advocated
by Simmonds (1986), represents a more holistic
mode of CFA than competitor cost assessment. It
broadens the analysis to include appraising major
competitors' sales, market share, volume, unit
costs and sales. Simmonds notes that an increase
in a competitor's cost per unit may initially appear
favourable. If this increase has resulted from
advertising devoted to brand strength develop-
ment or from investment in new product develop-
ment, however, the changed cost structure may be
more suggestive of the competitor securing a
stronger rather than a weaker competitive position.
Simmonds argues that extending management
accounting's measures beyond their conventional
internally-focused domain can strengthen apprai-
sals of competitor strategy. Competitive position
monitoring is de®ned in this study as the analysis
of competitor positions within the industry by
assessing and monitoring trends in competitor
sales, market share, volume, unit costs, and return
on sales. This information can provide a basis for
the assessment of a competitor's strategy.
Moon and Bates (1993) describe an approach to
competitor appraisal which is based on published
®nancial statement interpretation. The speci®c
nature of the approach to data collection evident
in this mode of CFA has given rise to its separate
consideration here. The signi®cance of this speci-
®city is underlined by the fact that, unlike the
approaches already considered, published ®nan-
cial statement interpretation involves techniques
that are familiar to traditionally-trained accoun-
tants. Moon and Bates outline an analytical fra-
mework that can be applied to a competitor's
published statements as part of an appraisal of key
sources of competitive advantage. This analysis
can include monitoring trends in sales and pro®t
levels as well as asset and liability movements.
Moon and Bates claim that strategically signi®cant
insights can be derived from an appropriately
584 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
conducted analysis of a competitor's published
statements.
2
Competitor appraisal based on
published ®nancial statements is de®ned in this
study as the numerical analysis of a competitor's
published statements as part of an assessment
of a competitor's key sources of competitive
advantage.
Strategic costing is a widely-used term in many
of Shank and Govindarajan's (1988, 1991, 1992,
1993) publications. They believe that in order for
cost analysis to support the pursuit of competitive
advantage, it must explicitly consider strategic
issues. Their 1988 study uses a case analysis to
demonstrate the sub-optimal decision that can
result from using a conventional costing approach
(i.e. an analysis conducted from a ``relevant'' cost,
short-run perspective). Employing an analysis that
considers strategic issues and draws on concepts
articulated in the marketing and competitive
strategy literatures (e.g. product positioning and
market penetration), Shank and Govindarajan
show how a preferred solution to the case can be
derived. Strategic costing is de®ned in this study as
the use of cost data based on strategic and mar-
keting information to develop and identify super-
ior strategies that will produce a sustainable
competitive advantage.
Strategic pricing is discussed in the context of
case studies by Jones (1988) and Simmonds
(1982). The more extensive consideration is pro-
vided by Simmonds who demonstrates how sub-
optimality can result from a pricing decision
informed by a conventional accounting analysis
based on internally-orientated, historically-based
information. He claims that strategic pricing
which uses competitively-orientated analysis will
result in a better-informed pricing decision. Inclu-
ded in the factors that might be appraised in such
an analysis are competitor price reaction, price
elasticity, projected market growth, economies of
scale and experience. Foster and Gupta's (1994)
survey ®nding that accounting information's
greatest potential use is perceived by marketing
executives to be in connection with pricing deci-
sions underlines the importance of separate con-
sideration applied to this mode of CFA. Strategic
pricing is de®ned in this study as the analysis of
strategic factors in the pricing decision process.
These factors may include: competitor price reac-
tion, price elasticity, market growth, economies of
scale, and experience.
2. Towards a contingency theory of competitor-
focused accounting
Propositions concerning four contingent fac-
tors that might a?ect CFA adoption rates as well
as perceptions of CFA's helpfulness are devel-
oped in this section. Following calls for research
into the role strategy might play in accounting
system design (Chapman, 1997; Dent, 1990;
Lang®eld-Smith, 1997; Otley, 1980; Simons, 1990),
and, more especially, the prima facie relevance
of strategy to CFA, the implications of two
strategy dimensions are considered. These two
dimensions are strategic mission and competitive
strategy. In addition, the potentially contingent
roles played by company size and industry are
explored.
2.1. Strategic mission
Strategic mission relates to the nature of the
strategic goal pursued. One example of the oper-
ationalisation of strategic mission is Govindarajan
and Gupta's (1985) ``build/harvest'' measure. This
measure is designed to determine where a business
lies on the spectrum ranging from pursuit of high
market share (build) to the pursuit of short-term
pro®t (harvest).
Porter (1980) believes that the desire to pre-empt
competitors in deliberations on capacity expan-
sion is one of the clearest examples of organiza-
tional decision making where competitor
information can play an invaluable role. In a
similar vein, Zajac and Bazerman (1991) see a
need for competitor analysis when considering
capacity expansion. These views suggest that
2
See Palepu, Bernard and Healy (1995) and Stickney (1990)
for further elaboration of a competitor focus in ®nancial state-
ment analysis.
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 585
``build'' ®rms will have a greater call for compe-
titor information.
Proposition 1a. CFA usage rates are higher in
companies pursuing a build strategic mission than in
companies pursuing a harvest strategic mission.
Proposition 1b. CFA's perceived helpfulness is
greater in companies pursuing a build strategic
mission than in companies pursuing a harvest stra-
tegic mission.
2.2. Competitive strategy
Competitive strategy relates to how business
units compete. This dimension of strategy has
been operationalised in prior accounting studies
(Abernethy & Guthrie, 1994; Simons, 1987)
using Snow and Hrebiniak's (1980) measure which
is based on Miles and Snow's (1978) four strategic
archetypes: ``prospector'', ``analyser'', ``reactor''
and ``defender''. Snow and Hrebiniak oper-
ationalised the ``prospector'' archetype using
terms such as ``values being `®rst in' in new pro-
duct and market areas'', and ``responds rapidly to
early signals concerning areas of opportunity, and
these responses often lead to a new round of
competitive actions'' (Snow & Hrebiniaky, 1980,
p. 336). At the other extreme, the ``defender''
archetype has more inwardly-focused character-
istics, i.e. ``trying to protect its domain by o?ering
higher quality, superior service, lower prices, and
so forth'', and ``it tends to ignore industry chan-
ges.... and concentrates instead on doing the best
job possible in a limited area'' (p. 336). These
characterisations highlight contrasting internal/
external foci, leading to the expectation that CFA
will be more compatible with ®rms that exhibit a
``prospector'' (more externally-orientated) strat-
egy. Further support for this expectation arises
from Zajac and Bazerman's (1991) description of
the importance of competitor analysis in the new
market entry decision.
Proposition 2a. CFA usage rates are higher in
``prospector'' companies than in companies employ-
ing other competitive strategies.
Proposition 2b. CFA's perceived helpfulness is
greater in ``prospector'' companies than in compa-
nies employing other competitive strategies.
2.3. Company size
Company size is expected to be positively rela-
ted to CFA adoption. This expectation derives
from the ability of larger ®rms to reap the bene®ts
of lower CFA costs per sale and per employee, as
well as the well-documented ®nding that size is
positively related to greater accounting sophisti-
cation (Bruns & Waterhouse, 1975; Merchant,
1981). A further factor supporting this expected
relationship stems from the earlier discussion of
how employee knowledge can be a signi®cant
source of competitor information (Ghoshal &
Westney, 1991; Ward, 1992). As the depth of this
information source is a function of company
size (more company employees signi®es a greater
font of competitor information), it is expected
that larger ®rms will have a greater capacity to
generate CFA information. Large ®rm's greater
capacity to generate quality CFA data also is
expected to positively impact on CFA's perceived
helpfulness.
Proposition 3a. CFA usage rates are higher in lar-
ger companies.
Proposition 3b. CFA's perceived helpfulness is
greater in larger companies.
2.4. Industry
Jones (1988) sees a greater role for CFA in high
technology and highly competitive industries.
Foster and Gupta's (1994) study concerned with
the use of accounting information in marketing
decision-making also attaches signi®cance to the
role played by industry factors. The potential for
industry to be a signi®cant factor a?ecting CFA's
usage and perceived helpfulness motivates Propo-
sitions 4a and 4b.
Proposition 4a. There is signi®cant cross-industry
variation in CFA usage rates.
586 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
Proposition 4b. There is signi®cant cross-industry
variation in CFA's perceived helpfulness.
3. Method and variable measurement
3.1. Sampling procedures
A mailed questionnaire survey was employed.
The sample was drawn from the Deloitte Touche
Tohmatsu (1994) listing of New Zealand's 230
largest companies: 200 public and private compa-
nies (measured by sales), and 30 ®nancial institu-
tions (measured by assets). Thirteen companies
where no ®nancial accounts could be obtained or
no published contact address was found were
deleted from the sample, providing a ®nal sample
size of 217 companies.
Questionnaires together with a cover letter, a
pre-paid return envelope and a glossary de®ning
each of the CFA terms, together with references to
the literature were mailed to the Chief Accountant
in each company sampled. Two mailings resulted
in 124 responses. Of these, 12 indicated an unwill-
ingness to participate in the study (the most
widely-cited reason being company policy). The
112 completed questionnaires represent a usable
response rate of 51%.
Two investigations for non-response bias were
undertaken. Firstly, ten of the non-respondents
were contacted by phone. Four non-respondents
indicated the most widely-cited ``too busy'' or
``not enough time'' reasons for their non-response.
One non-respondent cited ``lack of interest
because the practices referred to in the ques-
tionnaire are irrelevant to my organization''. This
gives cause for some concern, as other non-
respondents may have had a similar view. The
second test of non-response bias involved
comparing data provided by ``®rst mailing''
respondents with data provided by ``second mail-
ing'' respondents. None of the variables under
investigation reveal any statistically signi®cant
association with the timing of the returns of com-
pleted questionnaires. While this suggests non-
response bias is not a signi®cant threat to the
study's validity, the potential of the collected data
being biased towards the views of accountants
who are positively disposed to CFA (more likely
to respond), rather than those negatively disposed
towards CFA (less likely to respond), should be
borne in mind.
3.2. Variable measurement
3.2.1. CFA usage
Following the question, ``To what extent does
your organization use the following practices?'',
the ®ve CFA practices were listed. Next to each
one, a Likert scale ranging from ``1'' (not at all), to
``7'' (to a great extent) was provided. To aid
interpretation of CFA terminology, a glossary
outlining the CFA de®nitions presented earlier
was enclosed in the mailing.
3.2.2. Perceived helpfulness of CFA
Similar to the format employed to measure CFA
usage, following the question, ``To what extent do
you consider the following practices could be
helpful to your organization?'', the ®ve CFA
practices and the same seven point Likert scales
were provided.
3.2.3. Strategic mission
Strategic mission was measured using Govin-
darajan and Gupta's (1985) measure. This mea-
sure asks respondents to record the percentage of
their business unit's sales that relate most closely
to four speci®c strategies re¯ective of the trade-o?
between market share and short-term pro®tability
objectives. Govindarajan and Gupta referred to
these four strategic mission archetypes as ``build'',
``hold'', ``harvest'' and ``divest''. These four stra-
tegic archetypes were operationalised in the mea-
sure in the following manner. The build strategy
was operationalised as ``Increase sales and market
share, be willing to accept low returns on invest-
ment in the short-to-medium term if necessary''.
The hold strategy was operationalised as ``Main-
tain market share and obtain a reasonable return
on investment''. The harvest strategy was oper-
ationalised as ``Maximise pro®tability and cash
¯ow in the short-to-medium term, be willing to
sacri®ce market share if necessary''. The divest
strategy was operationalised as ``Prepare for sale
or liquidation''. In addition, respondents could
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 587
indicate ``none of the above''. No respondent
selected this ®nal option. From the data collected,
Govindarajan and Gupta generated a continuous
variable by multiplying the percentage of sales
associated with the build strategy by ``+1'', mul-
tiplying the sales percentage recorded for the hold
strategy by ``0'', multiplying the sales percentage
recorded for the harvest strategy by ``À1'', multi-
plying the sales percentage recorded for the divest
strategy by ``À2'', and then summing the four
products. In the current study, this variable had a
mean of À0.12 and a distribution of values across
the full range of +1 to À2 (one company recor-
ded 100% in connection with ``divest'', i.e., a
score of À2).
3.2.4. Competitive strategy
The ``prospector/defender'' measure derived
from Miles and Snow's (1978) strategic typology
was employed. This measure has been subjected to
considerable psychometric assessment (Hambrick,
1983; Shortell & Zajac, 1990; Snow & Hrebiniak,
1980). Respondents were presented with a brief
description of a ``defender'', ``prospector'', ``ana-
lyser'' and ``reactor'' ®rm and asked to select
which description best represented their organiza-
tion. Twenty-one (19%) respondents identi®ed
their companies as ``defenders'', 44 (41%) as
``prospectors'', 33 (31%) as ``reactors'', and 10
(9%) as ``analysers'' (four respondents failed to
complete this question).
3.2.5. Size
Company size was measured using the Deloitte
Touche Tohmatsu (1994) measure of assets. This
measure excludes goodwill and identi®able intan-
gibles such as patents, trademarks, mastheads, set
up and exploration costs.
3.2.6. Industry
Each respondent's company was identi®ed with
one of the 16 industries referred to in the Deloitte
Touche Tohmatsu (1994) industrial classi®cation.
The industries represented in the sample are: oil,
gas, minerals and electricity (23 companies), pri-
mary producers (14 companies), manufacturing
(15 companies), insurance (10 companies), pro-
cessed food and beverage (8 companies) and retail,
wholesale and distribution (8 companies). Ten of
the industrial categories were represented by ®ve
or less companies. These have been collapsed as
one miscellaneous category for the purposes of the
statistical analysis reported below.
4. Results
Table 1 presents descriptive statistics for the ®ve
CFA usage rate variables. The practices are pre-
sented in descending order of usage, with means
ranging from 4.95 (competitive position monitor-
ing) to 3.41 (strategic costing). For each practice
appraised, actual scores ranged across the full
theoretical range. Using the paired t-test, each
practice was found to be used statistically sig-
ni®cantly more than the next highest ranking
practice.
3
Table 2 presents descriptive statistics concerned
with the perceived helpfulness of each of the ®ve
CFA practices. Mean scores ranged from 5.69
(competitive position monitoring) to 4.86 (strate-
gic costing). This signi®es that mean scores of all
®ve variables were above the mid-point of the
range. Again, values across the entire theoretical
range were observed for each CFA practice.
With the exception of a reversal of the compe-
titor appraisal based on published ®nancial
statements and competitor cost assessment rank-
ings, the rankings in Tables 1 and 2 were the
same.
Table 3 presents Pearson correlations for usage
rates of the ®ve CFA practices. The statistically
signi®cant positive correlations ( p < 0:01 for all
combinations) signify that a company with a rela-
tively high usage of one CFA practice was likely
also to use the other practices. Table 4 presents
Pearson correlations for perceived helpfulness of
the ®ve CFA practices. The perceived helpfulness
3
Competitive position monitoring was used signi®cantly
more than strategic pricing ( p < 0:05), strategic pricing was
used more than competitor appraisal based on published
®nancial statements ( p < 0:05), competitor appraisal based on
published ®nancial statements was used more than competitor
cost assessment ( p < 0:1), and competitor cost assessment was
used more than strategic costing ( p < 0:01).
588 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
Table 1
Descriptive statistics for the CFA usage rate variables
Theoretical range Actual range
Variable Mean SD Min. Max. Min. Max. n
Competitive position monitoring 4.95 1.66 1 7 1 7 109
Strategic pricing 4.63 1.70 1 7 1 7 100
Competitor appraisal based on published ®nancial statements 4.17 1.79 1 7 1 7 109
Competitor cost assessment 3.91 1.83 1 7 1 7 108
Strategic coasting 3.41 1.78 1 7 1 7 98
Table 2
Descriptive statistics for the perceived CFA helpfulness variables
Theoretical range Actual range
Variable Mean SD Min. Max. Min. Max. n
Competitive position monitoring 5.69 1.31 1 7 1 7 104
Strategic pricing 5.32 1.58 1 7 1 7 95
Competitor cost assessment 5.16 1.58 1 7 1 7 104
Competitor appraisal based on published ®nancial statements 5.05 1.59 1 7 1 7 104
Strategic costing 4.86 1.84 1 7 1 7 96
Table 3
Matrix of Pearson product moment correlation coecients for the ®ve CFA usage variables
a
Competitor cost
assessment
Competitive
position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Competitive position monitoring 0.56
Competitor appraisal based on published
®nancial statements
0.65 0.63
Strategic costing 0.43 0.29 0.32
Strategic pricing 0.35 0.41 0.31 0.46
a
All correlation coecients are statistically signi®cant ( p < 0:01).
Table 4
Matrix of Pearson product moment correlation coecients for the ®ve CFA perceived helpfulness variables
a
Competitor cost
assessment
Competitive position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Competitive position monitoring 0.71
Competitor appraisal based on published
®nancial statements
0.73 0.66
Strategic costing 0.45 0.28 0.37
Strategic pricing 0.44 0.45 0.33 0.66
a
All correlation coecients are statistically signi®cant ( p < 0:01).
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 589
of the ®ve CFA variables were also highly inter-
correlated ( p < 0:01 for all combinations).
4
To test the propositions posited in the study, the
data for each of the ®ve CFA usage rate variables
and each of the ®ve perceived CFA helpfulness
variables were separately ®tted to the following
equation:
Y ? b
1
?b
2
MISSION?b
3
COMPSTRAT
?b
4
SIZE ?b
5
OIL ?b
6
PRIME ?b
7
MANU
?b
8
FOOD?b
8
RETAIL ?b
9
INSURE
where:
Y =CFA usage rate, or perceived
CFA helpfulness;
MISSION =strategic mission;
COMPSTRAT=competitive strategy;
dummy variable set equal to
one (1) if prospector, otherwise
zero (0);
SIZE =$ value of assets;
OIL =oil industry; dummy variable
set equal to one (1) if company
is in oil, gas, minerals and
electricity industry, otherwise
zero (0);
PRIME =primary producer industry;
dummy variable set equal to one
(1) if company is in primary
producer industry, otherwise
zero (0);
MANU =manufacturing industry; dummy
variable set equal to one (1) if
company is in manufacturing
industry, otherwise zero (0);
FOOD =processed food and beverage
industry; dummy variable set
equal to one (1) if company is
in processed food and beverage
industry, otherwise zero (0);
RETAIL =retail, wholesale and distribution
industry; dummy variable set
equal to one (1) if company is
in retail, wholesale and
distribution industry, otherwise
zero (0);
INSURE =insurance industry; dummy
variable set equal to one (1)
if company is in insurance
industry, otherwise zero (0).
Table 5 presents the results of the regression
analyses where usage of the ®ve CFA practices are
the dependent variables, and Table 6 presents the
regression results where perceptions of the help-
fulness of the ®ve CFA practices are the depen-
dent variables. The ®nal columns of the two tables
present the range of variable in¯ation factors
(VIF) observed in the regression formulations.
The relatively low VIFs signify that multi-colli-
nearity did not represent a signi®cant threat to the
stability of the estimated parameters.
5
Recall that Proposition 1a posited a positive
relationship between companies pursuing a build
strategic mission and CFA usage, and Proposition
1b posited a positive relationship between compa-
nies pursuing a build strategic mission and CFA's
4
These ®ndings provide preliminary support for the propo-
sitions. As it was proposed the four contingencies under study
impact on usage and also perceived helpfulness of all ®ve CFA
practices, we would expect the usage rates and also the per-
ceived helpfulness of the ®ve practices to be positively inter-
correlated. Exploratory factor analysis of the ®ve CFA usage
rate variables yielded a one factor result (56% total variance
explained). Factor analysis of the perceived helpfulness CFA
variables yielded a two factor result (61% and 21% total var-
iance explained), with strategic pricing and strategic costing
representing the second factor. In light of the exploratory nat-
ure of the study, rather than using the factor analytic outputs in
the examination of the proposed contingency relationships, it
was believed greater insight derives from treating the CFA
variables independently.
5
Due to some missing values for the dependent variables,
the VIFs exhibited a small degree of variation across each of
the regression equations formulated. Across all 10 regression
equations, the highest VIF (1.52) was yielded by ``oil industry''
where ``strategic costing usage'' is the dependent variable. The
presence of negligible multi-collinearity was also evident from
relatively low condition indices yielded by the independent
variables. Where ``strategic costing usage'' is the dependent
variable, the 10 condition indices were 1.00, 1.50, 1.59, 1.61,
1.62, 1.62, 1.68, 1.88, 2.24, 4.96.
590 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
perceived helpfulness. Table 5 provides some sup-
port for Proposition 1a as the coecient for stra-
tegic mission was positive and statistically
signi®cant in connection with strategic costing
( p < 0:1) and strategic pricing ( p < 0:05). Stronger
support for Proposition 1b is apparent from Table
6 as the coecient for strategic mission was posi-
tive and statistically signi®cant in connection with
competitor cost assessment ( p < 0:1), competitive
position monitoring ( p < 0:1), strategic costing
( p < 0:01) and strategic pricing ( p < 0:01).
6
Proposition 2a posited a positive relationship
between companies pursuing a ``prospector''
Table 5
CFA adoption rates regression analysis
a
Competitor
cost
assessment
Competitive
position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Strategic
pricing
Variable
in¯ation
factor range
b
Constant 3.02*** 4.26*** 3.56*** 3.10*** 4.29***
(8.03) (12.97) (9.58) (7.22) (11.07)
Strategic mission À0.01 0.09 0.01 0.14* 0.18** 1.07±1.13
(À0.11) (0.92) (0.07) (1.36) (1.76)
Competitive strategy 0.17* 0.37*** 0.22** 0.11 0.08 1.07±1.11
(1.62) (3.75) (2.19) (1.02) (0.71)
Size 0.21** 0.13* 0.22** 0.21** 0.13 1.15±1.27
(0.08) (1.36) (2.17) (1.85 (1.15)
Oil, gas, mineral and electricity industry 0.25** 0.10 0.09 0.10 À0.05 1.38±1.52
(2.20) (0.94) (0.87) (0.78) (À0.39)
Primary producer industry 0.17 À0.03 0.11 À0.04 0.01 1.27±1.37
(1.56) (À0.27) (1.06) (À0.35) (0.06)
Manufacturing industry 0.00 À0.03 À0.02 0.00 0.07 1.32±1.45
(0.03) (À0.30) (À0.18 (0.03) (0.61)
Processed food and beverage industry 0.12 0.13 À0.01 0.05 0.18 1.18±1.26
(1.17) (1.30) (À0.08) (0.47) (1.64)
Retail, wholesale and distribution industry 0.07 0.02 0.0 À0.05 0.15 1.19±1.24
(0.72) (0.17) (0.18) (À0.40) (1.37)
Insurance industry 0.07 0.03 À0.05 0.02 0.03 1.21±1.23
(0.65) (0.35) (À0.47) (0.18) (0.31)
Adjusted R
2
0.03 0.12 0.04 0.00 0.03
F 1.42 2.63 1.44 0.95 1.29
p 0.19 0.00 0.18 0.48 0.25
n 108 109 109 98 100
a
Each cell reports the standardized regression coecient followed by t-statistic in parentheses. For competitive strategy, strategic
mission and size, one-tailed tests of statistical sign®cance were employed. For the industry variables, two-tailed tests of statistical sig-
ni®cance were employed.
b
Due to some missing values for the dependent variables, the variable in¯ation factors (VIFs) exhibit a small degree of variation across
the ®ve regression equations formulated. The range of VIFs observed are reported.
* p < 0:10; **p < 0:05; ***p < 0:01.
6
The sensitivity of these results to the way the Govindarajan
and Gupta measure was calculated has been investigated by com-
puting an alternative measure for strategic mission. Under this
alternative method, ``+1'' has been recorded if the respondent
reported the highest percentage of sales as associated with the
``build'' mission, ``0'' is scored where ``hold'' ranks highest, ``À1''
is scored where ``harvest'' ranks highest and ``À2'' is scored
where ``divest'' ranks highest. The 10 regression equations were
reformulated using this alternative measure of strategic mission.
The alternative measure was signi®cantly positively related to the
use of two CFA practices (competitor position monitoring,
p < 0:1; strategic pricing, p < 0:1), and perceived helpfulness of
three practices (competitor position monitoring, p < 0:1; strategic
pricing, p < 0:05; strategic costing, p < 0:05). These results pro-
vided further corroborating support for Propositions 1a and 1b.
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 591
competitive strategy and CFA usage, and Propo-
sition 2b posited a positive relationship between
companies pursuing a ``prospector'' competitive
strategy and CFA's perceived helpfulness. Support
for Proposition 2a is provided in Table 5 as the
coecient for competitive strategy was positive
and statistically signi®cant in connection with
competitor cost assessment ( p < 0:1), competitive
position monitoring ( p < 0:01) and competitor
appraisal based on published ®nancial statements
( p < 0:05). Support for Proposition 2b is apparent
from Table 6 as the coecient for competitive
strategy was positive and statistically signi®cant in
connection with competitor cost assessment
( p < 0:1), competitive position monitoring
( p < 0:05) and competitor appraisal based on
published ®nancial statements ( p < 0:05).
Strong support was found for Propositions 3a
and 3b which posited a positive relationship
between company size and CFA usage and CFA's
perceived helpfulness. Size was found to play a
statistically signi®cant predictive role in nine of
the ten regression equations formulated. From
Table 5 it can be seen that size was statistically
Table 6
Perceived CFA helpfulness regression analysis
a
Competitor
cost
assessment
Competitive
position
monitoring
Competitor appraisal
based on published
®nancial statements
Strategic
costing
Strategic
pricing
Variable
in¯ation
factor range
b
Constant 4.44*** 5.07*** 5.49*** 4.55*** 5.02***
(13.74) (19.23) (13.60) (11.12) (14.68)
Strategic mission 0.13* 0.13* 0.10 0.26*** 0.26*** 1.07±1.08
(1.30) (1.36) (0.95) (2.55) (2.53)
Competitive strategy 0.15* 0.18** 0.22** 0.07 0.03 1.08±1.10
(1.46) (1.71) (2.07) (0.66) (0.30)
Size 0.19** 0.18** 0.15* 0.21** 0.22** 1.15±1.18
(1.87) (1.80) (1.46) (1.94) 92.01)
Oil, gas, mineral and electricity industry 0.26** 0.21* 0.16 0.16 0.11 1.33±1.45
(2.32) (1.89) (1.37) (1.31) 90.94)
Primary producer industry 0.12 0.05 0.03 0.04 À0.02 1.24±1.32
(1.09) (0.43) (0.23) (0.40) (À0.19)
Manufacturing industry 0.04 0.10 À0.05 À0.10 À0.03 1.27±1.40
(0.41) (0.95) (À0.43) (À0.90) (À0.27)
Processed food and beverage industry (0.19* 0.22** 0.05 0.18 0.18 1.18±1.26
(1.87) (2.15) (0.52) 91.68) (1.65)
Retail, wholesale and distribution industry 0.01 0.11 À0.08 À0.05 0.01 1.18±1.26
(0.06) (1.08) (À0.74) (À0.45) (0.06)
Insurance industry 0.14 0.13 0.04 0.60 0.15 1.19±1.27
(1.37) (1.24) (0.38) (0.54) (1.35)
Adjusted R
2
0.06 0.07 0.03 0.10 0.07
F 1.70 1.79 1.29 2.11 1.74
p 0.09 0.08 0.25 0.04 0.09
n 104 104 104 96 95
a
Each cell reports the standardized regression coecient followed by t-statistic in parentheses. For competitive strategy, strategic
mission and size, one-tailed tests of statistical sign®cance were employed. For the industry variables, two-tailed tests of statistical sig-
ni®cance were employed.
b
Due to some missing values for the dependent variables, the variable in¯ation factors (VIFs) exhibit a small degree of variation across
the ®ve regression equations formulated. The range of VIFs observed are reported.
* p < 0:10; **p < 0:05; ***p < 0:01.
592 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
signi®cantly positively related to the use of com-
petitor cost assessment ( p < 0:05), competitive
position monitoring ( p < 0:1), competitor apprai-
sal based on published ®nancial statements
( p < 0:05) and strategic costing ( p < 0:05). From
Table 6 it can be seen that size was statistically
signi®cantly positively related to the perceived
helpfulness of competitor cost assessment
( p < 0:05), competitive position monitoring
( p < 0:05), competitor appraisal based on pub-
lished ®nancial statements ( p < 0:01), strategic
costing ( p < 0:05) and strategic pricing ( p < 0:05).
Negligible support was provided for propositions
4a and 4b which concern a relationship between
industry and CFA use and CFA's perceived
helpfulness. From Table 5 it can be seen that of
the 30 relationships examined between industry
and CFA usage, only one revealed a statistically
signi®cant association (the oil, gas, mineral and
electricity industry was found to be signi®cantly
positively related to competitor cost assessment
use, p < 0:05). From Table 6 it can be seen that of
the 30 relationships examined between industry
and CFA's perceived helpfulness, only four
revealed statistically signi®cant associations. A
signi®cant positive relationship was found
between the oil, gas, mineral and electricity indus-
try and perceived helpfulness of competitor cost
assessment ( p < 0:05) and competitive position
monitoring ( p < 0:1). A signi®cant positive rela-
tionship was also found between the processed
food and beverage industry and perceived help-
fulness of competitor cost assessment ( p < 0:1)
and competitive position monitoring ( p < 0:05).
7
5. Summary and conclusions
Three main ®ndings can be distilled from this
study. First, given the limited research of CFA in
the management accounting literature, CFA usage
has been found to be higher than what might have
been reasonably anticipated. For three of the ®ve
CFA practices appraised, the mean usage was
above the mid-point of a scale ranging from ``not
at all'' to ``to a great extent''. There would, how-
ever, appear to be a potential for still greater use
of these practices. This observation stems from the
®nding that the mean scores for the perceived
helpfulness of all ®ve practices surpassed the mid-
point of the measurement scale. These relatively
high mean scores for perceived helpfulness would
also appear to provide some corroborative evi-
dence for Ghoshal and Westney's (1991) reported
gap between what is needed and what is supplied
by competitor analysis systems.
A second ®nding relates to the relative use and
perceived helpfulness of each CFA practice
appraised. Competitive position monitoring has
been found to be the most widely-used CFA
practice and is also perceived to be of the greatest
help. The de®nition of competitive position mon-
itoring provided in the survey questionnaire's
glossary included a reference to monitoring com-
petitor sales and market share. As this type of
information is widely available in many industries,
one might have reasonably expected a relatively
high ranking to be accorded to competitive posi-
tion monitoring. Competitor cost assessment and
strategic costing rank lowest in terms of usage and
below the mid-point of the measurement scale.
These observations are noteworthy as, relative to
the other CFA practices, there appears to be more
discussion of competitor cost assessment and
strategic costing in the accounting literature.
The third ®nding relates to the study's con-
tingency framework and the signi®cant relation-
ships found to exist between CFA and competitive
strategy, strategic mission and company size.
Extending prior work concerned with the rela-
tionship between accounting system design and
competitive strategy archetypes (Abernethy &
Guthrie, 1994; Simons, 1987) evidence uncovered
here suggests that, relative to other ®rms, prospector
7
Due to the limited signi®cance of the industry variables in
the analysis, the impact of excluding them from the regression
formulations was also investigated. When the industry vari-
ables were omitted, only two of the 10 equations failed to
achieve signi®cance at the 10% con®dence limit (i.e. where
competitor cost assessment usage and strategic pricing usage
were the dependent variables). The following three changes in
the remaining independent variables' levels of signi®cance were
also noted in the modi®ed regression formulations: competitive
strategy was not statistically signi®cant where competitor cost
assessment usage and also perceived helpfulness were the
dependent variables, and size recorded a lower level of statis-
tical signi®cance where competitive position monitoring help-
fulness was the dependent variable ( p < 0:1).
C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595 593
®rms make greater use of, and perceive greater
helpfulness in, CFA practices. The results also
provide an extension to Govindarajan and Gup-
ta's (1985) work which found greater reliance on
long-run performance to be more appropriate in
``build'' ®rms than in ``harvest'' ®rms. In this
study it has been found that ®rms pursuing a
``build'' strategic mission have a greater pro-
pensity to use strategic pricing and strategic cost-
ing and perceive greater helpfulness in four of the
®ve CFA practices appraised. Finally, extending
prior work suggesting a positive relationship
between company size and accounting system
sophistication (e.g. Bruns & Waterhouse, 1975;
Merchant, 1981), strong support has been pro-
vided for the view that size is positively related to
greater use of, and greater perceived helpfulness
in, CFA.
Little evidence of any systematic relationship
between industry type and CFA has been found.
Further work in this area might bene®t from
measuring any underlying constructs giving rise to
an anticipated industry e?ect. This approach
would circumvent two problems: the problem of
the generic and under-de®ned nature of industrial
classi®cation schemes (i.e. classi®cation based on
product type might result in a breadth of produc-
tion technologies, governance and capital struc-
tures, market types and other key constructs
associated with a particular industrial category),
and the problem arising when a ®rm classi®ed in
one industrial group exhibits key characteristics
that are atypical of its group. Instead of attempt-
ing to relate CFA to industry, a more productive
research design might involve focusing on speci®c
variables (which might, albeit, display some rela-
tionship to industry classi®cations), such as type
or degree of competition (see Khandwalla, 1972),
technology of production, etc.
The study's ®ndings should be interpreted in
light of several limitations. In addition to gen-
erally acknowledged limitations of survey
research, a signi®cant problem revolves around
de®ning and operationalising the CFA constructs
that lie at the heart of the study. The ®ve CFA
practices considered were drawn from the litera-
ture. While this supports their credibility as
accounting practices worthy of consideration, it
does not preclude the possibility of overlapping
practices. While due consideration was given to
this problem in the course of generating the ®ve
CFA practices, it is an issue that is bound to per-
sist in any attempt to itemise management
accounting practices. The constructs were oper-
ationalised using, wherever possible, terminology
and de®nitions that have been most widely-
applied in the literature. De®nitions of the terms
used in the questionnaire were provided to man-
agers participating in the study. Others, however,
may have chosen to de®ne the terms slightly dif-
ferently. In connection with these problems of
de®nition and demarcation, it should be recog-
nised that CFA has received little attention in
professional and tertiary accounting education.
Standardisation of terminology used in connection
with any CFA practices employed can therefore be
expected to be minimal. In fact where CFA is
employed, it may well be described in terms that
are fairly company speci®c. While attention
should be drawn to these limitations, in a study
concerned with socially under-de®ned constructs,
there is little that the researcher can do to counter
such problems.
A potentially fruitful research initiative that
builds on the current study could employ a case
study design. Close involvement in one or more
organizations may be the most appropriate means
to further our understanding of the variety of
forms that CFA can assume. Amongst the many
insights that might stem from such a research
initiative, we could anticipate the emergence of
more sharply-de®ned CFA variable measures, a
more complete appreciation of organisational fac-
tors a?ecting the adoption of CFA as well as an
improved understanding of the di?erent uses that
may be made of CFA. An alternative research
initiative could focus on the performance and
competitiveness e?ects of CFA, as these e?ects
may be seen as the acid test of CFA's ecacy.
Acknowledgements
This paper has bene®ted fromcomments provided
by participants at the July 1996 Australian and New
Zealand Accounting Association Conference, and
594 C. Guilding / Accounting, Organizations and Society 24 (1999) 583±595
seminar attendees at Grith University, the Uni-
versity of Auckland, and the University of Otago.
The author is especially grateful to two anony-
mous referees for their very helpful comments.
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