Description
This paper investigates associations between evaluations of activity based costing (ABC) systems, contextual factors,
and factors related to the ABC implementation process using interview and survey data from 21 ®eld research sites of
two ®rms. Structural equation modeling is used to investigate the ®t of a model of organizational change with the data.
The results support the proposed model; however, the signi®cance of speci®c factors is sensitive to the evaluation cri-
terion. The model is stable across ®rms and respondents, but is sensitive to the maturity of the ABC system.
The impact of contextual and process factors on the
evaluation of activity-based costing systems
$
Shannon W. Anderson
a,
*, S. Mark Young
b
a
Accounting Department, University of Michigan Business School, Ann Arbor, MI 48109, USA
b
Leventhal School of Accounting, University of Southern California, Los Angeles, CA 90089, USA
Abstract
This paper investigates associations between evaluations of activity based costing (ABC) systems, contextual factors,
and factors related to the ABC implementation process using interview and survey data from 21 ®eld research sites of
two ®rms. Structural equation modeling is used to investigate the ®t of a model of organizational change with the data.
The results support the proposed model; however, the signi®cance of speci®c factors is sensitive to the evaluation cri-
terion. The model is stable across ®rms and respondents, but is sensitive to the maturity of the ABC system. # 1999
Elsevier Science Ltd. All rights reserved.
1. Introduction
Early proponents of ABC claimed superiority
over traditional costing methods that stemmed
from employing causally related ``cost drivers'' to
assign common costs to business activities, pro-
ducts and services (Cooper, 1988; Cooper &
Kaplan, 1988). Later studies argued that a judi-
ciously designed ABC system provides e?ective
behavioral control (Cooper & Kaplan, 1991;
Cooper & Turney, 1990; Foster & Gupta, 1990.
Evidence of ABC implementation failures
1
has
caused researchers to suggest that achieving either
objective depends critically on organizational and
technical factors (Anderson, 1995; Malmi, 1997)
and recent empirical evidence supports this view
(Chenhall & Lang®eld-Smith, 1998; Foster &
Swenson, 1997; Gosselin, 1997; Innes & Mitchell,
1995; Krumwiede, 1998; McGowan & Klammer,
1997; Shields, 1995). This paper combines the
results of previous studies with theory on organi-
zational change to propose a structural model of
the relation between evaluations of ABC systems,
contextual factors and factors related to the ABC
implementation process.
We evaluate the model's descriptive validity
using survey data from managers and system
developers associated with 21 implementation
projects in two automobile manufacturers. Struc-
tural equation modeling (SEM) is used to investi-
gate the in¯uence of the contextual environment
and the implementation process on evaluations of
0361-3682/99/$ - see front matter # 1999 Elsevier Science Ltd. All rights reserved.
PI I : S0361- 3682( 99) 00018- 5
Accounting, Organizations and Society 24 (1999) 525±559
www.elsevier.com/locate/aos
$
The authors are not permitted to redistribute the data of
this study without permission of the participating ®rms.
* Corresponding author. Tel.: +1-734-647-3308; fax: +1-
734-936-8716.
E-mail address: [email protected] (S.W. Anderson)
1
By some estimates only 10% of ®rms that adopt ABC
continue to use it (Ness & Cucuzza, 1995). In reviews of inter-
national studies of ABC adoption, Innes and Mitchell (1995);
and Chenhall and Lang®eld-Smith (1998) ®nd adoption rates
generally less than 14%.
the ABC system and the in¯uence of the con-
textual environment on the ABC implementation
process. The data are consistent with the proposed
structural model. After establishing a plausible
model structure, we investigate its applicability to
di?erent evaluation criteria and its stability across
di?erent sub-groups in our sample. Thus, the
research contributes a uni®ed investigation of
three aspects of ABC implementation: model
structure; variable de®nition and measurement; and,
model stability.
We test a structural relation between contextual
variables, process variables and ABC system eva-
luations that is hypothesized in ``process theories''
of ABC implementation (Anderson, 1995; Argyris
& Kaplan, 1994; Kaplan, 1990; Shields & Young,
1989). By separating the in¯uence of the con-
textual environment on the ABC implementation
project from its in¯uence on the evaluation of the
ABC system, we extend previous studies that
document correlation between ABC project out-
comes and contextual and process factors. In a
case study of an ABC project that did not sur-
vive, Malmi (1997) posits that implementation
failures are related more to exogenous contextual
factors than to the process of implementation Ð
that even good implementation processes fail on
barren ground. Our results support this observa-
tion and point to speci®c exogenous factors that
make ABC less suitable and that are unlikely to
be remedied by improving the implementation
process.
The study contributes to the area of variable
de®nition and measurement through ®eld research
and the use of multiple data collection methods.
Multiple modes of data collection (e.g. surveys
and personal interviews) provide the opportunity
to address the question: What is meant by ``suc-
cess'' in ABC implementation? A danger of asking
managers to rate ABC implementation success
without specifying the de®nition of success is fail-
ure to detect cases in which individuals hold dif-
ferent views on the de®nition of success but share
views on attainment of a particular dimension of
success. In light of evidence that success in ABC
implementation is multi-dimensional (Cooper,
Kaplan, Maisel, Morrissey & Oehm, 1992) with
each dimension having somewhat di?erent corre-
lates (Foster & Swenson, 1997), it is appropriate
to ask what criteria respondents use in evaluating
ABC. Content analysis of interviews conducted
with survey respondents reveals two dominant
views of what de®nes an e?ective ABC system:
whether ABC data are used in product cost
reduction or process improvement; and, whether
ABC data are more accurate than data from the
traditional cost system. Further investigation
indicates that the respondent's job is a predictor of
which view is held. Previous studies explore deter-
minants of di?erent evaluation measures (Foster &
Swenson, 1997) and document respondent-e?ects
on evaluation levels (McGowan & Klammer, 1997).
This study investigates whether di?erent evaluation
measures correspond to di?erent views on appro-
priate evaluation criteria. Then, using survey data
we estimate simultaneously the contextual and
process determinants of respondents' evaluations
of the ABC systems according to the operative
criteria. Simultaneous estimation methods allow
us to consider whether the factors that in¯uence
di?erent evaluation measures are common Ð
(suggesting that all criteria may be achieved) Ð or
mutually exclusive Ð (suggesting that success
along one dimension is achieved at the expense of
another).
A ®nal contribution of this research is investi-
gation of the stability of the relation between eva-
luations of ABC implementation and factors
related to context and the implementation process.
The research design and sampling plan permit
investigation of three potential sources of model
instability: company e?ects, respondent e?ects
and e?ects of ABC system maturity. Company
e?ects are examined in the spirit of sensitivity
analysis, to explore the degree to which the results
generalize. We can not address the degree to which
results generalize to di?erent industry settings;
however, we ®nd few di?erences between the ®rms
and reject the hypothesis that a ®rm-speci®c model
is warranted. The exploration of respondent
e?ects, speci®cally of di?erences between man-
agers and ABC system developers, is a unique
contribution of this study.
2
Previous research relies
almost exclusively on data taken from accounting
professionals. These people may hold di?erent views
on the ABC system as a result of proximity to or
526 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
responsibility for ABC implementation, or as a
result of the degree to which ABC threatens or rein-
forces their professional standing. The results indi-
cate di?erences in what determines evaluations of
the ABCsystembetween managers and ABCsystem
developers; however, statistical tests reject the
hypothesis that a model that distinguishes between
respondent types improves model ®t. Exploration of
e?ects of ABC system maturity on model stability
continues the investigation of ``stages'' of ABC
implementation in Anderson (1995) and Krum-
wiede (1998). The results indicate signi®cant di?er-
ences in determinants of respondents' evaluation of
ABC as a function of ABC system maturity. Thus,
the maturity-speci®c model ®ts the data better than
a model that omits this factor.
Section 2 reviews the literature and develops the
research questions. Section 3 describes the
research sites and data collection methods.
Variable measures and descriptive statistics are
presented in Section 4. Evidence on the relation
between ABC system evaluations and contextual
and process variables is presented in Section 5.
The stability of the model between di?erent
companies, respondents and ABC systems of
di?ering maturity is investigated in Section 6.
Section 7 summarizes the contributions of the
research and discusses avenues for future investi-
gation.
2. Associations between context, process and
evaluations of ABC systems
2.1. Summary of prior research
Practitioner accounts of ABC projects and case
study research on determinants of project outcomes
have long associatedtechnical andbehavioral factors
with ABC implementation success (Beaujon &
Singhal, 1990; Foster & Gupta, 1990; Cooper,
1990; Cooper et al., 1992; Drumheller, 1993; Eiler
& Campi, 1990; Foster & Gupta, 1990; Haedicke
& Feil, 1991; Jones, 1991; Kleinsorge & Tanner,
1991; Richards, 1987; Shields & Young, 1989;
Stokes & Lawrimore, 1989). Anderson (1995) sur-
veys the literature on ABC and information tech-
nology implementation and compiles ®ve
categories of 22 variables that are implicated in
ABC project outcomes. More recent empirical
studies provide evidence on the correlation
between these factors and ABC implementation
e?ectiveness and introduce ®ve new variables
(Chenhall & Lang®eld-Smith, 1998; Foster &
Swenson, 1997; Gosselin, 1997; Innes & Mitchell,
1995; Krumwiede, 1998; Malmi, 1997; McGowan
& Klammer, 1997; Shields, 1995). Table 1 updates
Anderson's (1995) list of variables hypothesized to
in¯uence ABC system evaluations (column 1) and
summarizes the statistical relations documented in
these studies (column 3).
A diculty in specifying the hypothesized e?ect
of each factor on evaluations of ABC systems is
that each study is di?erent in ways that draw into
question comparability of results. For example,
Anderson (1995), Gosselin (1997) and Krumwiede
(1998) distinguish di?erent stages of ABC imple-
mentation and ®nd evidence that di?erent factors
in¯uence ``success'' at each stage. Foster and
Swenson (1997), McGowan and Klammer (1997)
and Malmi (1997) study speci®c ABC imple-
mentation projects, while other studies gather data
at the ®rm level. Moreover, Foster and Swenson
document somewhat di?erent correlates for four
di?erent measures of ABC implementation suc-
cess. Finally, McGowan and Klammer collect
data from di?erent informants at an ABC imple-
mentation site and ®nd evidence of a shift in the
mean level of evaluation that is associated with
respondents' involvement with the ABC project.
Other studies rely almost exclusively on informants
from accounting functions (of the ®rm or the ABC
site). In sum, comparing empirical studies of the
determinants of ABC implementation e?ectiveness
requires strong assumptions about invariance of
these relations across time, respondent groups,
measures of e?ectiveness and units of analysis.
In spite of caveats concerning comparability of
prior studies, the research ®ndings are remarkably
2
McGowan and Klammer (1997) document a signi®cant
di?erence in the level of satisfaction with ABC between those
who developed the ABC data and those who use the data. They
assume a common (stable) model for both populations with
di?erences re¯ected only in a shift in the mean level of satis-
faction.
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 527
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528 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
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S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 529
consistent. Although some studies fail to docu-
ment a statistically signi®cant e?ect (denoted ``0''),
in only one case (environmental uncertainty) do
studies ®nd signi®cant but con¯icting e?ects. In
this case, Innes and Mitchell (1995) investigate
uncertainty associated with the likelihood of ABC
data threatening respondents' employment (e.g.
cost reduction through layo?s), while other studies
focus on the potential for ABC data mitigating
informational uncertainties and promoting better
decision-making. Thus, this is a case of di?erent
de®nitions of uncertainty rather than substantive
disagreement between the studies' results. In sum-
mary, there is widespread agreement in the aca-
demic literature on broad correlates of ABC
implementation e?ectiveness. Sources of instability
in the relation are less well understood. These
observations are the departure point for this study,
which tests a structural framework among corre-
lates of ABC system e?ectiveness and examines the
stability of the structural model.
2.2. The proposed structural framework
Although the empirical literature has progressed
from case studies and anecdotes to systematic
evidence on correlates of ABC project outcomes,
there is little correspondence between empirical
studies and studies that propose process theories
of ABC implementation (Anderson, 1995; Argyris
& Kaplan, 1994; Kaplan, 1990; Shields &
Young,1989). Process theories hypothesize that
project outcomes depend critically on the imple-
mentation process and on contextual factors related
to the external environment. Process theories of
ABC implementation are similar to Rogers' (1962,
1983) model of organizational change and innova-
tion. In Rogers' model, managers' consideration of
an innovation is motivated or constrained by cir-
cumstances in the ®rm's external and internal envir-
onment and by characteristics of the individual
evaluating the innovation Ð what we refer to col-
lectively as contextual factors. Subsequent evalua-
tions of the innovation are in¯uenced by
comparison between the innovation, the status quo,
and alternative innovations, and by factors related
to the innovation experience Ð what we term pro-
cess factors. Contextual factors in¯uence the process
of implementation and the evaluation of the result-
ing ABC system. Process factors only in¯uence eva-
luations of the ABC system. This ``structure'' that
process theories hypothesize is depicted by arrows
that connect the boxes in Fig. 1 (ignore for now
relations among process factors).
Fig.1. Structural model of ABC implementation.
530 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
Process theories distinguish from the list of cor-
relates in Table 1 those that relate to the context in
which the evaluation of ABC is conducted Ð
including factors related to organizational context
and factors related to the individual asked to ren-
der an evaluation Ð and those that relate to the
process of implementing ABC. This distinction is
re¯ected in columns 4±7 of Table 1. The categories
are not perfectly separableÐfor example, organi-
zational norms with respect to functional speciali-
zation may be mirrored in how the ABC project is
managed (e.g. as an accounting project or as a
multi-disciplinary project). Nonetheless, the
separation is reasonably straightforward. Con-
textual factors include those related to the organi-
zation (column 4) and those related to the
individual asked to evaluate the ABC system (col-
umn 5). Implementation process factors are also
divided into two types: those that re¯ect interac-
tions between the ABC project team and the
organization (column 6), and those that re¯ect the
internal functioning of the ABC project team
(column 7, e.g. communications and goal clarity
among team members). The organizational litera-
ture discusses the relation between project outcomes
and internal team processes (e.g. Bettenhausen,
1991; Cohen, 1993; Cohen & Bailey, 1997). How-
ever, because these research questions are not clo-
sely related to the accounting literature that we
extend, are motivated by di?erent organizational
theories and demand a di?erent unit of analysis,
we consider the variables in column 7 outside the
scope of this paper.
3
We focus instead on the
structure and stability of relationships between the
variables in columns 4±6 and evaluations of ABC
systems.
2.3. Research questions
Two sets of related research questions are con-
sidered. The ®rst researchquestions are relatedtothe
objective of testing the descriptive validity of process
theories of ABC implementation. Speci®cally, we
investigate whether there are associations between:
1.1 evaluations of ABC systems and contextual
variables that represent individual and
organizational circumstances;
1.2 evaluations of ABC systems and the imple-
mentation process; and,
1.3 the ABC implementation process and con-
textual variables that represent individual
and organizational circumstances.
These research questions are depicted in Fig. 1
as arrows between three groups of variables: con-
textual and process factors and implementation
outcomes. Questions 1.1 and 1.2 have been con-
sidered in previous empirical research on corre-
lates of ABC implementation e?ectiveness.
Question 1.3, which links process theories of ABC
implementation and theories of organization
change to the existing empirical literature, is a
unique contribution of this study.
A second set of research questions is motivated
by the earlier observation that the third column of
Table 1 can not be constructed without assuming
very strong forms of model stability. We explore
the validity of these assumptions in two ways.
First, we use ®eld research to explore criteria that
our respondents employ in evaluating ABC sys-
tems. We then investigate how the model of ABC
evaluation is a?ected by the evaluation criterion.
Second, our research design and sample selection
permits us to test for forms of model stability
suggested by previous studies. Thus, we explore:
2.1 what criteria are used by managers and
ABC system developers to evaluate ABC
implementation e?ectiveness;
2.2 do the associations examined in research
questions 1.1±1.3 di?er for di?erent evalua-
tion criteria; and,
2.3 are the associations examined in research
questions 1.1±1.3 stable across ®rms, across
respondents with di?ering involvement in
the ABC project, and across sites with ABC
systems that are of di?erent maturity?
In summary, this paper attempts to link empirical
studies of correlates of ABC implementation with
process theories of ABC implementation (questions
1.1±1.3) and provides evidence on model stability
across a number of dimensions (questions 2.1±2.3).
3
We investigate questions related to intrateam processes of
designing and maintaining ABC systems in a second paper
from this study (Anderson, Hesford & Young, 1999).
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 531
3. Research design
The research design is de®ned by three choices:
selection of ®rms and speci®c ABC implementation
projects for study and selection of quali®ed respon-
dents for each project. Evaluating process models of
ABC implementation necessitates an understanding
of the ®rm's approach to implementing ABC and
access to several ABC implementation projects at
each ®rm. A research design that employs ®eld-
based research o?ers this level of understanding and
access; however, costs of ®eld research and the time
to develop relationships with corporate partners
limit the sample size. We study two automobile
manufacturing ®rms, both with mature corporate
ABC programs and many ABC implementation
sites. In the sections that follow, we discuss the
®rms' programs for implementing ABC and our
approach for selecting sites for study.
3.1. ABC implementation in two automobile
manufacturers
The US auto industry is an appropriate setting
for studying the applicability of models of organi-
zational change to ABC implementation because
®rm-wide implementation demands developing
ABC models for many of remote locations and
because in 1995 ABC was a mature technology for
two of the ®rms. Previous research that examines
ABC adoption by the ®rm ®nds that large organi-
zations with hierarchical structures, centralized
decision-making and signi®cant job standardiza-
tion are more likely to adopt ABC (Gosselin,
1997). Moreover, ABC is attractive to ®rms in
competitive environments that demand con-
tinuous cost reduction (Chenhall & Lang®eld-
Smith, 1998), particularly when existing cost sys-
tems fail to support decisions related to cost
reduction. In the early 1980s, the then ``Big 3'' US
auto manufacturers ®t this characterization. Con-
sequently, it is not surprising that when ABC
became visible in the practitioner literature (e.g.
Cooper, 1988), at least two ®rms began experi-
menting with it and adopted it by 1991. Anderson
(1995) investigates the correspondence of a model
of innovation with one company's eight year
experience of moving from``problemawareness'', to
experimentation and evaluation of alternative cost
systems, and ®nally, to adoption of ABC.
4
This
paper continues the exploration, adding a second
®rm that adopted ABC shortly after the ®rst ®rm,
and shifting the unit of analysis to individuals
involved in 21 ABC implementation projects.
After the ®rms adopted ABC as a corporate
initiative, corporate ABC groups were charged with
supporting implementation at all manufacturing
sites. Nonmanufacturing sites were to follow, as the
corporate group gained implementation expertise.
The process of implementing ABC at a site di?ers
somewhat between the two companies. Although
both companies espouse a theory of activity based
management Ð in which process or activity costs
are as important as product costs ÐCompany 2 has
made this more central to the objective of ABC
implementation than has Company 1. Neither com-
pany used ABC in budgeting or performance eva-
luation at the time of our study, although both were
experimenting with these possibilities. Company 2
used an outside consulting ®rm to oversee site-level
ABC implementation projects and augmented site
teams with corporate ABC group members. Com-
pany 1 relied solely on employees at the site,
although divisional liaisons were available to assist
the team. Assistance most often took the form of
computer software technical support.
In spite of these di?erences, there are striking
similarities in the ®rms' approach to ABC imple-
mentation. Both ®rms had a corporate mandate to
implement ABC that allowed plants to implement
ABC within a three to ®ve year window of local
management's choosing. Both ®rms used what
Lindquist and Mauriel (1989) term a ``depth
strategy'' of implementing ABC fully in a few sites
and adding sites over time, rather than a ``breadth
strategy'' of simultaneously implementing a more
limited version of ABC across all sites. Neither
®rm used ABC data for inventory valuation or in
performance evaluations of managers (e.g. calcu-
lating ABC-based cost variances) at the close of
our study. Indeed both ®rms were advised by their
(di?erent) external auditors to delay using ABC
4
Anderson (1995) uses the ®rm as the unit of observation
and limits consideration of speci®c ABC projects to prototype
projects that were critical to the ®rm-level adoption decision.
532 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
for inventory valuation until all sites installed ABC
systems. Both ®rms standardized development and
maintenance of ABC models over time and used the
same PC-based software. Both ®rms managed ABC
implementation froma corporate group that reports
through the ®nance function, but attempted to gain
support from the operations function. Both ®rms
asked that the local ABC team be ``multi-dis-
ciplinary''; however, most teams included at least
one accountant or budget analyst and the team
always reported to the plant controller. Finally,
both ®rms introduce the ABC project with an
executive awareness session for functional managers
at the site, training for ABC developers, and sub-
sequent management reviews of project milestones.
3.2. Selection of ABC implementation sites and
critical informants
Anderson (1995) observed that, after the ®rm's
decision to adopt ABC, continued corporate sup-
port of the ABC initiative did not depend upon
success of speci®c ABC projects. Rather, following
a period of controlled experimentation when pro-
ject success was critical, the corporate initiative
acquired a life of its own. This pattern is con-
sistent with research on innovation adoption and
illustrates a critical distinction between individual
and organizational adoption of innovations:
Because organizations are complex hierarchical
systems, contradictory part-whole relations are
often produced when system-wide innovations
are introduced. An organization-wide innova-
tion of change developed by one organizational
unit often represents an externally imposed
mandate to adopt the innovation to other,
often lower-level, organizational units. Thus . . .
top management . . . may express euphoria
about the innovation it developed for the entire
organization, while frustrations and opposi-
tions to that same innovation are expressed by
the a?ected organizational units (Van de Ven,
1993, p. 285).
Studies of ABC implementation that rely on a
single senior manager's evaluation of a ®rm's ABC
system may re¯ect an average assessment of
widely di?ering project outcomes or biases of top
management. To address these concerns, we
gather data from several ABC projects within each
®rm and use local informants for each project.
ABC sites are selected using three criteria. First,
we select sites that initiated ABC development after
the corporate decision to implement ABC but dur-
ing di?erent periods of the ®rm's ABC implementa-
tion history. We exclude experimental or prototype
projects to avoid confounding routine implementa-
tions with those that were linked to the organiza-
tional decision to adopt ABC.
5
Inclusion of projects
from di?erent periods permits investigation of tem-
poral in¯uences on ABC system evaluations.
A second factor in site selection is an attempt to
include all auto manufacturing production pro-
cesses. Approximately half of the sites from each
®rm produce components that are unlikely to be
outsourced (termed ``core'' components), including:
major metal stampings, foundry castings, engines,
and transmissions. The remaining sites produce
peripheral components and face external competi-
tion. Selecting core and peripheral components sites
maximizes variation in the external environment
factors of Table 1 (subject to the limitation that the
study occurs within a single industry), allowing
investigation of the relation between these con-
textual factors and ABC system evaluations. In
addition to traditional manufacturing sites, the ser-
vice parts distribution groups of both ®rms are
included. We were unable to match a contiguous
stamping and assembly plant that was included for
one ®rm; thus, the sample includes eleven sites from
one ®rm and ten sites from the other ®rm.
A ®nal factor in selecting sites is the perceived
success of the ABC project. We wish to study sites
that represent the full range of implementation
outcomes. One ®rm adopted ABC in 1991 and
consequently had fewer ABC projects from which
to choose. Meeting the ®rst two criteria for site
selection virtually exhausted the population of
ABC sites; thus, it is unlikely that we were directed
toward exceptional projects. The second ®rm
adopted ABC in 1989 and had over 150 ABC
models at the inception of our study. To guard
5
Anderson (1995) provides evidence of the highly charged
political environment of prototype projects.
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 533
against the ®rm directing us to relatively successful
projects, we examined an independent assessment
of ABC project success. In a related study we
conducted a survey of eight division-level ABC
managers; assessments of 50 ABC implementation
projects. Seven of the proposed sites were covered
by the survey. Responses to questions related to
ABC project outcomes indicate that the seven sites
span the full range of evaluations.
Selection of quali®ed informants about local ABC
implementation projects is guided by the literature
on organizational change and evidence on ``respon-
dent e?ects'' in ABC system evaluation. McGowan
and Klammer's (1997) ®nding that managers
charged with using the ABC system hold di?erent
opinions about the system compared to those who
develop the ABC data suggests two groups of
respondents. The organizational literature goes fur-
ther, arguing that organizational change is a process
of changing the beliefs and behaviors of individuals
(Marcus & Weber, 1989). Although key individuals
may play a disproportionate role in convincing oth-
ers to adopt an innovation, it is rare that a single
individual can unilaterally adopt innovations on
behalf of an organization. Moreover, the beliefs and
behaviors of individuals toward a particular inno-
vation are shaped by their unique, individual cir-
cumstances within the organization.
6
We attempt to
obtain full participation from two populations of
critical informants: ABC system developers and the
site's management team (e.g. the plant manager and
functional managers who report to the plant man-
ager), and measure ``individual characteristics''
(Table 1) that are hypothesized to in¯uence these
respondents evaluations of ABC
7
3.3. Data collection
Each research site was visited for two days
between March and November of 1995. Surveys
were mailed to the site one week before the visit
and respondents brought the completed survey to
the interview, or, if they were not available for an
interview, mailed it to the researchers. Similar
surveys were administered to ABC developers and
managers. Survey questions about individual
motivation, organizational circumstances and the
ABC project were developed from established
scales in the organizational and information sys-
tems literatures (e.g. Davis, 1989; Davis, Bagozzi
& Warshaw, 1989; Jaworski & Young, 1992;
McLennan, 1989; Robinson, Shaver & Wrights-
man, 1991; Seashore, Lawler, Mirvis & Cammann,
1983; Van de Ven & Ferry, 1980). At times wording
changes were necessary to ®t the organizational
context and the speci®cs of ABC system develop-
ment. Questions dealing with the implementation
process were based on information gathered in the
®rm-level study of ABC implementation and, where
applicable, by using question structures that are
similar to related scales (e.g. for involvement in sys-
tem design, scales for ``task involvement'' were
used). A survey pre-test administered to ten corpo-
rate and divisional ABC employees at each ®rm, all
with experience implementing ABC, was used to
revise the survey questions. We received 265 surveys
Ð 176 management surveys and 89 ABC developer
surveys (Table 2).
8
The pro®les of the respondents do not di?er
visibly between ®rms. Company 2 uses slightly less
experienced people as ABC system developers
6
See Pedhazur and Schmelkin (1991) for a discussion of
respondent e?ects associated with factors such as age, gender,
and educational attainment, as well as a variety of personality
traits. Weick (1995) describes individual processes of interpret-
ing, or ``making sense'' of the environment.
7
Although some have argued that e?ective use of ABC
requires involvement of employees at the lowest level of the
organization, the ®rms of this study have not disseminated
ABC data to this audience. Thus we have no basis for investi-
gating the associations between workers' attitudes and ABC
system outcomes and were discouraged from doing so by both
®rms. Production workers are occasionally included in the sur-
vey population as ABC system developers when they served on
development teams.
8
To our knowledge 15 people (all managers) who were tar-
geted to complete a survey failed to do so. Of these, twelve were
managers who claimed to be unfamiliar with ABC either by
virtue of recently joining the plant or because their job respon-
sibilities did not cause them to use the system (e.g. ®ve were
Personnel department managers). Three plant managers who
appeared quali®ed to complete the survey refused to do so
because of the time involved; however, even these managers
agreed to be interviewed and the interviews suggested that this
group included both advocates and opponents of the ABC
approach. The non-respondents were scattered across thirteen
of the 21 sites. In sum, we do not believe that this aspect of
non-response has induced signi®cant bias in the data.
534 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
than does Company 1 Ð evidenced by fewer years
on average with the company and in the depart-
ment from which they joined the ABC project.
There are no di?erences between the ®rms in edu-
cational attainment or ABC training Ð developers
typically receive 30 hours of training in ABC and
managers typically receive no ABC training.
Managers have longer tenure with the ®rms than
do ABC developers; however, by virtue of pro-
motions and company transfers, tenure at the site
is not appreciably di?erent between managers and
ABC developers.
Interviews were conducted with 236 of the 265
survey respondents. Although most interviewees
returned their surveys at the start of the interview,
they did not provide their names in the body of
the survey and speci®c survey responses were not
discussed during the interview. Interviews fol-
lowed a loose structure aimed at supplementing
the survey data. On average 10 interviews were
conducted at each plant, ranging in duration from
approximately 30 minutes, for functional man-
agers with little awareness of the ABC project, to 4
hours for system developers with years of system
design and maintenance experience. With two
exceptions, all interviews were taped and transcribed
for content analysis.
4. Measurement of variables and process structure
4.1. Contextual variables
A limitation of having only two ®rms is that
``organizational factors'' that re¯ect ®rm character-
istics (e.g. centralization, functional specialization)
are confounded (e.g. Table 1, column 8, ``C1 vs
C2''). We investigate the stability of our model
across ®rms; however, the research design does
not permit us to distinguish among alternative
explanations for ®rm e?ects. Studies that use a
large number of ®rms, each providing data on
several implementation sites are needed to investi-
gate the e?ect of ®rm characteristics on imple-
mentation project outcomes. This study focuses on
organizational factors that are more ``local'' Ð as
a result of di?erent products, processes and people
at the sites.
To explore research question 1.1, we examine
the signi®cance of direct associations between
twelve contextual factors (Table 1, column 8).
Three variables hypothesized to in¯uence indivi-
duals' evaluations of ABC are considered: (1) the
extent to which the individual believes that change
is warranted (CHANGE) Ð what the organiza-
tional psychology literature terms ``felt need for
Table 2
Distribution of survey respondents by site and company
Number of respondents Number of respondents
Plant processes Total ABC developers Plant management
Company 1 Company 2 Company 1 Company 2
Core manufacturing
Major stampings 22 3 2 10 7
Contiguous stamping and assembly 14 0 4 0 10
Foundry 28 4 2 10 12
Engine manufacture 31 5 9 9 8
Engine manufacture 24 2 5 10 7
Transmission assembly 40 7 5 15 13
Secondary manufacturing
Parts assembly 19 3 2 7 7
Parts machining and assembly 19 4 4 5 6
Parts machining and assembly 18 2 3 8 5
Electronics assembly 27 6 2 12 7
Other: service parts distribution 23 10 5 5 3
Total 265 46 43 91 85
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 535
change''; (2) individual commitment to the orga-
nization (COMMIT); and (3) the extent to which
the individual identi®es with the values of the
organization (VALUES). Of the four variables
identi®ed as individual contextual factors in Table
1, two are captured in these measures. A third
factor, ABC training received, was measured;
however, because most managers receive no train-
ing and most developers receive 30±40 hours of
training, this ``variable'' is confounded with other
factors that di?er between managers and ABC
developers (e.g. role involvement in the ABC sys-
tem). A fourth factor Ð the individual's knowl-
edge of production processes and job experience,
was explored in interviews only.
Eight organizational contextual factors are
hypothesized to in¯uence evaluations of the ABC
system and management involvement in the
implementation process: (1) the extent to which
individual performance is linked to rewards
(REWARD)
9
(2) the competitive environment
(COMPETE); (3) the quality of existing informa-
tion systems (INFOQUAL); (4) environmental
turbulence (TURB); (5) the likelihood of employee
layo?s (LAYOFF); (6) impediments to plant
growth (NOGROW); (7) the perceived importance
of the plant to the company (IMPPLT); and (8)
the perceived importance of cost reduction to the
plant (IMPCOST). Advocates of ABC claim that
new cost data are most valuable when competition
or limited growth prospects cause ®rms to focus
on cost reduction. COMPETE, NOGROW and
IMPCOST measure these motivations for adopt-
ing ABC. Cost reduction e?orts often produce
reductions in employment (Innes and Mitchell,
1995). In a unionized environment with con-
tractual employment guarantees, managers are
often reluctant or unable to reduce employee
headcount. As a result, many of the prospective
bene®ts of ABC systems may be unrealizable. A
measure of the likelihood of layo?s (LAYOFF) is
used to capture this potential deterrent to ABC
implementation. In the same vein, the quality of
historical management±labor relations (LABOR)
is a ninth contextual factor that is hypothesized to
in¯uence the degree to which the local union sup-
ports the ABC implementation project (but not
managers' evaluations of the ABC system). Even
in ®rms that face heightened competition, some
operations are less threatened than others. Selec-
tion of core and peripheral component plants
maximizes the observed range of competition
within each ®rm. The perceived importance of the
site (IMPPLT) to the ®rm is included as a poten-
tial mitigating factor to external competition.
Organizational theorists argue that there are limits
to the amount of change that an organization can
absorb. Site-speci®c turbulence (TURB) is a mea-
sure of concomitant changes that compete with
ABC for management attention. Finally, within a
®rm, sites often have diverse ``legacy'' information
systems that are more or less e?ective in meeting
managers' information needs. Adoption of new
information technology such as ABC systems
depends upon ®t with and incremental improve-
ment upon existing systems (Kwon & Zmud,
1987). A measure of respondents' beliefs about the
quality of existing information systems (INFOQ-
UAL) is used to examine how the current infor-
mation environment in¯uences managers'
commitment to or evaluation of the ABC system.
4.2. Process variables related to ABC
implementation
Appropriate process variables for analysis and
the relation between process variables depend
upon ®rm-speci®c ABC implementation strategies.
Previous studies that consider the relation between
process variables and ABC project outcomes test
for correlation between a wide range of possible
process variables without knowledge ex ante of
®rms' implementation processes. As a result, tests
that pool ®rms with di?erent implementation
strategies can not distinguish between relevant
process factors that are not statistically correlated
with ABC outcomes and irrelevant process fac-
tors. The ABC implementation process variables
that we consider are those identi®ed in Table 1,
9
It is important to note that REWARD does not measure
the extent to which individuals believe that they will be rewar-
ded if they implement ABC or use ABC data. Rather,
REWARD measures general reward expectancy, because man-
agement control practices and incentives were not changed to
promote ABC use in any of the sites.
536 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
column 6. The hypothesized structure between the
process variables (Fig. 1) was developed prior to
data collection based on interviews at the corporate
level and is described below.
The general structure of the ®rms' ABC imple-
mentation process is depicted inside of the box
labeled ``ABC Implementation Process Factors'' in
Fig. 1. Speci®cally, ®rm-level managers committed
the company to ABC implementation prior to the
ABC project at the research sites. Respondents'
opinions about the strength of this commitment
are measured by the variable, MSUPPORT. The
management awareness sessions that each ®rm
used to introduce ABC to local managers was
intended to increase managers' knowledge of ABC
and to secure their involvement in the project.
Respondents' beliefs about whether local commit-
ment was achieved are measured by the variable,
MINVOLVE. The proposed relation between
MSUPPORT and MINVOLVE re¯ects the direc-
tion of in¯uence described above. Both ®rms
assigned responsibility for implementing ABC to
local management. Although corporate resources
were available to augment or support the team,
team members were selected and freed from other
responsibilities (or not) by local managers. Local
managers were also given discretion in the deci-
sion to involve local union leaders in the project.
The adequacy of resources committed to the ABC
project is measured with the variable, RESOUR-
CES. The degree to which the union was aware of
and involved in the ABC project is measured by
the variable, USUPPORT. The proposed relation
between MINVOLVE and both RESOURCES
and USUPPORT re¯ects the gatekeeper role that
local managers are assigned. The proposed rela-
tion between MSUPPORT and USUPPORT
re¯ects a possible ¯ow of in¯uence from top man-
agers of the ®rm, to the local union. Although top
managers did not intervene directly in local union
a?airs, at least one ®rm noted that the ®rm's
decision to implement ABC had become a nego-
tiating point with labor at the national level.
The proposed relation between MSUPPORT
and RESOURCES re¯ects the support that the
corporate ABC group provided development
teams after local management initiated an ABC
project.
The relationships described above re¯ect ®rm-
speci®c implementation processes that have been
ignored in previous research. However, ®nding
that these relations hold is simply evidence of face
validity of the data rather than evidence on the
proposed research questions. To explore research
question 1.2 we examine the e?ects of each process
variable on evaluations of the ABC system.
Because implementing ABC is a local management
decision, we explore research question 1.3 by
examining the association between contextual fac-
tors and local managers' involvement in the ABC
project (MINVOLVE).
4.3. Evaluation measures of the ABC system
As in previous studies we employ an overall
evaluation of the ABC system (OVERALL) that
allows respondents to self-de®ne the evaluation
criteria. However, as research question 2.1 indi-
cates, this raises the question: ``What criteria are
embedded in overall assessments of ABC sys-
tems?'' Content analysis of 236 taped interviews is
used to explore this question.
10
Full text tran-
scripts of the 236 interviews were searched for key
words related to ABC system evaluations. Search
results yielded 129 respondents'' opinions.
11
The
129 respondents represent 20 of the 21 sites and
are split in approximately the same proportion as
the survey respondents (Table 2) between the ®rms
and between ABC developers and managers. After
identifying discussions of ABC system evaluation,
the transcripts were read by a researcher and a
research assistant. Three evaluation criteria
emerged: (1) use of ABC data for cost reduction;
(2) use of ABC data for process improvements;
and, (3) improved accuracy of product cost infor-
mation relative to the traditional cost system. The
10
An analysis software package designed for non-numerical,
unstructured data (NU.DIST
1
) was used. The researcher codes
interview passages related to constructs of interest and attri-
butes of the interviewee. The software uses these codes to create
a structured index that is useful for investigating systematic
response patterns.
11
Some interviewees did not believe that they had sucient
knowledge about ABC systems to o?er an opinion about sys-
tem e?ectiveness, while others were not asked to discuss the
issue.
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 537
researcher and research assistant independently
coded the responses as belonging primarily to one
of the three categories. The codes were compared
and di?erences were discussed and resolved.
Although respondents occasionally combined the
®rst and second criteria in their discussion, very
few respondents discussed the third criterion in
conjunction with either of the others. Conse-
quently, we combine the ®rst and second groups
to form two groups who di?er in the way that they
de®ne an e?ective ABC system. In the ®rst group
are 67 respondents who de®ne e?ectiveness as use
of ABC data in cost reduction or process improve-
ments. In the second group are 47 respondents who
believe that increased cost accuracy de®nes an
e?ective ABC system.
12
Contingency tables are used to evaluate the
association between opinions about evaluation
criteria and: the respondents' company; whether
the respondent worked in a plant that faced sig-
ni®cant external competition; whether the respon-
dent was an ABC system developer; whether the
respondent claimed to have received training in
ABC; and the respondent's job title. Small sample
sizes cause some contingency tables to have
observed and expected counts that violate asymp-
totic assumptions for normal chi-square estima-
tions. Consequently, we use exact test procedures
that do not impose distributional assumptions.
Comparing di?erences between respondents who
evaluated ABC system e?ectiveness based on use
in cost reduction or process improvement with
those who base their opinion on improved accu-
racy of cost data, respondents' job title is the only
signi®cant (p
This paper investigates associations between evaluations of activity based costing (ABC) systems, contextual factors,
and factors related to the ABC implementation process using interview and survey data from 21 ®eld research sites of
two ®rms. Structural equation modeling is used to investigate the ®t of a model of organizational change with the data.
The results support the proposed model; however, the signi®cance of speci®c factors is sensitive to the evaluation cri-
terion. The model is stable across ®rms and respondents, but is sensitive to the maturity of the ABC system.
The impact of contextual and process factors on the
evaluation of activity-based costing systems
$
Shannon W. Anderson
a,
*, S. Mark Young
b
a
Accounting Department, University of Michigan Business School, Ann Arbor, MI 48109, USA
b
Leventhal School of Accounting, University of Southern California, Los Angeles, CA 90089, USA
Abstract
This paper investigates associations between evaluations of activity based costing (ABC) systems, contextual factors,
and factors related to the ABC implementation process using interview and survey data from 21 ®eld research sites of
two ®rms. Structural equation modeling is used to investigate the ®t of a model of organizational change with the data.
The results support the proposed model; however, the signi®cance of speci®c factors is sensitive to the evaluation cri-
terion. The model is stable across ®rms and respondents, but is sensitive to the maturity of the ABC system. # 1999
Elsevier Science Ltd. All rights reserved.
1. Introduction
Early proponents of ABC claimed superiority
over traditional costing methods that stemmed
from employing causally related ``cost drivers'' to
assign common costs to business activities, pro-
ducts and services (Cooper, 1988; Cooper &
Kaplan, 1988). Later studies argued that a judi-
ciously designed ABC system provides e?ective
behavioral control (Cooper & Kaplan, 1991;
Cooper & Turney, 1990; Foster & Gupta, 1990.
Evidence of ABC implementation failures
1
has
caused researchers to suggest that achieving either
objective depends critically on organizational and
technical factors (Anderson, 1995; Malmi, 1997)
and recent empirical evidence supports this view
(Chenhall & Lang®eld-Smith, 1998; Foster &
Swenson, 1997; Gosselin, 1997; Innes & Mitchell,
1995; Krumwiede, 1998; McGowan & Klammer,
1997; Shields, 1995). This paper combines the
results of previous studies with theory on organi-
zational change to propose a structural model of
the relation between evaluations of ABC systems,
contextual factors and factors related to the ABC
implementation process.
We evaluate the model's descriptive validity
using survey data from managers and system
developers associated with 21 implementation
projects in two automobile manufacturers. Struc-
tural equation modeling (SEM) is used to investi-
gate the in¯uence of the contextual environment
and the implementation process on evaluations of
0361-3682/99/$ - see front matter # 1999 Elsevier Science Ltd. All rights reserved.
PI I : S0361- 3682( 99) 00018- 5
Accounting, Organizations and Society 24 (1999) 525±559
www.elsevier.com/locate/aos
$
The authors are not permitted to redistribute the data of
this study without permission of the participating ®rms.
* Corresponding author. Tel.: +1-734-647-3308; fax: +1-
734-936-8716.
E-mail address: [email protected] (S.W. Anderson)
1
By some estimates only 10% of ®rms that adopt ABC
continue to use it (Ness & Cucuzza, 1995). In reviews of inter-
national studies of ABC adoption, Innes and Mitchell (1995);
and Chenhall and Lang®eld-Smith (1998) ®nd adoption rates
generally less than 14%.
the ABC system and the in¯uence of the con-
textual environment on the ABC implementation
process. The data are consistent with the proposed
structural model. After establishing a plausible
model structure, we investigate its applicability to
di?erent evaluation criteria and its stability across
di?erent sub-groups in our sample. Thus, the
research contributes a uni®ed investigation of
three aspects of ABC implementation: model
structure; variable de®nition and measurement; and,
model stability.
We test a structural relation between contextual
variables, process variables and ABC system eva-
luations that is hypothesized in ``process theories''
of ABC implementation (Anderson, 1995; Argyris
& Kaplan, 1994; Kaplan, 1990; Shields & Young,
1989). By separating the in¯uence of the con-
textual environment on the ABC implementation
project from its in¯uence on the evaluation of the
ABC system, we extend previous studies that
document correlation between ABC project out-
comes and contextual and process factors. In a
case study of an ABC project that did not sur-
vive, Malmi (1997) posits that implementation
failures are related more to exogenous contextual
factors than to the process of implementation Ð
that even good implementation processes fail on
barren ground. Our results support this observa-
tion and point to speci®c exogenous factors that
make ABC less suitable and that are unlikely to
be remedied by improving the implementation
process.
The study contributes to the area of variable
de®nition and measurement through ®eld research
and the use of multiple data collection methods.
Multiple modes of data collection (e.g. surveys
and personal interviews) provide the opportunity
to address the question: What is meant by ``suc-
cess'' in ABC implementation? A danger of asking
managers to rate ABC implementation success
without specifying the de®nition of success is fail-
ure to detect cases in which individuals hold dif-
ferent views on the de®nition of success but share
views on attainment of a particular dimension of
success. In light of evidence that success in ABC
implementation is multi-dimensional (Cooper,
Kaplan, Maisel, Morrissey & Oehm, 1992) with
each dimension having somewhat di?erent corre-
lates (Foster & Swenson, 1997), it is appropriate
to ask what criteria respondents use in evaluating
ABC. Content analysis of interviews conducted
with survey respondents reveals two dominant
views of what de®nes an e?ective ABC system:
whether ABC data are used in product cost
reduction or process improvement; and, whether
ABC data are more accurate than data from the
traditional cost system. Further investigation
indicates that the respondent's job is a predictor of
which view is held. Previous studies explore deter-
minants of di?erent evaluation measures (Foster &
Swenson, 1997) and document respondent-e?ects
on evaluation levels (McGowan & Klammer, 1997).
This study investigates whether di?erent evaluation
measures correspond to di?erent views on appro-
priate evaluation criteria. Then, using survey data
we estimate simultaneously the contextual and
process determinants of respondents' evaluations
of the ABC systems according to the operative
criteria. Simultaneous estimation methods allow
us to consider whether the factors that in¯uence
di?erent evaluation measures are common Ð
(suggesting that all criteria may be achieved) Ð or
mutually exclusive Ð (suggesting that success
along one dimension is achieved at the expense of
another).
A ®nal contribution of this research is investi-
gation of the stability of the relation between eva-
luations of ABC implementation and factors
related to context and the implementation process.
The research design and sampling plan permit
investigation of three potential sources of model
instability: company e?ects, respondent e?ects
and e?ects of ABC system maturity. Company
e?ects are examined in the spirit of sensitivity
analysis, to explore the degree to which the results
generalize. We can not address the degree to which
results generalize to di?erent industry settings;
however, we ®nd few di?erences between the ®rms
and reject the hypothesis that a ®rm-speci®c model
is warranted. The exploration of respondent
e?ects, speci®cally of di?erences between man-
agers and ABC system developers, is a unique
contribution of this study.
2
Previous research relies
almost exclusively on data taken from accounting
professionals. These people may hold di?erent views
on the ABC system as a result of proximity to or
526 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
responsibility for ABC implementation, or as a
result of the degree to which ABC threatens or rein-
forces their professional standing. The results indi-
cate di?erences in what determines evaluations of
the ABCsystembetween managers and ABCsystem
developers; however, statistical tests reject the
hypothesis that a model that distinguishes between
respondent types improves model ®t. Exploration of
e?ects of ABC system maturity on model stability
continues the investigation of ``stages'' of ABC
implementation in Anderson (1995) and Krum-
wiede (1998). The results indicate signi®cant di?er-
ences in determinants of respondents' evaluation of
ABC as a function of ABC system maturity. Thus,
the maturity-speci®c model ®ts the data better than
a model that omits this factor.
Section 2 reviews the literature and develops the
research questions. Section 3 describes the
research sites and data collection methods.
Variable measures and descriptive statistics are
presented in Section 4. Evidence on the relation
between ABC system evaluations and contextual
and process variables is presented in Section 5.
The stability of the model between di?erent
companies, respondents and ABC systems of
di?ering maturity is investigated in Section 6.
Section 7 summarizes the contributions of the
research and discusses avenues for future investi-
gation.
2. Associations between context, process and
evaluations of ABC systems
2.1. Summary of prior research
Practitioner accounts of ABC projects and case
study research on determinants of project outcomes
have long associatedtechnical andbehavioral factors
with ABC implementation success (Beaujon &
Singhal, 1990; Foster & Gupta, 1990; Cooper,
1990; Cooper et al., 1992; Drumheller, 1993; Eiler
& Campi, 1990; Foster & Gupta, 1990; Haedicke
& Feil, 1991; Jones, 1991; Kleinsorge & Tanner,
1991; Richards, 1987; Shields & Young, 1989;
Stokes & Lawrimore, 1989). Anderson (1995) sur-
veys the literature on ABC and information tech-
nology implementation and compiles ®ve
categories of 22 variables that are implicated in
ABC project outcomes. More recent empirical
studies provide evidence on the correlation
between these factors and ABC implementation
e?ectiveness and introduce ®ve new variables
(Chenhall & Lang®eld-Smith, 1998; Foster &
Swenson, 1997; Gosselin, 1997; Innes & Mitchell,
1995; Krumwiede, 1998; Malmi, 1997; McGowan
& Klammer, 1997; Shields, 1995). Table 1 updates
Anderson's (1995) list of variables hypothesized to
in¯uence ABC system evaluations (column 1) and
summarizes the statistical relations documented in
these studies (column 3).
A diculty in specifying the hypothesized e?ect
of each factor on evaluations of ABC systems is
that each study is di?erent in ways that draw into
question comparability of results. For example,
Anderson (1995), Gosselin (1997) and Krumwiede
(1998) distinguish di?erent stages of ABC imple-
mentation and ®nd evidence that di?erent factors
in¯uence ``success'' at each stage. Foster and
Swenson (1997), McGowan and Klammer (1997)
and Malmi (1997) study speci®c ABC imple-
mentation projects, while other studies gather data
at the ®rm level. Moreover, Foster and Swenson
document somewhat di?erent correlates for four
di?erent measures of ABC implementation suc-
cess. Finally, McGowan and Klammer collect
data from di?erent informants at an ABC imple-
mentation site and ®nd evidence of a shift in the
mean level of evaluation that is associated with
respondents' involvement with the ABC project.
Other studies rely almost exclusively on informants
from accounting functions (of the ®rm or the ABC
site). In sum, comparing empirical studies of the
determinants of ABC implementation e?ectiveness
requires strong assumptions about invariance of
these relations across time, respondent groups,
measures of e?ectiveness and units of analysis.
In spite of caveats concerning comparability of
prior studies, the research ®ndings are remarkably
2
McGowan and Klammer (1997) document a signi®cant
di?erence in the level of satisfaction with ABC between those
who developed the ABC data and those who use the data. They
assume a common (stable) model for both populations with
di?erences re¯ected only in a shift in the mean level of satis-
faction.
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 527
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528 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
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S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 529
consistent. Although some studies fail to docu-
ment a statistically signi®cant e?ect (denoted ``0''),
in only one case (environmental uncertainty) do
studies ®nd signi®cant but con¯icting e?ects. In
this case, Innes and Mitchell (1995) investigate
uncertainty associated with the likelihood of ABC
data threatening respondents' employment (e.g.
cost reduction through layo?s), while other studies
focus on the potential for ABC data mitigating
informational uncertainties and promoting better
decision-making. Thus, this is a case of di?erent
de®nitions of uncertainty rather than substantive
disagreement between the studies' results. In sum-
mary, there is widespread agreement in the aca-
demic literature on broad correlates of ABC
implementation e?ectiveness. Sources of instability
in the relation are less well understood. These
observations are the departure point for this study,
which tests a structural framework among corre-
lates of ABC system e?ectiveness and examines the
stability of the structural model.
2.2. The proposed structural framework
Although the empirical literature has progressed
from case studies and anecdotes to systematic
evidence on correlates of ABC project outcomes,
there is little correspondence between empirical
studies and studies that propose process theories
of ABC implementation (Anderson, 1995; Argyris
& Kaplan, 1994; Kaplan, 1990; Shields &
Young,1989). Process theories hypothesize that
project outcomes depend critically on the imple-
mentation process and on contextual factors related
to the external environment. Process theories of
ABC implementation are similar to Rogers' (1962,
1983) model of organizational change and innova-
tion. In Rogers' model, managers' consideration of
an innovation is motivated or constrained by cir-
cumstances in the ®rm's external and internal envir-
onment and by characteristics of the individual
evaluating the innovation Ð what we refer to col-
lectively as contextual factors. Subsequent evalua-
tions of the innovation are in¯uenced by
comparison between the innovation, the status quo,
and alternative innovations, and by factors related
to the innovation experience Ð what we term pro-
cess factors. Contextual factors in¯uence the process
of implementation and the evaluation of the result-
ing ABC system. Process factors only in¯uence eva-
luations of the ABC system. This ``structure'' that
process theories hypothesize is depicted by arrows
that connect the boxes in Fig. 1 (ignore for now
relations among process factors).
Fig.1. Structural model of ABC implementation.
530 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
Process theories distinguish from the list of cor-
relates in Table 1 those that relate to the context in
which the evaluation of ABC is conducted Ð
including factors related to organizational context
and factors related to the individual asked to ren-
der an evaluation Ð and those that relate to the
process of implementing ABC. This distinction is
re¯ected in columns 4±7 of Table 1. The categories
are not perfectly separableÐfor example, organi-
zational norms with respect to functional speciali-
zation may be mirrored in how the ABC project is
managed (e.g. as an accounting project or as a
multi-disciplinary project). Nonetheless, the
separation is reasonably straightforward. Con-
textual factors include those related to the organi-
zation (column 4) and those related to the
individual asked to evaluate the ABC system (col-
umn 5). Implementation process factors are also
divided into two types: those that re¯ect interac-
tions between the ABC project team and the
organization (column 6), and those that re¯ect the
internal functioning of the ABC project team
(column 7, e.g. communications and goal clarity
among team members). The organizational litera-
ture discusses the relation between project outcomes
and internal team processes (e.g. Bettenhausen,
1991; Cohen, 1993; Cohen & Bailey, 1997). How-
ever, because these research questions are not clo-
sely related to the accounting literature that we
extend, are motivated by di?erent organizational
theories and demand a di?erent unit of analysis,
we consider the variables in column 7 outside the
scope of this paper.
3
We focus instead on the
structure and stability of relationships between the
variables in columns 4±6 and evaluations of ABC
systems.
2.3. Research questions
Two sets of related research questions are con-
sidered. The ®rst researchquestions are relatedtothe
objective of testing the descriptive validity of process
theories of ABC implementation. Speci®cally, we
investigate whether there are associations between:
1.1 evaluations of ABC systems and contextual
variables that represent individual and
organizational circumstances;
1.2 evaluations of ABC systems and the imple-
mentation process; and,
1.3 the ABC implementation process and con-
textual variables that represent individual
and organizational circumstances.
These research questions are depicted in Fig. 1
as arrows between three groups of variables: con-
textual and process factors and implementation
outcomes. Questions 1.1 and 1.2 have been con-
sidered in previous empirical research on corre-
lates of ABC implementation e?ectiveness.
Question 1.3, which links process theories of ABC
implementation and theories of organization
change to the existing empirical literature, is a
unique contribution of this study.
A second set of research questions is motivated
by the earlier observation that the third column of
Table 1 can not be constructed without assuming
very strong forms of model stability. We explore
the validity of these assumptions in two ways.
First, we use ®eld research to explore criteria that
our respondents employ in evaluating ABC sys-
tems. We then investigate how the model of ABC
evaluation is a?ected by the evaluation criterion.
Second, our research design and sample selection
permits us to test for forms of model stability
suggested by previous studies. Thus, we explore:
2.1 what criteria are used by managers and
ABC system developers to evaluate ABC
implementation e?ectiveness;
2.2 do the associations examined in research
questions 1.1±1.3 di?er for di?erent evalua-
tion criteria; and,
2.3 are the associations examined in research
questions 1.1±1.3 stable across ®rms, across
respondents with di?ering involvement in
the ABC project, and across sites with ABC
systems that are of di?erent maturity?
In summary, this paper attempts to link empirical
studies of correlates of ABC implementation with
process theories of ABC implementation (questions
1.1±1.3) and provides evidence on model stability
across a number of dimensions (questions 2.1±2.3).
3
We investigate questions related to intrateam processes of
designing and maintaining ABC systems in a second paper
from this study (Anderson, Hesford & Young, 1999).
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 531
3. Research design
The research design is de®ned by three choices:
selection of ®rms and speci®c ABC implementation
projects for study and selection of quali®ed respon-
dents for each project. Evaluating process models of
ABC implementation necessitates an understanding
of the ®rm's approach to implementing ABC and
access to several ABC implementation projects at
each ®rm. A research design that employs ®eld-
based research o?ers this level of understanding and
access; however, costs of ®eld research and the time
to develop relationships with corporate partners
limit the sample size. We study two automobile
manufacturing ®rms, both with mature corporate
ABC programs and many ABC implementation
sites. In the sections that follow, we discuss the
®rms' programs for implementing ABC and our
approach for selecting sites for study.
3.1. ABC implementation in two automobile
manufacturers
The US auto industry is an appropriate setting
for studying the applicability of models of organi-
zational change to ABC implementation because
®rm-wide implementation demands developing
ABC models for many of remote locations and
because in 1995 ABC was a mature technology for
two of the ®rms. Previous research that examines
ABC adoption by the ®rm ®nds that large organi-
zations with hierarchical structures, centralized
decision-making and signi®cant job standardiza-
tion are more likely to adopt ABC (Gosselin,
1997). Moreover, ABC is attractive to ®rms in
competitive environments that demand con-
tinuous cost reduction (Chenhall & Lang®eld-
Smith, 1998), particularly when existing cost sys-
tems fail to support decisions related to cost
reduction. In the early 1980s, the then ``Big 3'' US
auto manufacturers ®t this characterization. Con-
sequently, it is not surprising that when ABC
became visible in the practitioner literature (e.g.
Cooper, 1988), at least two ®rms began experi-
menting with it and adopted it by 1991. Anderson
(1995) investigates the correspondence of a model
of innovation with one company's eight year
experience of moving from``problemawareness'', to
experimentation and evaluation of alternative cost
systems, and ®nally, to adoption of ABC.
4
This
paper continues the exploration, adding a second
®rm that adopted ABC shortly after the ®rst ®rm,
and shifting the unit of analysis to individuals
involved in 21 ABC implementation projects.
After the ®rms adopted ABC as a corporate
initiative, corporate ABC groups were charged with
supporting implementation at all manufacturing
sites. Nonmanufacturing sites were to follow, as the
corporate group gained implementation expertise.
The process of implementing ABC at a site di?ers
somewhat between the two companies. Although
both companies espouse a theory of activity based
management Ð in which process or activity costs
are as important as product costs ÐCompany 2 has
made this more central to the objective of ABC
implementation than has Company 1. Neither com-
pany used ABC in budgeting or performance eva-
luation at the time of our study, although both were
experimenting with these possibilities. Company 2
used an outside consulting ®rm to oversee site-level
ABC implementation projects and augmented site
teams with corporate ABC group members. Com-
pany 1 relied solely on employees at the site,
although divisional liaisons were available to assist
the team. Assistance most often took the form of
computer software technical support.
In spite of these di?erences, there are striking
similarities in the ®rms' approach to ABC imple-
mentation. Both ®rms had a corporate mandate to
implement ABC that allowed plants to implement
ABC within a three to ®ve year window of local
management's choosing. Both ®rms used what
Lindquist and Mauriel (1989) term a ``depth
strategy'' of implementing ABC fully in a few sites
and adding sites over time, rather than a ``breadth
strategy'' of simultaneously implementing a more
limited version of ABC across all sites. Neither
®rm used ABC data for inventory valuation or in
performance evaluations of managers (e.g. calcu-
lating ABC-based cost variances) at the close of
our study. Indeed both ®rms were advised by their
(di?erent) external auditors to delay using ABC
4
Anderson (1995) uses the ®rm as the unit of observation
and limits consideration of speci®c ABC projects to prototype
projects that were critical to the ®rm-level adoption decision.
532 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
for inventory valuation until all sites installed ABC
systems. Both ®rms standardized development and
maintenance of ABC models over time and used the
same PC-based software. Both ®rms managed ABC
implementation froma corporate group that reports
through the ®nance function, but attempted to gain
support from the operations function. Both ®rms
asked that the local ABC team be ``multi-dis-
ciplinary''; however, most teams included at least
one accountant or budget analyst and the team
always reported to the plant controller. Finally,
both ®rms introduce the ABC project with an
executive awareness session for functional managers
at the site, training for ABC developers, and sub-
sequent management reviews of project milestones.
3.2. Selection of ABC implementation sites and
critical informants
Anderson (1995) observed that, after the ®rm's
decision to adopt ABC, continued corporate sup-
port of the ABC initiative did not depend upon
success of speci®c ABC projects. Rather, following
a period of controlled experimentation when pro-
ject success was critical, the corporate initiative
acquired a life of its own. This pattern is con-
sistent with research on innovation adoption and
illustrates a critical distinction between individual
and organizational adoption of innovations:
Because organizations are complex hierarchical
systems, contradictory part-whole relations are
often produced when system-wide innovations
are introduced. An organization-wide innova-
tion of change developed by one organizational
unit often represents an externally imposed
mandate to adopt the innovation to other,
often lower-level, organizational units. Thus . . .
top management . . . may express euphoria
about the innovation it developed for the entire
organization, while frustrations and opposi-
tions to that same innovation are expressed by
the a?ected organizational units (Van de Ven,
1993, p. 285).
Studies of ABC implementation that rely on a
single senior manager's evaluation of a ®rm's ABC
system may re¯ect an average assessment of
widely di?ering project outcomes or biases of top
management. To address these concerns, we
gather data from several ABC projects within each
®rm and use local informants for each project.
ABC sites are selected using three criteria. First,
we select sites that initiated ABC development after
the corporate decision to implement ABC but dur-
ing di?erent periods of the ®rm's ABC implementa-
tion history. We exclude experimental or prototype
projects to avoid confounding routine implementa-
tions with those that were linked to the organiza-
tional decision to adopt ABC.
5
Inclusion of projects
from di?erent periods permits investigation of tem-
poral in¯uences on ABC system evaluations.
A second factor in site selection is an attempt to
include all auto manufacturing production pro-
cesses. Approximately half of the sites from each
®rm produce components that are unlikely to be
outsourced (termed ``core'' components), including:
major metal stampings, foundry castings, engines,
and transmissions. The remaining sites produce
peripheral components and face external competi-
tion. Selecting core and peripheral components sites
maximizes variation in the external environment
factors of Table 1 (subject to the limitation that the
study occurs within a single industry), allowing
investigation of the relation between these con-
textual factors and ABC system evaluations. In
addition to traditional manufacturing sites, the ser-
vice parts distribution groups of both ®rms are
included. We were unable to match a contiguous
stamping and assembly plant that was included for
one ®rm; thus, the sample includes eleven sites from
one ®rm and ten sites from the other ®rm.
A ®nal factor in selecting sites is the perceived
success of the ABC project. We wish to study sites
that represent the full range of implementation
outcomes. One ®rm adopted ABC in 1991 and
consequently had fewer ABC projects from which
to choose. Meeting the ®rst two criteria for site
selection virtually exhausted the population of
ABC sites; thus, it is unlikely that we were directed
toward exceptional projects. The second ®rm
adopted ABC in 1989 and had over 150 ABC
models at the inception of our study. To guard
5
Anderson (1995) provides evidence of the highly charged
political environment of prototype projects.
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 533
against the ®rm directing us to relatively successful
projects, we examined an independent assessment
of ABC project success. In a related study we
conducted a survey of eight division-level ABC
managers; assessments of 50 ABC implementation
projects. Seven of the proposed sites were covered
by the survey. Responses to questions related to
ABC project outcomes indicate that the seven sites
span the full range of evaluations.
Selection of quali®ed informants about local ABC
implementation projects is guided by the literature
on organizational change and evidence on ``respon-
dent e?ects'' in ABC system evaluation. McGowan
and Klammer's (1997) ®nding that managers
charged with using the ABC system hold di?erent
opinions about the system compared to those who
develop the ABC data suggests two groups of
respondents. The organizational literature goes fur-
ther, arguing that organizational change is a process
of changing the beliefs and behaviors of individuals
(Marcus & Weber, 1989). Although key individuals
may play a disproportionate role in convincing oth-
ers to adopt an innovation, it is rare that a single
individual can unilaterally adopt innovations on
behalf of an organization. Moreover, the beliefs and
behaviors of individuals toward a particular inno-
vation are shaped by their unique, individual cir-
cumstances within the organization.
6
We attempt to
obtain full participation from two populations of
critical informants: ABC system developers and the
site's management team (e.g. the plant manager and
functional managers who report to the plant man-
ager), and measure ``individual characteristics''
(Table 1) that are hypothesized to in¯uence these
respondents evaluations of ABC
7
3.3. Data collection
Each research site was visited for two days
between March and November of 1995. Surveys
were mailed to the site one week before the visit
and respondents brought the completed survey to
the interview, or, if they were not available for an
interview, mailed it to the researchers. Similar
surveys were administered to ABC developers and
managers. Survey questions about individual
motivation, organizational circumstances and the
ABC project were developed from established
scales in the organizational and information sys-
tems literatures (e.g. Davis, 1989; Davis, Bagozzi
& Warshaw, 1989; Jaworski & Young, 1992;
McLennan, 1989; Robinson, Shaver & Wrights-
man, 1991; Seashore, Lawler, Mirvis & Cammann,
1983; Van de Ven & Ferry, 1980). At times wording
changes were necessary to ®t the organizational
context and the speci®cs of ABC system develop-
ment. Questions dealing with the implementation
process were based on information gathered in the
®rm-level study of ABC implementation and, where
applicable, by using question structures that are
similar to related scales (e.g. for involvement in sys-
tem design, scales for ``task involvement'' were
used). A survey pre-test administered to ten corpo-
rate and divisional ABC employees at each ®rm, all
with experience implementing ABC, was used to
revise the survey questions. We received 265 surveys
Ð 176 management surveys and 89 ABC developer
surveys (Table 2).
8
The pro®les of the respondents do not di?er
visibly between ®rms. Company 2 uses slightly less
experienced people as ABC system developers
6
See Pedhazur and Schmelkin (1991) for a discussion of
respondent e?ects associated with factors such as age, gender,
and educational attainment, as well as a variety of personality
traits. Weick (1995) describes individual processes of interpret-
ing, or ``making sense'' of the environment.
7
Although some have argued that e?ective use of ABC
requires involvement of employees at the lowest level of the
organization, the ®rms of this study have not disseminated
ABC data to this audience. Thus we have no basis for investi-
gating the associations between workers' attitudes and ABC
system outcomes and were discouraged from doing so by both
®rms. Production workers are occasionally included in the sur-
vey population as ABC system developers when they served on
development teams.
8
To our knowledge 15 people (all managers) who were tar-
geted to complete a survey failed to do so. Of these, twelve were
managers who claimed to be unfamiliar with ABC either by
virtue of recently joining the plant or because their job respon-
sibilities did not cause them to use the system (e.g. ®ve were
Personnel department managers). Three plant managers who
appeared quali®ed to complete the survey refused to do so
because of the time involved; however, even these managers
agreed to be interviewed and the interviews suggested that this
group included both advocates and opponents of the ABC
approach. The non-respondents were scattered across thirteen
of the 21 sites. In sum, we do not believe that this aspect of
non-response has induced signi®cant bias in the data.
534 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
than does Company 1 Ð evidenced by fewer years
on average with the company and in the depart-
ment from which they joined the ABC project.
There are no di?erences between the ®rms in edu-
cational attainment or ABC training Ð developers
typically receive 30 hours of training in ABC and
managers typically receive no ABC training.
Managers have longer tenure with the ®rms than
do ABC developers; however, by virtue of pro-
motions and company transfers, tenure at the site
is not appreciably di?erent between managers and
ABC developers.
Interviews were conducted with 236 of the 265
survey respondents. Although most interviewees
returned their surveys at the start of the interview,
they did not provide their names in the body of
the survey and speci®c survey responses were not
discussed during the interview. Interviews fol-
lowed a loose structure aimed at supplementing
the survey data. On average 10 interviews were
conducted at each plant, ranging in duration from
approximately 30 minutes, for functional man-
agers with little awareness of the ABC project, to 4
hours for system developers with years of system
design and maintenance experience. With two
exceptions, all interviews were taped and transcribed
for content analysis.
4. Measurement of variables and process structure
4.1. Contextual variables
A limitation of having only two ®rms is that
``organizational factors'' that re¯ect ®rm character-
istics (e.g. centralization, functional specialization)
are confounded (e.g. Table 1, column 8, ``C1 vs
C2''). We investigate the stability of our model
across ®rms; however, the research design does
not permit us to distinguish among alternative
explanations for ®rm e?ects. Studies that use a
large number of ®rms, each providing data on
several implementation sites are needed to investi-
gate the e?ect of ®rm characteristics on imple-
mentation project outcomes. This study focuses on
organizational factors that are more ``local'' Ð as
a result of di?erent products, processes and people
at the sites.
To explore research question 1.1, we examine
the signi®cance of direct associations between
twelve contextual factors (Table 1, column 8).
Three variables hypothesized to in¯uence indivi-
duals' evaluations of ABC are considered: (1) the
extent to which the individual believes that change
is warranted (CHANGE) Ð what the organiza-
tional psychology literature terms ``felt need for
Table 2
Distribution of survey respondents by site and company
Number of respondents Number of respondents
Plant processes Total ABC developers Plant management
Company 1 Company 2 Company 1 Company 2
Core manufacturing
Major stampings 22 3 2 10 7
Contiguous stamping and assembly 14 0 4 0 10
Foundry 28 4 2 10 12
Engine manufacture 31 5 9 9 8
Engine manufacture 24 2 5 10 7
Transmission assembly 40 7 5 15 13
Secondary manufacturing
Parts assembly 19 3 2 7 7
Parts machining and assembly 19 4 4 5 6
Parts machining and assembly 18 2 3 8 5
Electronics assembly 27 6 2 12 7
Other: service parts distribution 23 10 5 5 3
Total 265 46 43 91 85
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 535
change''; (2) individual commitment to the orga-
nization (COMMIT); and (3) the extent to which
the individual identi®es with the values of the
organization (VALUES). Of the four variables
identi®ed as individual contextual factors in Table
1, two are captured in these measures. A third
factor, ABC training received, was measured;
however, because most managers receive no train-
ing and most developers receive 30±40 hours of
training, this ``variable'' is confounded with other
factors that di?er between managers and ABC
developers (e.g. role involvement in the ABC sys-
tem). A fourth factor Ð the individual's knowl-
edge of production processes and job experience,
was explored in interviews only.
Eight organizational contextual factors are
hypothesized to in¯uence evaluations of the ABC
system and management involvement in the
implementation process: (1) the extent to which
individual performance is linked to rewards
(REWARD)
9
(2) the competitive environment
(COMPETE); (3) the quality of existing informa-
tion systems (INFOQUAL); (4) environmental
turbulence (TURB); (5) the likelihood of employee
layo?s (LAYOFF); (6) impediments to plant
growth (NOGROW); (7) the perceived importance
of the plant to the company (IMPPLT); and (8)
the perceived importance of cost reduction to the
plant (IMPCOST). Advocates of ABC claim that
new cost data are most valuable when competition
or limited growth prospects cause ®rms to focus
on cost reduction. COMPETE, NOGROW and
IMPCOST measure these motivations for adopt-
ing ABC. Cost reduction e?orts often produce
reductions in employment (Innes and Mitchell,
1995). In a unionized environment with con-
tractual employment guarantees, managers are
often reluctant or unable to reduce employee
headcount. As a result, many of the prospective
bene®ts of ABC systems may be unrealizable. A
measure of the likelihood of layo?s (LAYOFF) is
used to capture this potential deterrent to ABC
implementation. In the same vein, the quality of
historical management±labor relations (LABOR)
is a ninth contextual factor that is hypothesized to
in¯uence the degree to which the local union sup-
ports the ABC implementation project (but not
managers' evaluations of the ABC system). Even
in ®rms that face heightened competition, some
operations are less threatened than others. Selec-
tion of core and peripheral component plants
maximizes the observed range of competition
within each ®rm. The perceived importance of the
site (IMPPLT) to the ®rm is included as a poten-
tial mitigating factor to external competition.
Organizational theorists argue that there are limits
to the amount of change that an organization can
absorb. Site-speci®c turbulence (TURB) is a mea-
sure of concomitant changes that compete with
ABC for management attention. Finally, within a
®rm, sites often have diverse ``legacy'' information
systems that are more or less e?ective in meeting
managers' information needs. Adoption of new
information technology such as ABC systems
depends upon ®t with and incremental improve-
ment upon existing systems (Kwon & Zmud,
1987). A measure of respondents' beliefs about the
quality of existing information systems (INFOQ-
UAL) is used to examine how the current infor-
mation environment in¯uences managers'
commitment to or evaluation of the ABC system.
4.2. Process variables related to ABC
implementation
Appropriate process variables for analysis and
the relation between process variables depend
upon ®rm-speci®c ABC implementation strategies.
Previous studies that consider the relation between
process variables and ABC project outcomes test
for correlation between a wide range of possible
process variables without knowledge ex ante of
®rms' implementation processes. As a result, tests
that pool ®rms with di?erent implementation
strategies can not distinguish between relevant
process factors that are not statistically correlated
with ABC outcomes and irrelevant process fac-
tors. The ABC implementation process variables
that we consider are those identi®ed in Table 1,
9
It is important to note that REWARD does not measure
the extent to which individuals believe that they will be rewar-
ded if they implement ABC or use ABC data. Rather,
REWARD measures general reward expectancy, because man-
agement control practices and incentives were not changed to
promote ABC use in any of the sites.
536 S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559
column 6. The hypothesized structure between the
process variables (Fig. 1) was developed prior to
data collection based on interviews at the corporate
level and is described below.
The general structure of the ®rms' ABC imple-
mentation process is depicted inside of the box
labeled ``ABC Implementation Process Factors'' in
Fig. 1. Speci®cally, ®rm-level managers committed
the company to ABC implementation prior to the
ABC project at the research sites. Respondents'
opinions about the strength of this commitment
are measured by the variable, MSUPPORT. The
management awareness sessions that each ®rm
used to introduce ABC to local managers was
intended to increase managers' knowledge of ABC
and to secure their involvement in the project.
Respondents' beliefs about whether local commit-
ment was achieved are measured by the variable,
MINVOLVE. The proposed relation between
MSUPPORT and MINVOLVE re¯ects the direc-
tion of in¯uence described above. Both ®rms
assigned responsibility for implementing ABC to
local management. Although corporate resources
were available to augment or support the team,
team members were selected and freed from other
responsibilities (or not) by local managers. Local
managers were also given discretion in the deci-
sion to involve local union leaders in the project.
The adequacy of resources committed to the ABC
project is measured with the variable, RESOUR-
CES. The degree to which the union was aware of
and involved in the ABC project is measured by
the variable, USUPPORT. The proposed relation
between MINVOLVE and both RESOURCES
and USUPPORT re¯ects the gatekeeper role that
local managers are assigned. The proposed rela-
tion between MSUPPORT and USUPPORT
re¯ects a possible ¯ow of in¯uence from top man-
agers of the ®rm, to the local union. Although top
managers did not intervene directly in local union
a?airs, at least one ®rm noted that the ®rm's
decision to implement ABC had become a nego-
tiating point with labor at the national level.
The proposed relation between MSUPPORT
and RESOURCES re¯ects the support that the
corporate ABC group provided development
teams after local management initiated an ABC
project.
The relationships described above re¯ect ®rm-
speci®c implementation processes that have been
ignored in previous research. However, ®nding
that these relations hold is simply evidence of face
validity of the data rather than evidence on the
proposed research questions. To explore research
question 1.2 we examine the e?ects of each process
variable on evaluations of the ABC system.
Because implementing ABC is a local management
decision, we explore research question 1.3 by
examining the association between contextual fac-
tors and local managers' involvement in the ABC
project (MINVOLVE).
4.3. Evaluation measures of the ABC system
As in previous studies we employ an overall
evaluation of the ABC system (OVERALL) that
allows respondents to self-de®ne the evaluation
criteria. However, as research question 2.1 indi-
cates, this raises the question: ``What criteria are
embedded in overall assessments of ABC sys-
tems?'' Content analysis of 236 taped interviews is
used to explore this question.
10
Full text tran-
scripts of the 236 interviews were searched for key
words related to ABC system evaluations. Search
results yielded 129 respondents'' opinions.
11
The
129 respondents represent 20 of the 21 sites and
are split in approximately the same proportion as
the survey respondents (Table 2) between the ®rms
and between ABC developers and managers. After
identifying discussions of ABC system evaluation,
the transcripts were read by a researcher and a
research assistant. Three evaluation criteria
emerged: (1) use of ABC data for cost reduction;
(2) use of ABC data for process improvements;
and, (3) improved accuracy of product cost infor-
mation relative to the traditional cost system. The
10
An analysis software package designed for non-numerical,
unstructured data (NU.DIST
1
) was used. The researcher codes
interview passages related to constructs of interest and attri-
butes of the interviewee. The software uses these codes to create
a structured index that is useful for investigating systematic
response patterns.
11
Some interviewees did not believe that they had sucient
knowledge about ABC systems to o?er an opinion about sys-
tem e?ectiveness, while others were not asked to discuss the
issue.
S.W. Anderson, S.M. Young / Accounting, Organizations and Society 24 (1999) 525±559 537
researcher and research assistant independently
coded the responses as belonging primarily to one
of the three categories. The codes were compared
and di?erences were discussed and resolved.
Although respondents occasionally combined the
®rst and second criteria in their discussion, very
few respondents discussed the third criterion in
conjunction with either of the others. Conse-
quently, we combine the ®rst and second groups
to form two groups who di?er in the way that they
de®ne an e?ective ABC system. In the ®rst group
are 67 respondents who de®ne e?ectiveness as use
of ABC data in cost reduction or process improve-
ments. In the second group are 47 respondents who
believe that increased cost accuracy de®nes an
e?ective ABC system.
12
Contingency tables are used to evaluate the
association between opinions about evaluation
criteria and: the respondents' company; whether
the respondent worked in a plant that faced sig-
ni®cant external competition; whether the respon-
dent was an ABC system developer; whether the
respondent claimed to have received training in
ABC; and the respondent's job title. Small sample
sizes cause some contingency tables to have
observed and expected counts that violate asymp-
totic assumptions for normal chi-square estima-
tions. Consequently, we use exact test procedures
that do not impose distributional assumptions.
Comparing di?erences between respondents who
evaluated ABC system e?ectiveness based on use
in cost reduction or process improvement with
those who base their opinion on improved accu-
racy of cost data, respondents' job title is the only
signi®cant (p