The impact of participation in strategic planning and action planning on management control effectiveness: An analysis of independent and joint effects

Abstract

This research paper examines the independent and joint effects of participation in strategic planning and action planning. There is extensive research about employee participation in both the fields of strategic planning and budgeting. However, there is a lack of research about the interaction between participation in strategic planning and budgeting. Drawing on the research on participation in decision-making processes, the hypothesis is that strategic planning and action planning have both independent and joint effects on MC effectiveness. The research study draws on a large database assembled by researchers from eleven different countries. The total data set consists of personal interviews with top managers of 807 SBUs. Participation is operationalized with respect to both ends and means. The analysis shows that participative action planning has positive, direct effects on MC effectiveness, while no significant association is found for participation in strategic planning. In contrast to expectations, we also find that participative strategic planning and participative action planning decrease the effectiveness of each other, implying that they function as substitutes. We discuss and theorize further in explaining this interesting finding.