Mediating effect of strategic management accounting practices in the relationship between intellectual capital and corporate performance evidence from vietnam

UNIVERSITY OF ECONOMICS, HO CHI MINH CITY ---TRINH HIEP THIEN Mediating effect of strategic management accounting practices in the relationship between intellectual capital and corporate

UNIVERSITY OF ECONOMICS, HO CHI MINH CITY

-TRINH HIEP THIEN

Mediating effect of strategic

management accounting practices in the relationship between intellectual capital and corporate performance

Evidence from Vietnam

A dissertation submitted for the Degree of

Doctor of Philosophy in Accounting

May 2019

ACCOUNTING PRACTICES IN THE RELATIONSHIP BETWEEN INTELLECTUAL CAPITAL AND CORPORATE PERFORMANCE

EVIDENCE FROM VIETNAM

Trinh Hiep Thien

MPAcc (University of Sydney), MBA (UEH), BBus (UEH), ACMA, CGMA

A dissertation submitted for the Degree ofDoctor of Philosophy in Accounting

UNIVERSITY OF ECONOMICS, HO CHI MINH CITY

Submitted to School of UEH Graduate

Title of dissertation: Mediating effect of strategic management accounting practices

in the relationship between intellectual capital and corporateperformance – Evidence from Vietnam

Academic Supervisor: Dr Doan Ngoc Que

Dr Le Dinh Truc Date of Final Defense:

Final Defense Committee:

Defense Committee Chairperson

Accepted by the School and the University in partially fulfillment of the requirements for the degree of Doctor of Philosophy in Accounting

The work described in this dissertation is original based on raw data collected by

me, except where due acknowledgement is made in the text

I hereby declare that this material has not previously submitted, either in full or in part, for a degree at this or any other institution

Ho Chi Minh City, May 31st, 2019

TRINH HIEP THIEN

LIST OF TABLES I

LIST OF FIGURES II

LIST OF ABBREVIATIONS III

ABSTRACT IV

INTRODUCTION 1

1 Background 1

2 Research questions and research objectives 3

3 Research object and research scope 4

4 Methodology 5

5 Outline of the dissertation 5

CHAPTER 1: LITERATURE REVIEW 7

1.1 Review of international studies of intellectual capital 7

1.1.1 Stages in developing intellectual capital as a research field 8

1.1.2 Research trends on intellectual capital in the accounting discipline 10

1.1.3 Research methods used to study intellectual capital 14

1.1.4 Review of studies investigating the relationship between intellectual capital and corporate performance 16

1.2 Review of international studies of strategic management accounting 18

1.2.1 Research on conceptualizing strategic management accounting 18

1.2.2 Research on strategic management accounting techniques 20

1.2.3 Research on the relationship between environment, strategy choice and strategic management accounting practices 22

1.2.4 Research on strategic management accounting process 22

1.2.5 Review of studies investigating the relationship between strategic management accounting practices and corporate performance 24

1.3 Review of studies of intellectual capital and strategic management accounting in Vietnam 25

1.3.2 Research on intellectual capital in Vietnam 27

1.3.3 Research on strategic management accounting in Vietnam 28

1.4 Research gaps 30

1.4.1 Lack of studies concerning performance implication of intellectual capital in association with the mediating role of SMA practices 30

1.4.2 Lack of empirical research concerning the relationship between intellectual capital and each group of SMA practices 31

1.4.3 Lack of Vietnamese empirical studies on intellectual capital and SMA practices 31

SUMMARY OF CHAPTER 1 33

CHAPTER 2: THE CONCEPTS AND INTELLECTUAL CAPITAL MEASUREMENT MODELS 34

2.1 Definition of intellectual capital 34

2.2 Components of intellectual capital 37

2.2.1 Human capital 37

2.2.2 Structural capital 38

2.2.3 Relational capital 39

2.3 Definition of corporate performance 41

2.4 Determinants of strategic management accounting practices 43

2.5 Intellectual capital measurement models 46

SUMMARY OF CHAPTER 2 49

CHAPTER 3: THEORETICAL FRAMEWORK AND HYPOTHESES DEVELOPMENT 50

3.1 Mediating effect of strategic management accounting practices in the relationship between intellectual capital and corporate performance 50

3.1.1 Human capital, structural capital and relational capital reciprocally affect each other (H1 ) 51

3.1.2 Intellectual capital impacts on SMA practices (H ) 2 52

3.1.2.1 Underlying theoretical framework 52

3.1.3 Intellectual capital impacts on corporate performance (H3 ) .56

3.1.3.1 Underlying theoretical framework 56

3.1.3.2 Hypotheses development (H ) 3 57

3.1.4 SMA practices impact on corporate performance (H4 ) .59

3.1.4.1 Underlying theoretical framework 59

3.1.4.2 Hypothesis development (H4 ) .60

3.1.5 The mediating role of strategic management accounting practices in the relationship between intellectual capital and corporate performance (H5 ) .62

3.2 Associations between intellectual capital components and each group of strategic management accounting practices 64

3.2.1 Underlying theoretical framework 65

3.2.2 Hypotheses development (H6 ) .66

3.3 Summary of the correlations in the two research models 68

SUMMARY OF CHAPTER 3 71

CHAPTER 4: RESEARCH METHODOLOGY 72

4.1 Selection of an appropriate regression approach 72

4.2 Research process 73

4.2.1 Evaluation of reflective measurement scales 75

4.2.2 Evaluation of formative measurement scales 77

4.2.3 Evaluation of the fitness of structural model 78

4.2.4 Evaluation of the significance and the stability of path coefficients 79

4.3 Unit of analysis and sample size 80

4.3.1 Unit of analysis and informants 80

4.3.2 Sample size 81

4.4 Variables measurement 83

4.4.1 Measures of each component of intellectual capital 83

4.4.1.1 Operationalization of value added (VA) 84

4.4.1.2 Operationalization of human capital efficiency (HCE) 85

4.4.1.4 Operationalization of relational capital efficiency (RCE) 91

4.4.2 Measures of the variables of strategic management accounting practices 91

4.4.3 Measures of the variables of corporate performance 92

4.4.4 Measures of control variables 94

SUMMARY OF CHAPTER 4 96

CHAPTER 5: SAMPLE CHARACTERISTICS AND MEASUREMENT SCALES ASSESSMENT 97

5.1 Data collection to construct the variables of SMA practices 97

5.1.1 Questionnaire structure 97

5.1.2 Translating and pilot testing of the questionnaire 98

5.1.3 Main data collection procedure 99

5.2 Sample characteristics 101

5.2.1 Industry type 101

5.2.2 Organization size and SMA practices type 102

5.2.3 Respondents’ position type 103

5.3 The outcomes of reflective measurement scales assessment 104

5.4 The outcomes of formative measurement scales assessment 106

5.4.1 Calculation of measurement scale of innovation capital efficiency 106

5.4.2 Calculation of measurement scale of organizational capital efficiency 106

5.4.3 Assessment of formative measurement scales related to the structural capital efficiency variable 108

5.5 Calculation of the variable of investment efficiency 110

5.6 Descriptive statistics and collinearity assessment 111

SUMMARY OF CHAPTER 5 113

CHAPTER 6: DATA ANALYSIS AND DISCUSSION 114

6.1 Evaluation of the fitness of theoretical models 114

6.2 Empirical results – testing of reciprocal correlations between intellectual capital components (H1 ) .115

components and strategic management accounting practices (H2 ) .117

6.4 Empirical results – testing of the direct correlations between strategic management accounting practices and corporate performance (H4 ) .120

6.5 Empirical results – testing of the direct correlations (H3 ) and indirect correlations between intellectual capital components and corporate performance (H5 ) .121

6.6 Empirical results – testing of the associations of strategic management accounting practices and intellectual capital components (H6 ) .127

6.7 Empirical results – testing of control variables 130

SUMMARY OF CHAPTER 6 132

CHAPTER 7: IMPLICATIONS FOR MANAGING INTELLECTUAL CAPITAL BY STRATEGIC MANAGEMENT ACCOUNTING PRACTICES 133

7.1 A discovery of three-stage value-creating process 133

7.2 Implications for the management, policy and research of intellectual capital 135

7.2.1 Recommendations for leaderships 135

7.2.2 Recommendations for policymakers 137

7.2.3 Recommendations for academic communities 139

7.3 Implications for integration of strategic management accounting practices into intellectual capital management 140

7.3.1 Orientations to manage intellectual capital by strategic cost management 140

7.3.2 Orientations to manage intellectual capital by competitor accounting 142

7.3.3 Orientations to manage intellectual capital by strategic accounting 145

7.3.4 Orientations to manage intellectual capital by customer accounting 147

SUMMARY OF CHAPTER 7 150

CONCLUSION 151

1 Summary of research findings 151

2 Theoretical contributions 152

3 Practical managerial contributions 153

4 Limitation 155

5 Further research directions 156

REFERENCES 161

APPENDIX 1: PREVIOUS STUDIES INVESTIGATING THE RELATIONSHIP BETWEEN IC AND CORPORATE PERFORMANCE 185

STRATEGIC MANAGEMENT ACCOUNTING 188

APPENDIX 3: PREVIOUS STUDIES INVESTIGATING THE RELATIONSHIP BETWEEN STRATEGIC MANAGEMENT ACCOUNTING AND CORPORATE PERFORMANCE 192

APPENDIX 4: ELEMENTS OF HUMAN CAPITAL IN INTELLECTUAL CAPITAL REPORT 195

APPENDIX 5: ELEMENTS OF STRUCTURAL CAPITAL IN INTELLECTUAL CAPITAL REPORT 197

APPENDIX 6: ELEMENTS OF RELATIONAL CAPITAL IN INTELLECTUAL CAPITAL REPORT 199

APPENDIX 7: DESCRIPTIONS OF SMA TECHNIQUES 201

APPENDIX 8: CATEGORIZATION OF THE IC MEASUREMENT METHODS UNDER MARKET CAPITALIZATION MODEL 205

APPENDIX 9: CATEGORIZATION OF THE INTELLECTUAL CAPITAL MEASUREMENT METHODS UNDER RETURN ON ASSETS MODEL 208

APPENDIX 10: CATEGORIZATION OF THE IC MEASUREMENT METHODS UNDER DIRECT IC MODEL 210

APPENDIX 11: CATEGORIZATION OF THE INTELLECTUAL CAPITAL MEASUREMENT METHODS UNDER SCORECARD MODEL 213

APPENDIX 12: INDICATORS FOR REFLECTIVE MEASUREMENT OF SMA CONSTRUCTS 215

APPENDIX 13: SURVEY FORM IN ENGLISH 218

APPENDIX 14: SURVEY FORM IN VIETNAMESE 224

INDICATORS OF SMA CONSTRUCTS 230

APPENDIX 20: THE ESTIMATION OF ORGANIZATIONAL CAPITAL 239

APPENDIX 21: THE ESTIMATION OF INVESTMENT EFFICIENCY 241

COEFFICIENTS 244

APPENDIX 23: COLLINEARITY STATISTICS – INNER VIF VALUES 246

APPENDIX 24: PLS ALGORITHM RESULT WITH THE ASSET TURNOVER VARIABLE 247

APPENDIX 25: PLS ALGORITHM RESULT WITH THE INVESTMENT EFFICIENCY VARIABLE 249

APPENDIX 26: PLS ALGORITHM RESULT WITH THE RETURN ON EQUITY VARIABLE 251

APPENDIX 27: PLS ALGORITHM RESULT WITH THE TOBIN Q VARIABLE 253

APPENDIX 28: REGRESSION RESULTS BETWEEN IC COMPONENTS AND EACH GROUP OF SMA PRACTICES 255

APPENDIX 29: THE INTELLECTUAL CAPITAL BENCHMARKING SYSTEM FRAMEWORK 256

APPENDIX 30: LIST OF PARTICIPATING FIRMS 257

LIST OF TABLES

Table 1.1 Milestones of significant contributions to the identifications, measurement and

reporting of intellectual capital 9

Table 1.2 Topics of intellectual capital research in the accounting discipline 11

Table 1.3 Methods used in intellectual capital accounting research 14

Table 1.4 Literature review of essential techniques in strategic management accounting toolbox 20

Table 1.5 Research trends on management accounting in Vietnam 28

Table 2.1 Definitions of intellectual capital 35

Table 2.2 Some key differences between strategic and traditional management accounting 45

Table 2.3 Summary of measurement approaches that are mainly used in intellectual capital research 47

Table 3.1 Integration of firm-level strategy and reliance on human capital 54

Table 5.1 Development of the final sample in the main study 100

Table 5.2 The number of respondents by Industry type 102

Table 5.3 The number of respondents by Organization size and SMA practices type .103

Table 5.4 Number of Respondents by Positions type and Working Years type in the current organization 104

Table 5.5 VIF, Significance and relevance of formative indicators 109

Table 5.6 The coefficient of explanatory variables in Equation 4.20 110

Table 6.1 Summary of the SRMR results of 5-testing models 114

Table 6.2 Summary of the results of the first hypothesis testing 116

Table 6.3 Summary of the results of the second hypothesis testing 119

Table 6.4 Summary of the results of the forth hypothesis testing 120

Table 6.5 Summary of the results of the third and fifth hypothesis testing 126

Table 6.6 Summary of the results of the sixth hypothesis testing 130

Table 6.7 Summary of the testing results of control variables 131

Table 7.1 Example of intellectual capital components in value chain 141

LIST OF FIGURES

Figure 2.1 Four-stage model of corporate market valuation 43

Figure 3.1 The first research model 51

Figure 3.2 Basic contingency framework 60

Figure 3.3 The second research model 64

Figure 4.1 The research process 74

Figure 4.2 Calculation of sample size of the first research model 82

Figure 4.3 Calculation of sample size of the second research model 82

Figure 4.4 The value-added intellectual coefficient model 83

Figure 5.1 Assessment of convergent validity of formative indicators relative to structural capital 108

Figure 7.1 The three-stage value-creating process by IC and SMA practices 134

Figure 7.2 Five-step intellectual capital management model 137

Average variance extracted

The Chartered Institute of Management Accountants

Explanatory factor analysisHuman capital

Hochiminh Stock ExchangeHanoi Stock ExchangeHeterotrait-Montrait testInvestors assigned market valueIntellectual capital

Intellectual capital benchmarking systemOrdinary least square

Partial least square structural equation modellingResource-based view

Relational capitalResearch and developmentResearch objective

Return on assetsReturn on equityStructural capitalStrategic cost managementStructural equation modellingStandard deviations

Selling and general administrative expensesStrategic management accounting

Small and medium enterprisesStandardized root mean square residualValue added

Value Added Intellectual CoefficientVariance inflation factor

ABSTRACTTitle of dissertation: Mediating effect of strategic management accounting practices

in the relationship between intellectual capital and corporateperformance – Evidence from Vietnam

Abstract:

Reason for writing – The organizations with strong level of intellectual capital should

have developed management accounting with strategic directions that support suchendeavors In the history of IC accounting research, the focus of empirical studies hasalways been the direct relationship between intellectual capital components and corporateperformance A little research investigates that intellectual capital has an indirectrelationship to corporate performance via the mediating role of management accounting.Furthermore, Vietnamese managers have not actually realized the critical value ofintellectual capital in their managing process; hence, this study is expected to raiseVietnamese managers’ awareness in terms of intellectual capital

Purpose – This study investigates empirically the issue of whether an organization

develops strategic management accounting (SMA) system that supports intellectualcapital (IC) which in turn to enhance its financial performance If doing so, how SMAmanages IC components to boost an organization’s financial performance

Method – Using secondary data drawn from Vietnamese listed companies and Public’s

Value-Added Intellectual Coefficient (VAICTM) as the efficiency measure of ICcomponents and primary data through questionnaire survey to investigate the level ofSMA practices, the author constructs regression model to examine the relationshipbetween IC components and corporate performance via the mediating role of SMApractices In addition, this study also analyses which group of SMA practices are related

to manage which components of IC

Findings – The results support the hypothesis that firms’ IC has a positive impact on the

level of SMA practices and corporate performance The author finds that under the mediatingrole of SMA practices, SMA practices fully or partially mediates the positive influence of ICcomponents over corporate performance Finally, in terms of IC management, the studyhighlights only strategic accounting approaches are used to manage human capital Thefindings validate the usefulness of all groups of SMA practices as

techniques to manage structural capital Except for strategic accounting approaches, threeremaining groups of SMA practices are most appropriately situated as techniques ofrelational capital management.

Originality/ value – This study contributes to bridge the research gap and adds to

existing resources management literature on the Resources (i.e intellectual capital) –

Practices (i.e SMA practices) – Performance (i.e financial performance) link Itdiscoveries three-stage value creating process and thereby presents the implications forintegrations of SMA practices into IC management In addition, this study contributes to

a growing body of literature providing empirical evidence on IC and SMA practices roles

in improving investment efficiency

Conclusion: This study provides an alarming to Vietnamese managers to become more

aware of the role played by intellectual capital in generating a firm’s value, with supportfrom the techniques of SMA Therefore, new demands of Vietnamese managers are beingimposed on management accounting to capture, measure and report IC value andperformance

Keywords: Corporate performance, human capital, intellectual capital, strategic management accounting practices, structural capital, relational capital

1 Background

It is often argued that organizations in today’s knowledge-based economy do notonly initially invest in physical assets, nevertheless in intangibles, as these are but alsotoday’s value drivers (Mehralian, Rasekh, Akhavan, & Ghatari, 2013) Amongst theseintangible assets, intellectual capital plays a key role, and due to the huge investments inintellectual capital, its management becomes a critical issue given the direct and indirectadvantages Some of these advantages may consist of the added value of the knowledgethat is processed, the learning process included in the measurement of intellectual capital(Roos, Roos, Dragonetti, & Edvinsson, 1997), the enhancement of sustainablecompetitive advantages arising from the strategic assets i.e intellectual capital (Riahi-Belkaoui, 2003), the determinants and the foremost sources of company success (Alum &Drucker, 1986) Like the countries with free trading, Vietnam has adopted an open-doorpolicy since 1990’s, the level of competition in the economy has been thereforeincreasing significantly for most Vietnamese enterprises when Vietnam’s integration inAEC and TPP, thereby, managers in Vietnamese firms should be aware of the importance

of intangibles as well intellectual capital, which achieve sustainable competitiveadvantages in the international competitive arena This will be a motivator to impulsescholars doing research on the influence of intellectual capital in the Vietnamese context

Based on the concerns of the society, the concept of intellectual capital was introduced

in the large body of literature and has expanded in three stages The first stage started in the1990s and concentrated on increasing awareness, defining concepts, reviewing case studiesand developing primary definitions (Mehralian et al., 2013) The second stage, which started

in the year of 2000, consider measurement, modelling, international case studies, and variouslevel of analysis (Mehralian et al., 2013) Therefore, there are a numerous piece of research

in many countries, affirming the correlation between intellectual capital and corporateperformance, that has been undertaken by a variety of research methods In general, thesestudies find a positive relationship between intellectual capital (or some of its components)and corporate performance The third stage of IC research, which began from 2004, focuses

on the managerial implications of managing IC Although most of the studies on intellectualcapital have been conducted in developed Western countries and some of Asian developingcountries such as Thailand, Malaysia,

Hong Kong, this specific area of intellectual capital has been neglected in the body ofVietnamese literature.

On the other hand, as being introduced by CIMA, strategic management accounting is aform of management accounting which emphasis is placed on information which relates tokey strategic decision (CIMA, 2014a) Simultaneously, following by resource-based theory,intellectual capital is the asset used for strategic purposes Strategic management accountingwould therefore appear to have a potential role to play in intellectual capital management.Notwithstanding the intellectual capital literature in accounting is varied but mainlyaddresses external reporting or the measurement or the valuation of such strategic assets,there has been little discussion on the two-way relationship between intellectual capital andstrategic management accounting Firstly, the organizations with strong levels of intellectualcapital will have the assets as the necessary concrete to develop strategic managementaccounting system to support the managerial efforts in terms of identifying, measuring, andcommunicating the value drivers (Tayles, Pike, & Saudah, 2007) Secondly, once strategicmanagement system has been evolved, it will address the issues of identifying, measuring,and communicating intellectual capital to support the strategic objectives The challenge,therefore, is to devise a system of strategic management accounting practices that are inalignment with the unique attributes and the competitive strategies of the company In otherwords, it must be possible to identify and value, with some precision, the componentelements of the generic intellectual capital of the company Furthermore, when analysing theVietnamese transitional economic context, Vietnamese enterprises have gradually applied theadvanced accounting techniques, in line with market mechanisms because many whollyforeign-owned enterprises established in Vietnam have been providing practical knowledge

of strategic management accounting, which has been introduced to Vietnamese practitionersand scholars Therefore, it is undeniable that medium and large enterprises in Vietnam do nothave any understanding of how to implement strategic management accounting in theirbusiness operations Not surprisingly, the issue of strategic management accounting therebystarted to be studied in Vietnam since the 2010s Based on all above arguments, the authorbelieves the necessity of studying the correlation between intellectual capital, strategicmanagement accounting practices and corporate performance in the case study of Vietnam.Vietnamese business environment will provide enough information about intellectual capital

as well as strategic management accounting practices that support such

research endeavours More particularly, the author emphasizes “the mediating role of

strategic management accounting practices in the relationship between intellectual capital and corporate performance”.

2 Research questions and research objectives

The research gaps mentioned in Section 1.4 suggest that a need to investigate theeffects of intellectual capital and strategic management accounting practices on corporateperformance in the organizations operating in the transitional economy such as Vietnambecause these issues have not been discovered in such economy This also raises the issue

of whether an organization should develop strategic management accounting system thatsupports intellectual capital which in turn to enhance its financial performance If doing

so, it is also inevitable that how strategic management accounting manages intellectualcapital to boost an organization’s financial performance Accordingly, three researchquestions have been proposed:

Research question 1: What is the direct effect of intellectual capital components

on corporate performance in Vietnamese enterprises?

Research question 2: What is the effect of intellectual capital components on

corporate performance in the presence of strategic management accountingpractices?

Research question 3: How do strategic management accounting practices handle

each component of intellectual capital to improve corporate performance?

Overall research objective:

The overall research objective of this dissertation is to empirically examine theassociation between intellectual capital, strategic management accounting practices andcorporate performance More importantly, it investigates the mediating effect of strategicmanagement accounting practices on the relationship among intellectual capitalcomponents and three financial dimensions of corporate performance It also empiricallyanalyses the role of strategic management accounting practices playing the management

of intellectual capital components

Specific research objectives:

- RO1: Testing the direct impact of each of intellectual capital components on corporate performance

- RO2: Examining the direct influence of strategic management accounting practices over corporate performance.

- RO3: Investigating an indirect path between intellectual capital componentsand corporate performance through the mediating role of strategicmanagement accounting practices

- RO4: Empirically analysing which group of strategic management accountingpractices (i.e strategic cost management, competitor accounting, strategicaccounting and customer accounting) are related to manage which components

of intellectual capital

- RO5: Providing additional evidence on the interconnection of intellectual capital components

3 Research object and research scope

The research object of this dissertation is the relationship among intellectualcapital, strategic management accounting practices and corporate performance.Therefore, the unit of analysis is a business organization To investigate SMA practicesapplied in a business organization, the data is collected through questionnaire surveywhich is sent to SMA practitioners; thereby, the unit of observation is the informant (i.e.managers or members of top management) with knowledge about accounting, planning orfinance and at least two years of working experience in the current organization.Moreover, the unit of observation is also financial information in annual reports orfinancial statement reports which draw financial data on IC and corporate performance

The scope of this study is limited in three aspects Firstly, this study selects Vietnam,

a developing country in Asia with a transitional economy and a collectivist culture, as theresearch site for observation and empirical testing Secondly, the observed businessorganizations are enterprises listed on Hochiminh Stock Exchange (HoSE) and Hanoi StockExchange (HNX) in order the author to collect financial data more conveniently Thirdly,since the survey related to SMA practices is conduct in the year of 2016, this study only uses

2016 financial information about IC and financial performance of the public companieswhere respondents has been working instead of using panel data with many successive years

to analyse intellectual capital alike the previous studies However, to calculate somevariables such as organizational capital, innovation capital, investment

efficiency, the author has to collect financial data in the period of 7 years (from 2010 to2016).

4 Methodology

This study first reviews the literature related to intellectual capital, strategicmanagement accounting practices, corporate performance before proposing two researchmodels with six hypotheses This study mainly uses quantitative research method byusing empirical survey data and financial data obtained from a sample of at least 127public enterprises in Vietnam for the year of 2016 Due to the complex of the researchmodels with mediators and a small sample size context, data analysis is conducted byapplying partial least squares structural equation modelling (PLS-SEM) with the support

of SPSS 24.0 and SmartPLS 3.1 software packages

5 Outline of the dissertation

Besides the parts of introduction and conclusion, this dissertation is organized with

7 chapters, as follows:

Introduction part This part states the background well as the research questions

and objectives Then it briefly describes the research methodology and provides the

research scope

Chapter 1: Literature review This chapter reviews the literature in terms of

intellectual capital, strategic management accounting studied in many different countries

as well as in Vietnam so as to reveal the research gaps which are desirable researchdirections to develop the research objectives of this dissertation

Chapter 2: The concepts and intellectual capital measurement models This chapter

not only determines the definitions of intellectual capital and its components but alsodiscusses the concepts of corporate performance and strategic management accountingpractices in order to explain the relationships amongst these concepts Next, the existingtheories underpinning the measurement of intellectual capital are introduced in theliterature extant so that the measurement of the intellectual capital variables are clearlyunderstood in the next chapters

Chapter 3: Theoretical framework and hypotheses development This chapter focuses

on underlying conceptual framework to develop the testable hypotheses of the two

research models, that answer research questions to bridge research gaps This chapterthen presents the arguments that led to six testable hypotheses.

Chapter 4: Research methodology This chapter presents in detail the development

of the research methodology It describes and explains how the constructs in thetheoretical model are operationalised and measured It also discusses the unit of analysisand informants as well as sample size

Chapter 5: Sample characteristics and measurement scales assessment This chapter

firstly demonstrates how to collect data to construct the variables of SMA practices and thepilot test to examine the attributes of the indicators of SMA practices before collecting maindata The next is to represent the refinement of the measurement scales from the dataobtained in Vietnamese public enterprises Finally, it provides descriptive statistics of theresearch data and an evaluation of collinearity issue in the inner structural models

Chapter 6: Data analysis and discussion Chapter 6 presents and analyses the data

used in this study It is started at the evaluation of the fitness of theoretical models Thenext sections present the empirical results of examining the hypotheses developed inChapter 3 It includes the outcomes of the direct regressions and the mediated pathregressions that are processed by the tool of SmartPLS 3.1 The empirical results arearranged in order from the first to sixth hypothesis and finally the testing results ofcontrol variables Not only is the analysis of the data described but corresponding to eachsignificant proposition it is also explained in the managerial context

Chapter 7: Implications for managing intellectual capital by strategic management

accounting practices The managerial implications of this study are outlined in this

chapter It is started at a discovery of three-stage value creating process, which is inferred

from the testing results of six hypotheses This chapter also presents the suggestions forleaders, policymakers and academic community the approaches to manage intellectualcapital Particularly, the last section suggests the orientations how to manage intellectualcapital following each group of strategic management accounting techniques

Conclusion part Following the introductory part, a summary of the main findings

is presented in this part Then, the theoretical contributions and managerial contributions

of this study are also summarized, followed by a discussion on the research limitationsand suggested directions for further research

CHAPTER 1: LITERATURE REVIEW

The first chapter reviews the literature in terms of intellectual capital, strategicmanagement accounting studied in many different countries as well as in Vietnam so as

to reveal the research gaps which are desirable research directions to develop the researchobjectives of this dissertation This chapter is structured into four main sections Section1.1 presents history, research trends as well as methods used to discover the empiricalrelationships between intellectual capital and corporate performance in the accountingdiscipline Section 1.2 continues to review the international studies to identify four mainresearch themes of strategic management accounting focused by scholars Next, section1.3 is developed as a distinctive part to review intellectual capital and strategicmanagement accounting studies conducted in Vietnam since this dissertation isundertaken in Vietnamese context All above sections are aimed at identifying threemajor research gaps in the Section 1.4

1.1 Review of international studies of intellectual capital

When changing from an industrial-based economy to knowledge-based economy, afirm’s value is no longer measured solely on the basis of financial results; rather thanvalue of activities that develop knowledge resources must also be considered (Stewart &Ruckdeschel, 1998) Doing so helps understanding how employees, stakeholders andactivities contribute into value creation, leading to the challenge of how to identify,measure and report on the value of intellectual capital (Dumay, Guthrie, & Ricceri,2012) Therefore, the emergence of the intellectual capital topic in the mid-1990s hasproduced literature spanning a range of research disciplines In retrospect, it appears thatlike a research fashion (Alcaniz, Gomez-Bezares, & Roslender, 2011), the intellectual

capital’s specialist journals have been continuously developed including the Journal of

Intellectual Capital, the International Journal of Learning and Intellectual Capital, the Journal of Human Resource Costing and Accounting, as well as within the pages of many

leading business and management journals, with the Accounting, Auditing and

Accountability Journal, European Accounting Review, the Accounting Organizations and Society Journal especially important in the accounting discipline of intellectual capital

measurement and management

1.1.1 Stages in developing intellectual capital as a research field

The historical perspective is a vital component in fostering an understanding of thecontext within which intellectual capital came to be viewed as the essential businesselement that it is today Petty and Guthrie (2000) also outlined two stages in researchingintellectual capital The first-stage efforts typically focused on raising awareness as towhy recognizing and understanding the potential of IC towards creating and managingsustainable competitive advantages is extremely essential (Petty & Guthrie, 2000).Additionally, attempts were characterized by the creation of guidelines and standards.These early publications pay attention to the fact that intellectual capital is somethingsignificant and should be measured and reported, but without referring to specificempirical research (Petty & Guthrie, 2000) Most research conducted prior to the mid-1990s is considered first stage (Petty & Guthrie, 2000) The second stage of IC researchgathered further evidence, at an organizational level, focusing on the how of IC capitaland labour market reacted towards the potential for IC to create value (Petty & Guthrie,2000) In general, the first and second stages contributed to a commonly acceptedterminology of intellectual capital Several classifications of IC have been provided,resulting in the identification of three main IC components Together with the appearance

of three components of IC, the researchers defined the accounting discipline of IC as amanagement, measurement and accountability toward IC (Dumay et al., 2012).According to Dumay et al (2012), a third stage of IC research is emerging and ischaracterised by research critically examining IC in practice, devoted to the managerialimplications of how to use IC in managing a company, at the beginning with the 2004special edition of Journal of intellectual capital entitled “IC at the crossroads – theory andresearch” by Marr and Chatzkel (2004) While second stage IC research is predominatelydevoted to evaluating IC’s influence on financial outcomes, third-stage IC research

focuses on “the deeper managerial implications of managing IC in all types of

organisations and can be classified as bottom-up research as opposed to top-down”

(Dumay & Garanina, 2013) Thus, the third stage considers value from IC is not justmonetary but incorporates worth and importance of the products and services tocustomers and other stakeholders (Dumay &Garanina, 2013)

Despite looking at three developing stages of IC, Guthrie (2001) provides a timeline

of major IC research milestones, as summarized in Table 1.1

Table 1.1 Milestones of significant contributions to the identifications, measurement and reporting of

Coalition of Service Industries (SCSI) (1995))

 Kaplan and Norton (1992) introduce the concept of a BalancedScorecard The Scorecard evolved around the premise that

“what you measure is what you get”

Mid  Nonaka and Takeuchi (1995) pre se nt their highly influential1990s work on “the knowledge creating company” Although the book

concentrates on “knowledge”, the distinction between knowledgeand Intellectual Capital is sufficiently fine as to make it relevant tothose with a pure focus on Intellectual Capital

 Also in 1994, a supplement to Skandia’s annual report is producedwhich focuses on presenting an evaluation of the company’s stock

of Intellectual Capital “Visualizing Intellectual Capital” generates

a great deal of interest from other companies seeking to followSkandia’s lead (Edvinsson & Sullivan, 1996)

 Pioneers of the Intellectual Capital movement publish bestsellingbooks on the topic (Kaplan and Norton (1996); Edvinsson andSullivan (1996); Sveiby (1997)) Edvinsson and Malone’s work,

in particular, is very much about the process and the “how” ofmeasuring intellectual capital.

Late  Intellectual Capital becomes a popular topic with researchers and1990s academic conferences, working papers, and other publications

find an audience

 An increasing number of large scale projects (e.g the MERITUMproject; Danish; Stockholm) commence which aim, in part, tointroduce some academic rigour into research on IntellectualCapital

 In 1999, the OECD convenes an international symposium inAmsterdam on intellectual capital (Organization for EconomicCo-operation and Development (OECD), 2000)

2000 -  Through the 2000s and onwards, IC research is continuously

2016 disseminated to the wider accounting research community The

generalist accounting journals and generalist accountingconferences have opened the doors to special editions to accept

IC accounting papers (Dumay et al., 2012)

 There is an increasing trend on knowledge management research besides intellectual capital research (Dumay et al., 2012)

Source: Summarized by the author on the sources of Guthrie (2001) and Dumay et al (2012)

1.1.2 Research trends on intellectual capital in the accounting discipline

Although it is generally accepted that intellectual capital is a knowledge resource thatneeds to be well managed, it can be analysed not just from a microeconomic viewpoint, butalso from a macroeconomic aspect The issue of intellectual capital is studied in fourperspectives, such as economic, strategic, managerial and accounting perspective (Alcaniz etal., 2011) For example, on the economic perspective, intellectual capital is related to thewealth of countries which possess it such as high technology, well-educated labour forces,etc (Stewart & Ruckdeschel, 1998) On the strategic perspective, the success of a company’sstrategy is critically dependent no longer on its tangible assets, but on its intangibles, and theaccumulation of intellectual capital is also determined by strategy as a

consequence of a two-way relationship existing between resources and strategy(Brooking,1996) On the managerial perspective, types of capital (i.e physical, financial,and intellectual capital) combine to form an organization’s resources, and thus such need

to be well identified and managed as the roots of an organization’s value (Bontis, 1999).However, this study concentrates on numerous insights on the issues involved inaccounting for intellectual capital In the accounting discipline, as showed in Dumay et

al (2012)’s paper examining 423 journal papers in terms of intellectual capital during theperiod from 2000 to 2009 (Table 1.2), the popular focus of IC accounting research ismanagement accounting and external reporting but little has been published aboutaccountability, governance and auditing

Table 1.2 Topics of intellectual capital research in the accounting discipline

Table 1.2 presents the focus of research trends on intellectual capital in the

accounting discipline, as follows:

 External reporting: The disclosure on IC can be voluntary and non-quantitativeand if IC is linked to firm performance, firms as well investors would benefitfrom this disclosure Therefore, a great deal research has been undertaken onintellectual capital disclosure practices in developed countries, a substantiallyless amount of research can be found on IC disclosure practices in emergingcountries (Wagiciengo & Belal, 2012) Amongst few studies available fromthe emerging economies’ context, most of them concentrated on the Asiancountries The studies have provided an empirical understanding of IC

disclosure practices by collecting a range of media in which IC disclosure wasmade including annual reports, website, corporate social responsibility reportsand others The findings of studies include variations in IC disclosure withcompany size and industrial sectors (Striukova, Unerman, & Guthrie, 2008),disclosure in Europe on relational capital around 49%, 30% related tostructural capital and 21% concerning human capital (Bozzolan, O'Regan, &Ricceri, 2006) The review suggests that most of the previous studies focused

on single year’s data by content analysis while only a handful of studies usedlongitudinal data Several researchers such as Bozzolan, Favotto, and Ricceri(2003), Bharathi Kamath (2008) used for longitudinal studies for detailedexamination of intellectual capital disclosure practices

 Accountability and governance: Some papers (Keenan and Aggestam (2001);

J Li, Pike, and Haniffa (2008)) examine the influence of corporate governancefactors on intellectual capital disclosure, using various disclosure measures.These papers hypothesise that significant relationships exist betweenintellectual capital disclosure in annual reports and board structure, roleduality, ownership concentration, audit committee size and frequency of auditcommittee meetings, controlling for listing age, firm size and profitability

 Management control: The extent of publications in management control andstrategy, as the most researched area of interest, is highlighted in Table 1.2,demonstrating 160 articles covering a wide range of management-relatedsubjects For examples, there were articles on the Balanced scorecards(Flamholtz, 2003) and its uses for managing IC (O'Connor & Feng, 2005),managing IC in different organization settings such as service organizations(Namasivayam & Denizci, 2006), banking industry (Puntillo, 2009) and for thenot-for-profit sector (Kong, 2009), and for mapping IC inside organizations(Hellström & Husted, 2004) Some studies (Tayles, Bramley, Adshead, and Farr(2002), Tayles et al (2007)) suggest the application of management accountingapproach to support the control of IC, that draws on the authors’ experience in theservice company environment These publications also indicate theappropriateness of management accounting techniques to control IC, such as lessreliance on traditional and zero-based budgeting, preferring the beyond

budgeting concept to control IC (Tayles et al., 2007), real options valuationbetter than capital budgeting approach to assess strategic IC investmentopportunities (Neil & Hickey, 2001).

 Performance measurement: In the early 1990s, various performancemeasurement frameworks were developed, to overcome the weaknesses offinancial-only measures (Tayles et al., 2007) Such models place greater focus

on intangible resources (Amir & Lev, 1996) such as key customers, internalprocesses and learning Commonly used models include Intangible AssetsMonitor (Roos, Edvinsson, & Dragonetti, 1997), and Skandia Navigator(Sveiby, 1997) which were particularly developed with intellectual capital inmind and the Balanced Scorecard (Kaplan & Norton, 1996) which had a moregeneral strategic focus The Balanced Scorecard (BSC), for example,considers relational capital (customer perspective), structural and humancapital (innovation, learning, and internal perspectives) and the impact of these

on shareholder goals (financial perspective) Lev (2001) advocates the ValueChain Scoreboard, to be used by both management and investors, which seeks

to report in a structured manner on the impact of intellectual capital oncorporate performance and valuation As many of these performancemeasurement frameworks have been developed or adapted to accommodate

IC, the greater part of the extant literature evidence the tested hypotheses thatfirms with relatively high intellectual capital are more likely to employ variousperformance measurement framework approaches linked to shareholder value

 Commentaries/ Policy statement: A group of articles did not have empiricalresearch and tended to be either commentaries or policy statements referred toPetty and Guthrie (2000), Brennan and Connell (2000), Roslender andFincham (2001), García-Meca (2005) as first-stage contributions This trend isconducted at the beginning of the decade and there were fewer at the end ofthe decade of the 2000s The initial focus was on understanding andexplaining the various facets of IC phenomenon, little interest in testinghypotheses These studies have given a rise with accounting literature totheoretical contributions on how to take IC components into account

1.1.3 Research methods used to study intellectual capital

As at journal paper of Dumay et al (2012) paper, the authors reviewed 423 journalpapers in terms of IC to conclude that there are five groups of research methods found.Table 1.3 indicates that commentary/ normative/ policy is the most commonly used,followed by survey/ questionnaire and next to case study/ interviews Dumay et al (2012)highlight that the trend over the last 10 years is a steady increase in empirical work, whilenormative work has declined Dumay et al (2012) are also alarming that there is a danger

of over-dependence on empirical studies unsupported by theoretical underpinning.Additionally, they also highlight a failure to convert IC theory into practice resulted from

a focus of top-down research instead of bottom-up performative research (Dumay et al.,2012)

Table 1.3 Methods used in intellectual capital accounting research

Survey/ questionnaire/ other empirical 103 24.3%

Theoretical review (literature review) 40 9.5%

a large Australia financial services company, named AusFinCo with over25,000 employees

 Content analysis: It has been conducted on annual reports by a number of ICresearchers who want to measure the level of IC disclosure This “involvescodifying qualitative and quantified information into predefined categories in

order to derive patterns in the presentation and reporting of information”(Dumay et al., 2012) The researchers used an identical framework (i.e Sveiby(1997)’s framework), which categories intangibles according whether theyaccompany with an organization’s internal structure, employee competence orexternal relationships Doing so helps to find that the key components of ICare inadequately identified, ineffectively managed and inconsistently reported.This method can be found in the studies of Brennan (2001), Olsson (2001),Guthrie, Petty, Yongvanich, and Ricceri (2004), Whiting and Miller (2008).

 Survey/ questionnaire/ other empirical: To conduct empirical research on IC, twoexisting IC measurement systems can be broadly classified as the accountingframework and the perceptual school of thought (Kannan & Aulbur, 2004) Onequantifiable and easily measure for IC under the accounting framework is VAIC.VAIC is offered as a measure of the efficiency of IC components via financialdata Alternatively, the perceptual school of thought concentrates on employees’perceptions and their needs for an effective knowledge management system(Kannan & Aulbur, 2004) Therefore, a survey was designed that taps into theintellectual capital constructs as well as business performance within the context

of the conceptual model Such a designed survey is sent to top management toevaluate IC components The use of survey/ questionnaire (Bollen, Vergauwen, &Schnieders, 2005; Bontis, Chua Chong Keow, & Richardson, 2000; Tovstiga &Tulugurova, 2007) or questionnaire combined with financial data (S Cohen &Kaimenakis, 2007) can be found in a great deal of research to indicate therelationship between IC or some of IC components and performance

 Commentary/ normative/ policy: The part of the extant literature evidence astrongly normative character; here the emphasis is essentially policy or practiceoriented, focusing on discussion about various alternative ways of identifying,measuring and reporting the growth of stocks of intellectual capital during anaccounting period (Alcaniz et al., 2011) To compose a normative paper, theresearcher applies the methodology which analyses the assumptions underpinningguidelines and frameworks that have been developed to provide an understanding

of the art in relation to measuring and reporting IC

(Abhayawansa, 2014) By another way, most commentary research in IC isregularly built on a basic theory derived from another research field to affirmthe writers’ arguments (Alcaniz et al., 2011).

 Theoretical (literature) review: To conduct literature review, the researchersread the selected papers based on both abstracts and full text of the articles todiscuss and make preliminary classifications With respect to the method ofliterature review, one author manually codes all the papers for the contents insimilarity while the second and the third authors re-check the coding forconsistency to find the outcome of what has happened in the field ofintellectual capital accounting research over the past decades Alternatively,some (Guthrie and Petty (2000), Dumay et al (2012)) used the meta-analysis

of the selected IC articles to answer the question of how and why this field ischanging The method of reviewing published articles have been found in thestudies of Petty and Guthrie (2000); Parker (2005); Broadbent and Guthrie(2008); Dumay et al (2012)

Overall, there is an opportunity for researchers to publish more performative research

A reason for the lack of performative studies are the time and resources required, alongsidegaining access to investigate inside organisations that may be reluctant to have researchersexamine what they see as key capabilities driving their competitive advantage (Alvesson

& Deetz, 2000) In contrast, performing ostensive research based on observations frompublicly available data sets such as VAIC analysis or content analysis of companydisclosures avoids this access problem and allows researchers to analyse these IC issues

as researchers wish Thus, many researchers may be putting performative research in thetoo hard basket and undertake ostensive research as an easy way out

1.1.4 Review of studies investigating the relationship between intellectual capital and corporate performance

The main purpose of reviewing the prior empirical studies investigating the relationshipbetween IC and corporate performance is to understand and confirm that IC is thefundamental and strategic assets for organizational survival and success If IC is linked tocorporate performance as the origin of value creation, investors would benefit from thisrelationship Therefore, there are numerous pieces of research in many countries, affirmingthis correlation undertaken by a variety of research methods In general, these studies find

a positive relationship between IC (or some of its components) and corporateperformance, although the exact nature of this correlation varies (see Appendix 1) Forinstances, Bontis et al (2000) find a positive relationship between structural capital andperformance in Malaysian firms, and observed that investment in human capital has anindirect impact on performance via structural capital In similarity, a German study,Bollen et al (2005) discover that all components of IC have an indirect correlation withperformance acting through intellectual property as a mediator Nevertheless, J Cohen,Krishnamurthy, and Wright (2004) recognize that there may be a time-lag betweeninvestment in intellectual capital and performance incremental for which they did notcontrol Unfortunately, the studies are rarely directly comparable, differing in theirmeasure of both intellectual capital and performance (Clarke, Seng, & Whiting, 2011).One quantifiable and obtainable measure for IC is the VAIC, developed by (Pulic,2000) VAIC provides a standard measure of IC efficiency to evaluate the link between

IC efficiency and performance As evidence of this, a number of studies in a range ofcountries investigate the relationship between VAIC and performance (see Appendix 1).For examples, Hang-Chan (2009) find a significant positive relationship between VAICand return on assets (ROA), and likewise, Ming-Chin, Shu-Ju, and Hwang (2005)observe significant positive relationships between VAIC, HCE, CEE, SCE and ROA.Hong Pew, Plowman, and Hancock (2007) find the significant positive relationshipsbetween the current and prior year components of VAIC and ROE while Maditinos,Chatzoudes, Tsairidis, and Theriou (2011) also observe this relationship with HCE.However, not all studies support the same outcome As evidence of this, Firer andMitchell-Williams (2003) discover that human capital efficiency has a significantnegative relationship with asset turnover and market-to-book ratio, showing that theefficiency with which a firm use its HC negatively influence firm performance Incontrast, Appuhami (2007) does not find a significant correlation between eachcomponent of IC and the capital gains made by shareholders, although the relationshipbetween VAIC in general and performance is a positive one

Overall, studies using VAIC as measures of IC components have resulted in a mixture

of outcomes across different countries, industries and years For example, Ming-Chin et al

(2005) conclude that IC is a driver of both firm value and financial performance Shiu(2006) finds only weak relationships between VAIC and performance In addition, Clarke

et al (2011) discover that structural capital efficiency is rarely found to have a significantcorrelation with performance A range of inconsistent evidence do not result in a compellingconclusion regarding the correlation between IC and corporate performance A furtherinvestigation with Vietnamese data is therefore undertaken to provide evidence ofassociation between intellectual capital and corporate performance, and if so, its direction.

1.2 Review of international studies of strategic management accounting

In 1981, Simmonds published a paper in the UK professional magazine, ManagementAccounting, in which he presented a strong case for the adoption of strategic managementaccounting (SMA) (Simmonds, 1981) Many professional and academic papers continuedthis theme Overall, the research continues to maintain four themes emphasizing on (1) how

to define the concept of strategic management accounting, (2) what kinds of SMA techniquesapplied in a variety of industries, countries, (3) the impacts of strategy options on SMAchanges and (4) strategic management accounting process (see in Appendix 2) Most of thepublished empirical research over the past 30 years has consisted of questionnaire surveysthat sought to establish the extent to which specific SMA techniques have been adopted(Langfield-Smith, 2008) However, the limitations of surveys and the relative dearth of casestudies mean that very little is known about how the SMA techniques are used, by whom andfor whom (Nixon & Burns, 2012)

1.2.1 Research on conceptualizing strategic management accounting

There is no agreed definition of SMA in the literature At its very simplest, SMA isconceptualized as an approach that lies at the interface between strategic managementand accounting (Roslender & Hart, 2003) According to Simmonds (1981)’s firstdefinition, SMA can be generally defined as a generic approach that connectsmanagement accounting, strategy and strategic positioning of the company, whileBromwich (1990) provides a definition that limits SMA to financial information, butwhich is focused on performance relative to competitors However, some other authorssee marketing as the more relevant orientation for SMA (for example, Foster and Gupta(1994); Roslender (1995); Wilson (1995)) From the relevant literature, three mainapproaches in conceptualizing SMA can be distinguished as follows:

 Simmonds (1981)’s approach to SMA is based more on Porter’s framework,which catalysed a stream of research, focusing more on cost management

needed to support low price competitive strategy rather than design andinnovation to earn a price premium through product differentiation Thus,there is a demand of financial information about competitors to cope with corecompetitors’ moves.

 Bromwich (1990)’s SMA approach is based on attribute costing technique,where the aim is to cost a product’s benefit providing to customers, as opposed

to the approach that determines reasons driving costs of product Thus, there is

a need of considering the benefits offered to customers, and how thesecontribute into building sustainable competitive advantage

 On the perspective of marketing connecting to SMA, Roslender and Hart (2003)argue that SMA should become “more thoroughly infused with marketing issues,theories and concepts to form a marriage of equal partners” Thus, there is anecessity of “brand management accounting” that would include performancemeasures such as market share, market growth and brand strength, and customerprofitability focusing on sub-brands and specific market offerings

From the stated definitions, it is obvious that the terminology of SMA has amultitude of different interpretations, depending on the researchers’ scientificbackground, underlying assumptions and starting points Since Simmonds’ first definitionwas introduced over 30 years ago, there is little agreement what is and what constitutesSMA This term itself is opening to a number of interpretations due to varied nature ofresearch associated with it, while some researchers has emphasized the interface betweenaccounting and marketing, while others pay more attention on linkages to strategy The1990s are described as “the glory decade” where academics, consultants and practitionersall played a role in popularizing strategic accounting (Langfield-Smith, 2008) Shank andGovindarajan (1993) note that many SMA techniques has been implemented as pilotstudies in US companies and published as teaching case studies, or as chapters in books.Professional journals carried articles with SMA themes and the training activities ofprofessional accounting bodies focused on SCM tools and techniques (Langfield-Smith,2008) Global consulting firms developed very active practices in the field of SMA andthereby the SMA term, due to the absence of generally conceptual framework, ranges inits definitions from narrow ones (competitor-focused and performance measurementpractices) to the umbrella under the viewpoint of “external orientation”

1.2.2 Research on strategic management accounting techniques

When it comes to SMA practices, due to the absence of generally conceptualframework, there is a multitude of listing and propositions of various accountingtechniques that have strategic focus As can be seen in Appendix 2, there are significantoverlaps between the classifications of SMA techniques, whereas the differences exist incustomer accounting and strategic accounting Despite the differences in researchviewpoints, the groups of SMA techniques such as strategic cost accounting, competitoraccounting and strategic accounting are widely accepted as the components of SMApractices Until 2001, Guilding and McManus (2002)’s research adds 3 customer-focusedtechniques that may be referred to as the fourth dimension “customer accounting” Theliterature review neglects the dimension of customer accounting due to perhaps its lateappearance and its difficulty-to-observation

Table 1.4 Literature review of essential techniques in strategic management accounting toolbox

SMA SMA techniques Guilding, Cravens Cadez Cinquini Shah, Fowzia

Competitor cost      assessment

Source: The author’s literature review

The studies around this theme add to the literature on SMA by identifying particularSMA techniques important for corporate, analysing the dissemination of SMA techniques inconsideration of structural characteristics and performing a cluster analysis in order toinvestigate performance differences between various groups of corporates The usage level ofSMA techniques varied depending on what kind of firms being investigated For example,Lachmann, Knauer, and Trapp (2013) concludes that a plethora of SMA techniquesoriginally developed for the non-hospital sector is now used in hospitals, several widely-applied techniques (i.e balanced scorecard, activity-based costing) are used only moderately

in hospitals Cadez (2006) finds that capital budgeting and competitor-focused

techniques are the most widely used while customer-focused techniques are the leastwidely used.

1.2.3 Research on the relationship between environment, strategy choice and strategic management accounting practices

This theme discovers strategic management accounting in the organizational context

by building on the premises of contingency theory The studies tried to affirm thatperformance is a product of an appropriate fit between the structure (management accountingsystem) and context (contingent factors), as the study of Cadez (2007) As can be showed inthe research outcomes of Gerdin (2005); Seaman and Williams (2011), SMA plays a role asmedium focusing on performance measurement using strategic rather than tactical indicatorsowing to SMA’s support to the organization’s strategic intent

Alternatively, the studies have been conducted to investigate the effects ofcompetitive strategies and strategic management accounting techniques on the perceivedqualitative and quantitative performance of medium and large size businesses Forexample, Cinquini and Tenucci (2010) test 328 Italian manufacturing firms with saleshigher than $25 million to conclude that both defender- and cost leader-type of strategyare found to be more willing to use SMA techniques addressing cost information.Similarly, Fowzia (2011) indicates that there are differences in using different types ofstrategic management accounting techniques applied among cost leadership anddifferentiation strategy, build and harvest strategy Aykan and Aksoylu (2013) examineswhether or not competitive strategies (cost leadership, differentiation and focusing) andthe use of strategic management accounting techniques have any significant effects on theperceived performance (qualitative and quantitative) of businesses The results reveal thatdifferentiation strategies and competitor-oriented and customer-oriented strategicmanagement accounting techniques affect the perceived qualitative performance of thebusinesses (Aykan & Aksoylu, 2013)

1.2.4 Research on strategic management accounting process

Surprisingly, there is an importantly smaller attention in literature being paid on theprocess of SMA usage in comparison with some other research aspects that discussed with agreat deal of articles, conference papers Some researchers have seen SMA as a process andargue that the usage of SMA techniques can be framed into process stages (Langfield-

Smith, 2008) Likewise, the variety of SMA definitions, there are also variations inperceptions of the SMA process For examples, Dixon and Smith (1993) present fourstages to their SMA process: “strategic business unit identification, strategic costanalysis, strategic market analysis, and strategy evaluation” while Brouthers and Roozen(1999) think that the usage of SMA techniques via three process stages: (1) monitoring,(2) decision-making and planning, and (3) controlling In this context, Lord (1996)differentiates SMA as a six-stage process as follows:

“(1) Collection of competitor information.

(2) Exploitation of cost reduction opportunities.

(3) Matching of accounting emphasis with strategic position.

(4) Collection of competitor information.

(5) Exploitation of cost reduction opportunities.

(6) Matching of accounting emphasis with strategic position.” (Lord, 1996, p 352)Following Lord (1996)’s study, Shah et al (2011) summarize SMA process intofour stages: (1) collecting information related to the competitors, (2) using accounting forstrategic decisions, (3) cutting costs on the basis of strategic decisions and (4) gainingcompetitive advantage through identifying opportunities and strategic choice Overall,although the process of strategic management accounting usage can be varied by theviewpoint of researchers, the perception of this process majorly relies on the perception

of strategic management process

In summary, the issue of strategic management accounting has been studiedworldwide for more than 25 years and it can be argued that SMA has made an impact onpractice, scholars and accounting Although it exists the interest of how SMA managesintellectual capital or intangibles, little research to the best of my knowledge do empiricalexploratory study to discover this issue Therefore, it may open more recently IC stageresearch has continued to focus on developing how intellectual capital is managed andreported and more importantly how strategic management accounting practices areapplied to manage intellectual capital

1.2.5 Review of studies investigating the relationship between strategic management accounting practices and corporate performance

The accumulated body of evidence also suggests that tailoring an organisation’sstrategic management accounting control system to its strategy may result in enhancedperformance Most empirical work in this area assumes a contingency approach.Contingency theory assumes the expectation that there is a structural design that best fits agiven strategy and hence results in highest performance (Cadez & Guilding, 2012) Thereby,many studies, based on contingency theory, have examined the relationship amongststrategy, SMA practices and corporate performance The start point of the empirical research

on the correlation between SMA practices and performance is the work of Chenhall andLangfield-Smith (1998) in the research scope of Australian companies Chenhall andLangfield-Smith (1998) discover that there are positive associations between performanceand a range of SMA practices, under various strategic orientations The following studiesalso find a positive direct relationship between SMA practices and corporate performance orperceived strategy moderating the positive correlation between SMA practices and firmperformance For instances, Aykan and Aksoylu (2013) discover the effects of competitivestrategies and strategic management accounting techniques on the perceived qualitative andquantitative performance of medium and large size businesses in Kayseri, Turkey Insimilarity, Al-Mawali and Al-Shammari (2013) conducted an empirical investigation into therelations among strategic management accounting, perceived environmental uncertainty andorganizational performance in 296 companies in Jordan The results indicated that the level

of SMA usage positively affect organizational performance, and perceived environmentaluncertainty moderates this relationship (Al- Mawali & Al-Shammari, 2013) Alternatively,SMA practices are examined in association with one of the perspectives of corporateperformance It is evidenced by Ramljak and Rogošić (2012) who realized that thesynergistic effect of the different strategic management accounting techniquesimplementation has a positive impact on cost control and reduction In another research, inspite of using contingency theory, Cadez and Guilding (2012) deploys a holisticconfigurational approach to examine the relationship between strategy, strategic managementaccounting, and performance Configurations are derived empirically, using an inductiveapproach, from a sample of 109 manufacturing companies The study of Cadez and Guilding(2012) suggest that high SMA technique