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

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS, HO CHI MINH CITY ---TRINH HIEP THIEN Mediating effect of strategic management accounting practices in the relationship betwee

MINISTRY OF EDUCATION AND TRAINING 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

MEDIATING EFFECT OF STRATEGIC MANAGEMENT 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 of

Doctor of Philosophy in Accounting

Title of dissertation: Mediating effect of strategic management accounting practices

in the relationship between intellectual capital and corporate performance – Evidence from Vietnam

Author: Trinh Hiep Thien

Academic Supervisor: Dr Doan Ngoc Que

Dr Le Dinh Truc Date of Final Defense:

Final Defense Committee:

Jury Composition Read and Approved by

TABLE OF CONTENTS

Page

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

1.3.1 Vietnamese context 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 (H2) 52

3.1.2.1 Underlying theoretical framework 52

3.1.2.2 Hypotheses development (H2) 54

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 (H3) 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

4.4.1.3 Operationalization of structural capital efficiency (SCE) 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

6.3 Empirical results – testing of the correlations between intellectual capital

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

LIST OF THE AUTHOR’S PUBLICATIONS 158 REFERENCES 161 APPENDIX 1: PREVIOUS STUDIES INVESTIGATING THE RELATIONSHIP BETWEEN IC AND CORPORATE PERFORMANCE 185 APPENDIX 2: REVIEW OF PRIOR INTERNATIONAL STUDIES OF 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 APPENDIX 15: CRONBACH ALPHA AND EFA RESULTS OF THE INDICATORS OF SMA CONSTRUCTS 230

APPENDIX 16: EVALUATION OF INDICATORS AND LATENT VARIABLES 231 APPENDIX 17: CROSS LOADINGS OF REFLECTIVE MEASUREMENT SCALES 233 APPENDIX 18: CORRELATIONS, SQUARE ROOT OF AVE AND HTMT 234 APPENDIX 19: THE ESTIMATION OF SGA EXPENDITURES AMORTIZATION RATE 235 APPENDIX 20: THE ESTIMATION OF ORGANIZATIONAL CAPITAL 239 APPENDIX 21: THE ESTIMATION OF INVESTMENT EFFICIENCY 241 APPENDIX 22: DESCRIPTIVE STATISTICS AND CORRELATION 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

LIST OF ABBREVIATIONS

Abbreviation Meanings

CIMA The Chartered Institute of Management Accountants

HTMT Heterotrait-Montrait test

IAMV Investors assigned market value

ICBS Intellectual capital benchmarking system

PLS-SEM Partial least square structural equation modelling

R&D Research and development

SGA Selling and general administrative expenses

SRMR Standardized root mean square residual

VAIC Value Added Intellectual Coefficient

ABSTRACT

Title of dissertation: Mediating effect of strategic management accounting practices

in the relationship between intellectual capital and corporate performance – 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 such endeavors In the history of IC accounting research, the focus of empirical studies has always been the direct relationship between intellectual capital components and corporate performance A little research investigates that intellectual capital has an indirect relationship to corporate performance via the mediating role of management accounting Furthermore, Vietnamese managers have not actually realized the critical value of intellectual capital in their managing process; hence, this study is expected to raise

Vietnamese 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 intellectual capital (IC) which in turn to enhance its financial performance If doing so, how SMA manages

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 IC components and primary data through questionnaire survey to investigate the level of SMA practices, the author constructs regression model to examine the relationship between IC components and corporate performance via the mediating role of SMA practices 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 mediating role of SMA practices, SMA practices fully or partially mediates the positive influence of IC components over corporate performance Finally, in terms of IC management, the study highlights only strategic accounting approaches are used to manage human capital The findings validate the usefulness of all groups of SMA practices as

techniques to manage structural capital Except for strategic accounting approaches, three remaining groups of SMA practices are most appropriately situated as techniques of relational 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 It discoveries three-stage value creating process and thereby presents the implications for integrations 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 support from the techniques of SMA Therefore, new demands of Vietnamese managers are being imposed on management accounting to capture, measure and report IC value and

performance

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

INTRODUCTION

1 Background

It is often argued that organizations in today’s knowledge-based economy do not only initially invest in physical assets, nevertheless in intangibles, as these are but also today’s value drivers (Mehralian, Rasekh, Akhavan, & Ghatari, 2013) Amongst these intangible assets, intellectual capital plays a key role, and due to the huge investments in intellectual capital, its management becomes a critical issue given the direct and indirect advantages Some of these advantages may consist of the added value of the knowledge that is processed, the learning process included in the measurement of intellectual capital (Roos, Roos, Dragonetti, & Edvinsson, 1997), the enhancement of sustainable competitive 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-door policy since 1990’s, the level of competition in the economy has been therefore increasing significantly for most Vietnamese enterprises when Vietnam’s integration in AEC and TPP, thereby, managers in Vietnamese firms should be aware of the importance of intangibles as well intellectual capital, which achieve sustainable competitive advantages in the international competitive arena This will be a motivator to impulse scholars 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 the 1990s and concentrated on increasing awareness, defining concepts, reviewing case studies and developing primary definitions (Mehralian et al., 2013) The second stage, which started in the year of 2000, consider measurement, modelling, international case studies, and various level of analysis (Mehralian et al., 2013) Therefore, there are a numerous piece of research in many countries, affirming the correlation between intellectual capital and corporate performance, that has been undertaken by a variety of research methods In general, these studies 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 intellectual capital have been conducted in developed Western countries and some of Asian developing countries such as Thailand, Malaysia,

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

On the other hand, as being introduced by CIMA, strategic management accounting

is a form of management accounting which emphasis is placed on information which relates to key strategic decision (CIMA, 2014a) Simultaneously, following by resource-based theory, intellectual capital is the asset used for strategic purposes Strategic management accounting would therefore appear to have a potential role to play in intellectual capital management Notwithstanding the intellectual capital literature in accounting is varied but mainly addresses 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 and strategic management accounting Firstly, the organizations with strong levels of intellectual capital will have the assets as the necessary concrete to develop strategic management accounting system to support the managerial efforts in terms of identifying, measuring, and communicating the value drivers (Tayles, Pike, & Saudah, 2007) Secondly, once strategic management 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 in alignment with the unique attributes and the competitive strategies of the company In other words, it must be possible to identify and value, with some precision, the component elements of the generic intellectual capital of the company Furthermore, when analysing the Vietnamese transitional economic context, Vietnamese enterprises have gradually applied the advanced accounting techniques, in line with market mechanisms because many wholly foreign-owned enterprises established in Vietnam have been providing practical knowledge of strategic management accounting, which has been introduced to Vietnamese practitioners and scholars Therefore, it is undeniable that medium and large enterprises in Vietnam do not have any understanding of how to implement strategic management accounting in their business operations Not surprisingly, the issue of strategic management accounting thereby started to be studied in Vietnam since the 2010s Based on all above arguments, the author believes the necessity of studying the correlation between intellectual capital, strategic management 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 the effects of intellectual capital and strategic management accounting practices on corporate performance in the organizations operating in the transitional economy such as Vietnam because these issues have not been discovered in such economy This also raises the issue

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

it is also inevitable that how strategic management accounting manages intellectual capital

to boost an organization’s financial performance Accordingly, three research questions 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 accounting practices?

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 the association between intellectual capital, strategic management accounting practices and corporate performance More importantly, it investigates the mediating effect of strategic management accounting practices on the relationship among intellectual capital components and three financial dimensions of corporate performance It also empirically analyses 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 components and corporate performance through the mediating role of strategic management accounting practices

- RO4: Empirically analysing which group of strategic management accounting practices (i.e strategic cost management, competitor accounting, strategic accounting 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 intellectual capital, strategic management accounting practices and corporate performance Therefore, the unit

of analysis is a business organization To investigate SMA practices applied in a business organization, the data is collected through questionnaire survey which 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 or finance and at least two years of working experience in the current organization Moreover, the unit of observation is also financial information in annual reports or financial 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 the research site for observation and empirical testing Secondly, the observed business organizations are enterprises listed on Hochiminh Stock Exchange (HoSE) and Hanoi Stock Exchange (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 companies where respondents has been working instead of using panel data with many successive years to analyse intellectual capital alike the previous studies However, to calculate some variables such as organizational capital, innovation capital, investment

efficiency, the author has to collect financial data in the period of 7 years (from 2010 to 2016)

4 Methodology

This study first reviews the literature related to intellectual capital, strategic management accounting practices, corporate performance before proposing two research models with six hypotheses This study mainly uses quantitative research method by using empirical survey data and financial data obtained from a sample of at least 127 public enterprises in Vietnam for the year of 2016 Due to the complex of the research models with mediators and a small sample size context, data analysis is conducted by applying 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 research directions 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 also discusses the concepts of corporate performance and strategic management accounting practices in order to explain the relationships amongst these concepts Next, the existing theories underpinning the measurement of intellectual capital are introduced in the literature extant so that the measurement of the intellectual capital variables are clearly understood 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 chapter then 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 the theoretical model are operationalised and measured It also discusses the unit of analysis and 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 the pilot test to examine the attributes of the indicators of SMA practices before collecting main data The next is to represent the refinement of the measurement scales from the data obtained in Vietnamese public enterprises Finally, it provides descriptive statistics of the research 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 The next sections present the empirical results of examining the hypotheses developed in Chapter 3 It includes the outcomes of the direct regressions and the mediated path regressions that are processed by the tool of SmartPLS 3.1 The empirical results are arranged in order from the first to sixth hypothesis and finally the testing results of control variables Not only is the analysis of the data described but corresponding to each

significant 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 for leaders, policymakers and academic community the approaches to manage intellectual capital Particularly, the last section suggests the orientations how to manage intellectual capital

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 limitations and

suggested directions for further research

CHAPTER 1: LITERATURE REVIEW

The first 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 research directions to develop the research objectives of this dissertation This chapter is structured into four main sections Section 1.1 presents history, research trends as well as methods used to discover the empirical relationships between intellectual capital and corporate performance in the accounting discipline Section 1.2 continues to review the international studies to identify four main research themes of strategic management accounting focused by scholars Next, section 1.3 is developed as a distinctive part to review intellectual capital and strategic management accounting studies conducted in Vietnam since this dissertation is undertaken

in Vietnamese context All above sections are aimed at identifying three major 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, a firm’s value is no longer measured solely on the basis of financial results; rather than value

of activities that develop knowledge resources must also be considered (Stewart & Ruckdeschel, 1998) Doing so helps understanding how employees, stakeholders and activities 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 has produced literature spanning a range of research disciplines In retrospect, it appears that like 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 the context within which intellectual capital came to be viewed as the essential business element that it is today Petty and Guthrie (2000) also outlined two stages in researching intellectual capital The first-stage efforts typically focused on raising awareness as to why recognizing and understanding the potential of IC towards creating and managing sustainable 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 something significant and should be measured and reported, but without referring to specific empirical research (Petty & Guthrie, 2000) Most research conducted prior to the mid-1990s is considered first stage (Petty & Guthrie, 2000) The second stage of IC research gathered further evidence, at an organizational level, focusing on the how of IC capital and 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 accepted terminology 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 a management, measurement and accountability toward IC (Dumay et al., 2012) According

to Dumay et al (2012), a third stage of IC research is emerging and is characterised by research critically examining IC in practice, devoted to the managerial implications of how

to use IC in managing a company, at the beginning with the 2004 special edition of Journal

of intellectual capital entitled “IC at the crossroads – theory and research” by Marr and Chatzkel (2004) While second stage IC research is predominately devoted 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 just monetary but incorporates worth and importance of the products and services to customers 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 intellectual capital Period Progress

 Kaplan and Norton (1992) introduce the concept of a Balanced Scorecard The Scorecard evolved around the premise that “what you measure is what you get”

Mid

1990s

 Nonaka and Takeuchi (1995) present their highly influential work on “the knowledge creating company” Although the book concentrates on “knowledge”, the distinction between knowledge and Intellectual Capital is sufficiently fine as to make it relevant

to those with a pure focus on Intellectual Capital

 Also in 1994, a supplement to Skandia’s annual report is produced which 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 follow Skandia’s lead (Edvinsson & Sullivan, 1996)

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

in particular, is very much about the process and the “how” of measuring intellectual capital

Late

1990s

 Intellectual Capital becomes a popular topic with researchers and academic conferences, working papers, and other publications find an audience

 An increasing number of large scale projects (e.g the MERITUM project; Danish; Stockholm) commence which aim, in part, to introduce some academic rigour into research on Intellectual Capital

 In 1999, the OECD convenes an international symposium in Amsterdam on intellectual capital (Organization for Economic Co-operation and Development (OECD), 2000)

2000 -

2016

 Through the 2000s and onwards, IC research is continuously disseminated to the wider accounting research community The generalist accounting journals and generalist accounting conferences 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 that needs to be well managed, it can be analysed not just from a microeconomic viewpoint, but also from a macroeconomic aspect The issue of intellectual capital is studied in four perspectives, such as economic, strategic, managerial and accounting perspective (Alcaniz

et al., 2011) For example, on the economic perspective, intellectual capital is related to the wealth 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’s strategy is critically dependent no longer on its tangible assets, but on its intangibles, and the accumulation 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 in accounting 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 the period from 2000 to 2009 (Table 1.2), the popular focus of IC accounting research is management accounting and external reporting but little has been published about accountability, governance and auditing

Table 1.2 Topics of intellectual capital research in the accounting discipline

Source: Dumay et al (2012)

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-quantitative and if IC is linked to firm performance, firms as well investors would benefit from this disclosure Therefore, a great deal research has been undertaken on intellectual capital disclosure practices in developed countries, a substantially less amount of research can be found on IC disclosure practices in emerging countries (Wagiciengo & Belal, 2012) Amongst few studies available from the emerging economies’ context, most of them concentrated on the Asian countries The studies have provided an empirical understanding of IC

disclosure practices by collecting a range of media in which IC disclosure was made including annual reports, website, corporate social responsibility reports and others The findings of studies include variations in IC disclosure with company size and industrial sectors (Striukova, Unerman, & Guthrie, 2008), disclosure in Europe on relational capital around 49%, 30% related to structural 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 used longitudinal data Several researchers such as Bozzolan, Favotto, and Ricceri (2003), Bharathi Kamath (2008) used for longitudinal studies for detailed examination

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 governance factors on intellectual capital disclosure, using various disclosure measures These papers hypothesise that significant relationships exist between intellectual capital disclosure in annual reports and board structure, role duality, ownership concentration, audit committee size and frequency of audit committee meetings, controlling for listing age, firm size and profitability

 Management control: The extent of publications in management control and strategy, as the most researched area of interest, is highlighted in Table 1.2, demonstrating 160 articles covering a wide range of management-related subjects 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 the not-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 accounting approach to support the control of IC, that draws on the authors’ experience in the service company environment These publications also indicate the appropriateness of management accounting techniques to control IC, such as less reliance on traditional and zero-based budgeting, preferring the beyond

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

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

on intangible resources (Amir & Lev, 1996) such as key customers, internal processes and learning Commonly used models include Intangible Assets Monitor (Roos, Edvinsson, & Dragonetti, 1997), and Skandia Navigator (Sveiby, 1997) which were particularly developed with intellectual capital in mind and the Balanced Scorecard (Kaplan & Norton, 1996) which had a more general strategic focus The Balanced Scorecard (BSC), for example, considers relational capital (customer perspective), structural and human capital (innovation, learning, and internal perspectives) and the impact of these on shareholder goals (financial perspective) Lev (2001) advocates the Value Chain Scoreboard, to be used by both management and investors, which seeks to report

in a structured manner on the impact of intellectual capital on corporate performance and valuation As many of these performance measurement frameworks have been developed or adapted to accommodate IC, the greater part of the extant literature evidence the tested hypotheses that firms with relatively high intellectual capital are more likely to employ various performance measurement framework approaches linked to shareholder value

 Commentaries/ Policy statement: A group of articles did not have empirical research and tended to be either commentaries or policy statements referred to Petty and Guthrie (2000), Brennan and Connell (2000), Roslender and Fincham (2001), García-Meca (2005) as first-stage contributions This trend is conducted

at the beginning of the decade and there were fewer at the end of the decade of the 2000s The initial focus was on understanding and explaining the various facets of IC phenomenon, little interest in testing hypotheses These studies have given a rise with accounting literature to theoretical 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 journal papers 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, while normative 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%

Source: Dumay et al (2012)

 Case/ field study/ interviews: The works use case studies to explore and understand IC phenomena in a particular context For example, Dumay (2009) found a case study into the attempt to understand IC reporting in a division of a large Australia financial services company, named AusFinCo with over 25,000 employees

 Content analysis: It has been conducted on annual reports by a number of IC researchers who want to measure the level of IC disclosure This “involves codifying 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 they accompany with an organization’s internal structure, employee competence or external relationships Doing so helps to find that the key components of IC are 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, two existing IC measurement systems can be broadly classified as the accounting framework and the perceptual school of thought (Kannan & Aulbur, 2004) One quantifiable and easily measure for IC under the accounting framework is VAIC VAIC is offered as a measure of the efficiency of IC components via financial data 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 the intellectual capital constructs as well as business performance within the context of the conceptual model Such a designed survey is sent to top management to evaluate 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 the relationship between IC or some of IC components and performance

 Commentary/ normative/ policy: The part of the extant literature evidence a strongly normative character; here the emphasis is essentially policy or practice oriented, focusing on discussion about various alternative ways of identifying, measuring and reporting the growth of stocks of intellectual capital during an accounting period (Alcaniz et al., 2011) To compose a normative paper, the researcher applies the methodology which analyses the assumptions underpinning guidelines 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 is regularly built on a basic theory derived from another research field to affirm the writers’ arguments (Alcaniz et al., 2011)

 Theoretical (literature) review: To conduct literature review, the researchers read the selected papers based on both abstracts and full text of the articles to discuss and make preliminary classifications With respect to the method of literature review, one author manually codes all the papers for the contents in similarity while the second and the third authors re-check the coding for consistency to find the outcome of what has happened in the field of intellectual 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 is changing The method of reviewing published articles have been found in the studies 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, alongside gaining access to investigate inside organisations that may be reluctant to have researchers examine what they see as key capabilities driving their competitive advantage (Alvesson

& Deetz, 2000) In contrast, performing ostensive research based on observations from publicly available data sets such as VAIC analysis or content analysis of company disclosures avoids this access problem and allows researchers to analyse these IC issues as researchers wish Thus, many researchers may be putting performative research in the too 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 relationship between IC and corporate performance is to understand and confirm that IC is the fundamental and strategic assets for organizational survival and success If IC is linked

to corporate performance as the origin of value creation, investors would benefit from this relationship Therefore, there are numerous pieces of research in many countries, affirming this correlation undertaken by a variety of research methods In general, these studies find

a positive relationship between IC (or some of its components) and corporate performance, although the exact nature of this correlation varies (see Appendix 1) For instances, Bontis

et al (2000) find a positive relationship between structural capital and performance in Malaysian firms, and observed that investment in human capital has an indirect 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 with performance acting through intellectual property as a mediator Nevertheless, J Cohen, Krishnamurthy, and Wright (2004) recognize that there may be a time-lag between investment in intellectual capital and performance incremental for which they did not control Unfortunately, the studies are rarely directly comparable, differing in their measure 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 of countries investigate the relationship between VAIC and performance (see Appendix 1) For examples, Hang-Chan (2009) find a significant positive relationship between VAIC and 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 relationships between 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 and Mitchell-Williams (2003) discover that human capital efficiency has a significant negative relationship with asset turnover and market-to-book ratio, showing that the efficiency with which a firm use its

HC negatively influence firm performance In contrast, Appuhami (2007) does not find a significant correlation between each component of IC and the capital gains made by shareholders, although the relationship between 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 significant correlation with performance A range of inconsistent evidence do not result in a compelling conclusion regarding the correlation between IC and corporate performance A further investigation with Vietnamese data is therefore undertaken to provide evidence of association 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, Management Accounting, in which he presented a strong case for the adoption of strategic management accounting (SMA) (Simmonds, 1981) Many professional and academic papers continued this 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 techniques applied in a variety of industries, countries, (3) the impacts of strategy options

on SMA changes and (4) strategic management accounting process (see in Appendix 2) Most of the published empirical research over the past 30 years has consisted of questionnaire surveys that 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 case studies mean that very little is known about how the SMA techniques are used, by whom and for 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 is conceptualized as an approach that lies at the interface between strategic management and accounting (Roslender & Hart, 2003) According to Simmonds (1981)’s first definition, SMA can be generally defined as a generic approach that connects management accounting, strategy and strategic positioning of the company, while Bromwich (1990) provides a definition that limits SMA to financial information, but which is focused on performance relative to competitors However, some other authors see marketing as the more relevant orientation for SMA (for example, Foster and Gupta (1994); Roslender (1995); Wilson (1995)) From the relevant literature, three main approaches 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 and innovation to earn a price premium through product differentiation Thus, there

is a demand of financial information about competitors to cope with core competitors’ 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 these contribute 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 a necessity of “brand management accounting” that would include performance measures such as market share, market growth and brand strength, and customer profitability focusing on sub-brands and specific market offerings From the stated definitions, it is obvious that the terminology of SMA has a multitude

of different interpretations, depending on the researchers’ scientific background, underlying assumptions and starting points Since Simmonds’ first definition was introduced over 30 years ago, there is little agreement what is and what constitutes SMA This term itself is opening to a number of interpretations due to varied nature of research associated with it, while some researchers has emphasized the interface between accounting and marketing, while others pay more attention on linkages to strategy The 1990s are described as “the glory decade” where academics, consultants and practitioners all played a role in popularizing strategic accounting (Langfield-Smith, 2008) Shank and Govindarajan (1993) note that many SMA techniques has been implemented as pilot studies 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 of professional accounting bodies focused on SCM tools and techniques (Langfield-Smith, 2008) Global consulting firms developed very active practices in the field of SMA and thereby the SMA term, due to the absence of generally conceptual framework, ranges in its definitions from narrow ones (competitor-focused and performance measurement practices) 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 conceptual framework, there is a multitude of listing and propositions of various accounting techniques that have strategic focus As can be seen in Appendix 2, there are significant overlaps between the classifications of SMA techniques, whereas the differences exist in customer accounting and strategic accounting Despite the differences in research viewpoints, the groups of SMA techniques such as strategic cost accounting, competitor accounting and strategic accounting are widely accepted as the components of SMA practices Until 2001, Guilding and McManus (2002)’s research adds 3 customer-focused techniques that may be referred to as the fourth dimension “customer accounting” The literature review neglects the dimension of customer accounting due to perhaps its late appearance and its difficulty-to-observation

Table 1.4 Literature review of essential techniques in strategic management

Cravens and Guilding (2001)

Cadez (2006)

Cinquini and Tenucci (2010)

Shah, Malik, and Malik (2011)

Fowzia (2011)

Source: The author’s literature review

The studies around this theme add to the literature on SMA by identifying particular SMA techniques important for corporate, analysing the dissemination of SMA techniques

in consideration of structural characteristics and performing a cluster analysis in order to investigate performance differences between various groups of corporates The usage level

of SMA techniques varied depending on what kind of firms being investigated For example, Lachmann, Knauer, and Trapp (2013) concludes that a plethora of SMA techniques originally 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 least widely 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 that performance is a product of an appropriate fit between the structure (management accounting system) and context (contingent factors), as the study of Cadez (2007) As can

be showed in the research outcomes of Gerdin (2005); Seaman and Williams (2011), SMA plays a role as medium focusing on performance measurement using strategic rather than tactical indicators owing to SMA’s support to the organization’s strategic intent

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

1.2.4 Research on strategic management accounting process

Surprisingly, there is an importantly smaller attention in literature being paid on the process of SMA usage in comparison with some other research aspects that discussed with

a great deal of articles, conference papers Some researchers have seen SMA as a process and argue 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 in perceptions of the SMA process For examples, Dixon and Smith (1993) present four stages

to their SMA process: “strategic business unit identification, strategic cost analysis, 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 into four stages: (1) collecting information related to the competitors, (2) using accounting for strategic decisions, (3) cutting costs on the basis of strategic decisions and (4) gaining competitive advantage through identifying opportunities and strategic choice Overall, although the process of strategic management accounting usage can be varied by the viewpoint 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 studied worldwide for more than 25 years and it can be argued that SMA has made an impact on practice, scholars and accounting Although it exists the interest of how SMA manages intellectual capital or intangibles, little research to the best of my knowledge do empirical exploratory study to discover this issue Therefore, it may open more recently IC stage research has continued to focus on developing how intellectual capital is managed and reported and more importantly how strategic management accounting practices are applied

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’s strategic management accounting control system to its strategy may result in enhanced performance Most empirical work in this area assumes a contingency approach Contingency theory assumes the expectation that there is a structural design that best fits a given strategy and hence results in highest performance (Cadez & Guilding, 2012) Thereby, many studies, based on contingency theory, have examined the relationship amongst strategy, 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 and Langfield-Smith (1998) in the research scope of Australian companies Chenhall and Langfield-Smith (1998) discover that there are positive associations between performance and a range of SMA practices, under various strategic orientations The following studies also find a positive direct relationship between SMA practices and corporate performance or perceived strategy moderating the positive correlation between SMA practices and firm performance For instances, Aykan and Aksoylu (2013) discover the effects of competitive strategies and strategic management accounting techniques on the perceived qualitative and quantitative performance of medium and large size businesses

in Kayseri, Turkey In similarity, Al-Mawali and Al-Shammari (2013) conducted an empirical investigation into the relations among strategic management accounting, perceived environmental uncertainty and organizational performance in 296 companies in Jordan The results indicated that the level of SMA usage positively affect organizational performance, and perceived environmental uncertainty moderates this relationship (Al-Mawali & Al-Shammari, 2013) Alternatively, SMA practices are examined in association with one of the perspectives of corporate performance It is evidenced by Ramljak and Rogošić (2012) who realized that the synergistic effect of the different strategic management accounting techniques implementation has a positive impact on cost control and reduction In another research, in spite of using contingency theory, Cadez and Guilding (2012) deploys a holistic configurational approach to examine the relationship between strategy, strategic management accounting, and performance Configurations are derived empirically, using an inductive approach, from a sample of 109 manufacturing companies The study of Cadez and Guilding (2012) suggest that high SMA technique