Examining the impact of top-management teams on performance measurement system design: a social network perspective

Mohamed M.M. Ahmed

International Journal of Accounting, Auditing and Performance Evaluation, 2023, vol. 19, issue 4, 487-509

Abstract: This study explores the informal social relationship among top-management teams (TMTs) in relation to the sophistication of the performance measurement system (PMS) in small and medium-sized enterprises (SMEs) manufacturing companies. Drawing on social network theory, the paper argues that when TMT members network based on interpersonal ties, this would provide managers with easier access to information and knowledge exchanges. Hence, informal relationships could facilitate their control over day-to-day activities, and there would be a lesser need for adopting sophisticated management control practices. Using survey data on manufacturing SMEs from World Management Survey project, the negative impact of interpersonal ties in TMTs on PMS sophistication is confirmed. The results also shed light on the key role of Chief Executive Officer (CEO) in SMEs, by showing that this negative association is larger in TMTs led by internally promoted CEOs compared to outsider CEOs. Further, interpersonal ties among TMTs moderate the extent to which SMEs adopt sophisticated PMSs due to pursuing differentiation strategic priorities.

Keywords: PMS; performance measurement system; management accounting and control system; TMTs; top-management teams; interpersonal ties; CEO origin; social network theory; upper echelon theory; manufacturing strategy; differentiation strategy; SMEs; small-and-medium-sized; World Management Survey. (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijaape:v:19:y:2023:i:4:p:487-509

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