Accounting Research Journal

Management control systems and organisational learning: the effects of design and use
Shu Hui Wee Soon Yau Foong Michael S.C. Tse
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learning: the effects of design and use", Accounting Research Journal, Vol. 27 Iss 2 pp. 169 - 187
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Management control systems Management

control systems
and organisational learning: the
effects of design and use
Shu Hui Wee 169
Faculty of Accountancy and Accounting Research Institute, Universiti
Teknologi MARA, Shah Alam, Malaysia
Soon Yau Foong
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Graduate School of Management, Universiti Putra Malaysia, Serdang,

Malaysia, and
Michael S.C. Tse
School of Accounting, Economics and Finance, Deakin University,
Burwood, Australia

Abstract
Purpose – The purpose of this paper is to present a study on relationships between the design of
management control systems (MCS), the use of MCS and organisational learning (OL).
Design/methodology/approach – This study adopted a survey method. A written questionnaire
was prepared and mailed out to collect quantitative data. After analysis of the empirical results,
follow-up interviews were conducted to develop a deeper understanding of the empirical results.
Findings – Findings of the study show that both the design and use of MCS are significantly
associated with levels of OL activities in organisations, and the use of MCS is found to be a more
influential factor in OL.
Originality/value – This paper contributes to the accounting literature by providing empirical
evidence on the relative impacts of the design and use of MCS on OL activities in organisations and the
interaction between the design and use of MCS in influencing OL.
Keywords Knowledge, Organisational learning, Management control systems
Paper type Research paper

1. Introduction
As business environment becomes more dynamic and competitive, organisations’
abilities to adapt to the environment are critical to their success in meeting
organisational objectives (Choe, 2002; Kloot, 1997; Senge, 1990). Organisational learning
(OL) facilitates the creation and retention of knowledge that enable organisations to cope
with the changing environment (Bapuji and Crossan, 2004; Driver, 2001; Sisaye and
Birnberg, 2010; Teare and Rayner, 2002; Zhang et al., 2010). As such, OL plays an
increasingly important role in contemporary organisations.
Management control systems (MCS), as reservoirs of organisational financial and Accounting Research Journal
Vol. 27 No. 2, 2014
non-financial information, can be used as platforms to facilitate OL (Batac and Carassus, pp. 169-187
2009; Chenhall, 2005; Henri, 2006; Hedberg, 1981; Huber, 1991; Kaplan and Norton, © Emerald Group Publishing Limited
1030-9616
1996). A major purpose of MCS is to induce individuals to behave in ways which DOI 10.1108/ARJ-05-2013-0026
 ARJ contribute to overall organisational performance and competitive advantage
(Emmanuel et al., 1990; Kerr and Slocum, 1987; Lei et al., 1997). Information provided by
27,2 MCS can change individuals’ perceptions on whether existing strategies and structures
are still relevant in a changing environment, and changes in perceptions, in turn, can
prompt individuals to identify new sources of competitive advantage for their
organisations through OL (Coopey, 1995; Daft and Weick, 1984; Naranjo-Gil and
170 Hartmann, 2007a).
This paper presents a study on relationships between the design of MCS, the use of
MCS and OL. Examining MCS as potential facilitators for OL is grounded in the
information processing perspective advanced by Jones (1995), Kloot (1997) and Pentland
(1992, 1995). Prior studies show that both the design and use of MCS are influential to OL
on their own (Batac and Carassus, 2009; Chenhall, 2005; Choe, 2002, 2004; Henri, 2006;
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Kloot, 1997). Nonetheless, in prior studies, the effects of the two aspects of MCS on OL
have often been examined separately. Studies on the effects of MCS’ use on OL generally
consider existing MCS as given, whereas studies on the relationship between the design
of MCS and OL place little attention on how different types of MCS’ use affect
organisations’ abilities to learn. This study attempts to fill the gap by examining both
the design and use of MCS in the same study, with both quantitative and qualitative
data. Studying the design and use of MCS concurrently enables the researchers to
develop insights into the relative effects of the two aspects of MCS on OL. The use of
both quantitative and qualitative data in the study enables the researchers to identify
the rationale behind the relative strengths of relationships between the two aspects of
MCS and OL.
The remainder of this paper is organised as follows. The second section presents a
review of the literature and the development of hypotheses for the study. The third
section outlines the research methods adopted in the study. The findings of the study are
presented and discussed in the fourth section. Concluding remarks are then made in the
fifth section.

2. Theoretical development
2.1 Organisational learning
The term “organisational learning” is coined by Argyris and Schön (1978). It refers to the
processes of knowledge acquisition, information distribution, information
interpretation and organisational memory within an organisation that influence
organisational behaviour (Huber, 1991; Templeton et al., 2002; Walsh and Ungson,
1991). The OL processes need not be conscious or intentional, and changes in
organisational behaviour caused by OL may not be observable (Huber, 1991).
The popularisation of OL as a field of study is partly attributable to the notion of a
learning organisation (Rebelo and Gomes, 2008). Learning organisations can create and
maintain competitive advantages by structuring themselves upon five core disciplines,
namely, personal mastery, mental models, team learning, shared vision and systems
thinking (Bui and Baruch, 2010; Senge, 1990). Personal mastery provides the spiritual
foundation of learning organisations. It is about organisational members’ ongoing
commitments to clarify and deepen their personal visions, focus energies, develop
patience and see reality objectively (Appelbaum and Goransson, 1997). Organisational
members interpret and understand the world through certain deeply held assumptions
or metaphors (Senge, 1990). Collectively, these assumptions or metaphors form
 individuals’ mental models. Mental models influence organisational members’ mindsets Management
and guide their actions (Bui and Baruch, 2010). Unlike individuals’ learning processes,
OL is based on team learning. Dialogues between organisational members and the
control systems
members’ abilities to suspend their own assumptions and enter into genuine thinking
together are considered as key initiating factors of OL (Senge, 1990). Through team
learning, organisational members can create a shared vision that fosters their
commitment to a shared future and provides a focus for OL activities (Appelbaum and 171
Goransson, 1997; Senge, 1990). At the organisational level, organisational members’
ability to examine the interconnect elements of a problem in a holistic way, systems
thinking, plays a critical role in integrating the other four disciplines (personal mastery,
mental models, team learning and shared vision) to establish a learning organisation
(Senge, 1990).
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A major focus of OL is continuous improvement (Senge, 1990; Wang and Ahmed,

2003). Senge (1990) argues that members of learning organisations “continuously
expand their capacity to create the results they truly desire”. To facilitate the pursuit of
continuous improvement, total quality management (TQM) is practiced in
organisations as both a philosophy and a set of techniques (Sharma et al., 2010; Wang
and Ahmed, 2003). TQM provides a vehicle for OL and enables organisations to achieve
continuous sustainable improvements in cost, quality, customer satisfaction and
profitability (Chenhall, 1997; Garvin, 1993; Terziovski et al., 2000; Wang and Ahmed,
2003).
OL has attracted significant interest from researchers and practitioners since 1990s
(Bapuji and Crossan, 2004; Easterby-Smith et al., 2009). However, the evolution towards
a generally accepted OL theory is slow (Crossan et al., 1995; 1999; 2011). In the 1980s, Fiol
and Lyles (1985) lament the absence of a generally accepted theory of OL. The same
concern is voiced by Huber (1991), Simon (1991) and Weick (1991). Nonetheless, a
generally accepted OL theory has yet to emerge in the 2000s after more than two decades
of research in the area (Crossan et al., 2011). Bell et al. (2002) attribute this lack of
progress in the development of OL theory to the embedding of OL research within
different schools of thought.
Bell et al. (2002) identify four principal schools of OL research, namely, economic,
developmental, managerial and processes. The economic school focuses on single-loop
learning (also known as lower-order learning) with the interest on gains in the stock of
tacit knowledge. Experience yields tacit knowledge, which leads to a reduction in
production costs. The developmental school of thought focuses on double-loop learning
(also referred to as higher-order learning) and the stages that must be followed to reach
such levels of learning. The managerial school also focuses on the achievement of
double-loop learning through following a set of prescriptive guidelines and not through
hierarchical stages. The process school focuses on the fundamental processes
underpinning learning and takes both single- and double-loop learning into account.

2.2 MCS and OL

The study of MCS in the organisational context has drawn considerable interest from
accounting researchers. Researchers’ interest in the behavioural and organisational
factors relating to MCS dates back to the 1950s (Otley, 1988). Otley (1988) notes that
management accounting practices are rooted in organisational life, and management
accounting processes are part of wider organisational processes. MCS and other
 ARJ organisational processes are complementary in nature, so it would not be sensible to
study one without considering the other.
27,2 The relationship between MCS and OL is bi-directional. On the one hand,
organisations’ abilities to learn can be influenced by their MCS (Chenhall, 2005; Choe,
2002, 2004; Kloot, 1997; Simon, 1999). Kloot (1997) argues that the four aspects of OL
(knowledge acquisition, information distribution, information interpretation and
172 organisational memory) are inextricably linked to MCS. Prior knowledge in an area can
influence organisations’ ability to assimilate and exploit new knowledge (Cohen and
Levinthal, 1990; Libby and Waterhouse, 1996). It can also be stored within organisations
as organisational memory and disseminated to relevant parties through MCS
(Virkkunen and Kuutti, 2000). The design of MCS determines the types of information
that the systems can provide and the types of MCS’ use can influence the ways that
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individuals use information provided by MCS (Abernethy and Brownell, 1999; Chenhall,
1997; Naranjo-Gil and Hartmann, 2007b; Tse, 2011; Tse and Gong, 2009). On the other
hand, OL contributes to the evolution of MCS in organisations. Through feedback,
detection of errors and performance monitoring, organisations may change their beliefs
and assumptions from time to time, and adjust organisational routines such as their
MCS accordingly (Levitt and March, 1988). The knowledge of organisations and their
environments generated from OL can provide inputs to this adjustment process and an
organisation’s learning requirements can influence how an MCS is used (Choe, 2004;
Driver, 2001).
As information provided by an MCS can be used as an input to OL, the design of an
MCS can have direct implications on OL. The design of an MCS can be conceptualised in
terms of its informational characteristics. Chenhall and Morris (1986) identify four broad
characteristics of information perceived to be useful to top management, namely, scope,
timeliness, aggregation and information on how activities are integrated. A broad-scope
MCS is one that provides information on the external environment and is non-financial
and future-oriented. The timeliness of MCS information refers to the speed and
frequency of reporting information. Aggregation of MCS information refers to the extent
of information aggregated over multiple periods of time and/or across different
departments or functions. Information provided by an MCS which assists integration
includes information on the effect of sub-unit decisions on the overall organisation. The
four information characteristics of MCS, taken together, represent the overall MCS
design. With effective dissemination of relevant information among its members, an
organisation with MCS that exhibits strong informational characteristics is likely to
have higher levels of OL activities (Chenhall, 2005).
Besides the design of MCS, the extent of MCS’ use can also influence OL. Prior studies
identify six major types of MCS’ use, namely, improve understanding, focus attention,
scorekeeping, improve learning, performance evaluation and reward and provide
feedback (Chenhall and Langfield-Smith, 2003; Chenhall and Morris, 1993; Henri, 2006;
Kerr and Slocum, 1987; Kloot, 1997). Individuals often use different types of MCS
information for different purposes (Tse, 2011). Information may be available from an
MCS, but OL would not occur if the information is not actually used by members in
organisations. When individuals make more extensive use of an organisation’s MCS, a
broader range of MCS information is likely to be used. The use of a broader range of MCS
information in an organisation can, in turn, stimulate OL activities.
Based on the above arguments, the following hypotheses are developed:
 H1. The design of MCS is significantly associated with the level of OL. Management
H2. The use of MCS is significantly associated with the level of OL. control systems

3. Research methods
3.1 Data collection
This study adopted a survey method. A written questionnaire was prepared and mailed 173
out to collect quantitative data. In total, 3,000 questionnaires were mailed to chief
executive officers (CEOs) or managing directors of listed and non-listed companies in
Malaysia. The questionnaires were addressed to CEOs and managing directors, as it
was expected that recipients of the questionnaires will either be able to complete the
questionnaires themselves or pass them to appropriate persons in the organisations to
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complete. An ID code was printed on each questionnaire and the accompanying return
envelope for identification of late respondents. Recipients were given two weeks to
respond and reminder letters were sent to recipients who did not reply after two weeks.
In total, 272 questionnaires were returned to the researchers, representing a response
rate of 9 per cent. Among the returned questionnaires, 123 were received after reminder
letters were sent. Questionnaires from late respondents were used as the proxy of
non-respondents, and an independent group t-test was performed to determine whether
there was any significant difference between early respondents and non-respondents.
Results of the test indicated that there was no significant difference between the two
groups.
Regression analysis was used to test the significance of the association of the
hypothesised relationships between MCS and OL. After analysis of the empirical
results, follow-up interviews with managers from five companies were conducted to
develop a deeper understanding of the empirical results.

3.2 Measurement of variables

The measurement of four information characteristics of MCS design was based on 13
5-point Likert scale items adapted from Chenhall and Morris (1986). There were five
items for scope, two items for integration, four items for timeliness and three items for
aggregation. Anchors for scope and integration scales were “non-existent” (1) and “very
comprehensive” (5) and anchors for timeliness and aggregation scales were “strongly
disagree” (1) and “strongly agree” (5). The use of MCS was measured by 31 5-point Likert
scale items developed by the researchers with reference to prior literature in the area
(Chenhall and Morris, 1993; Ittner and Larcker, 1997; Sahraoui, 2002; Vandenbosch,
1999). There were four items for improve understanding, two items for focus attention,
three items for scorekeeping, three items for improve learning, 11 items for performance
evaluation and reward and eight items for feedback. Anchors for improve
understanding, focus attention, scorekeeping and improve learning scales were “never”
(1) and “always” (5) and anchors for performance evaluation and reward scales were
“strongly disagree” (1) and “strongly agree” (5). Six of the eight feedback items had
anchors “never” (1) and “always” (5) for their scales and the anchors for scales of the
other two items were “strongly agree” (1) and “strongly agree” (5). For measurement of
OL, 22 5-point Likert scale items were adapted from Templeton et al. (2002). The items
were grouped into four categories, namely, knowledge acquisition (eight items),
information distribution (four items), information interpretation (five items) and
 ARJ organisation memory (five items). Anchors for all OL item scales were “strongly
disagree” (1) and “strongly agree” (5).
27,2 Confirmatory factor analysis (CFA) was performed on each dimension to check the
validity using LISREL. The results of the reliability and validity tests are presented in
Table I. The Cronbach’s alpha test was used to test the reliability of the research
instrument. All the reliability coefficients (Cronbach’s alpha) had Cronbach’s alphas
174 exceeding 0.7. Validity tests using CFA were performed on all dimensions that had more
than three items. Table I shows the results of CFA performed on all dimensions.
Descriptive statistics are presented in Table II. Of the four characteristics of MCS
design, “aggregation” had the highest mean (3.81) and “scope” had the lowest mean
(3.15). For the use of MCS, “scorekeeping” had the highest mean (4.02), whereas
“improve understanding” had the lowest mean (3.53).
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4. Findings and discussion

The correlation matrices in Tables III and IV indicated significant and positive
associations between all dimensions of MCS design and use and all dimensions of OL.
The greater use of MCS in scorekeeping indicated the prevalence of the traditional role
of MCS and provided an indicator of the prevalence of adaptive or single-loop learning.
Table IV indicated a stronger association (r ⫽ 0.55) between MCS’ use and OL than that
between MCS design and OL (r ⫽ 0.47).
The hypotheses of this study were tested with standard multiple regression analysis.
The following regression equation was used to test the hypotheses:

Y ⫽ ␤ 0 ⫹ ␤ 1 ⫻ D ⫹ ␤2 ⫻ U ⫹ ␧

Variables N Cronbach’s alpha RMSEA p CFI GFI

MCS design
Scope 215 0.8368 0.00 0.75 1.00 1.00
Integration 218 0.8402
Timeliness 222 0.8639 0.086 0.18 0.99 0.99
Aggregation 222 0.8141
MCS use
Improve understanding 222 0.8374 0.043 0.42 1.00 0.99
Focus attention 221 0.7591
Scorekeeping 221 0.8656
Improve learning 221 0.8694
Performance evaluation and reward 221 0.7515 0.081 0.064 0.97 0.96
Feedback 219 0.7585 0.063 0.31 0.99 0.99
OL
Knowledge acquisition 220 0.8038 0.067 0.20 0.98 0.96
Information distribution 222 0.7881 0.13 0.05 0.98 0.98
Information interpretation 220 0.7638 0.079 0.17 0.98 0.98
Organisation memory 219 0.7949 0.091 0.16 0.99 0.99
Table I.
Reliability and validity Notes: RMSEA ⫽ root mean square error of approximation; CFI ⫽ comparative fit index; GFI ⫽
statistics goodness-of-fit index
 Variables N Minimum Maximum Mean SD
Management
control systems
MCS design
Scope 215 1 5 3.15 0.887
Integration 218 1 5 3.53 0.915
Timeliness 222 1 5 3.70 0.792
Aggregation 222 1 5 3.81 0.812 175
MCS use
Improve understanding 222 1 5 3.53 0.847
Focus attention 221 1 5 3.87 0.801
Scorekeeping 221 1 5 4.02 0.786
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Improve learning 221 1 5 3.65 0.813

Performance evaluation and reward 221 2.14 5 3.58 0.608
Feedback 219 2 5 3.65 0.664
OL
Knowledge acquisition 220 2 5 3.82 0.556
Information distribution 222 1 5 3.75 0.671
Information interpretation 220 2 5 3.87 0.632 Table II.
Organisation memory 219 1 5 3.78 0.730 Descriptive statistics

Where, Y represents OL; D represents the design of MCS; U represents the use of MCS;
and ␧ represents an error term.
As summarised in Table V, the results of the multiple regression analysis
model indicated a significant positive relationship between MCS and OL (R2 ⫽ 0.33,
F(2, 199) ⫽ 49.08, p ⫽ 0.001). Both the quality of MCS design and the extent of MCS’ use
had significant positive relationships with OL, as indicated by the t-values. The
regression coefficients for both MCS design and use were positive. The design and use
of MCS explained 33 per cent of the variance in OL. This was particularly high by
behavioural research norms (Kalagnanam and Lindsay, 1998). The results indicated
that both H1 and H2 were supported. Comparatively speaking, the beta coefficient for
MCS’ use was greater than that for MCS design. This finding indicated that MCS’ use
has a more significant effect on OL than MCS design, and was consistent with the
outcomes reported in Table IV.
Feedback from follow-up interviews with three of the respondents (hereafter referred
to as GA, GC and KH) provided additional insights into the relationship between MCS
and OL in practice. While quantitative data collected from the questionnaires supported
the hypothesised relationships between MCS and OL, the data did not provide
information on the reason that the use of MCS has a more significant effect on OL than
the design of MCS. Follow-up interviews with respondents of the questionnaires enabled
the researchers to look into the issue.
The interviewees suggested that the use of formal MCS in dissemination of
information was restricted in their organisations. As discussed in the second section, OL
was more likely to occur when information was widely disseminated within
organisations (Huber, 1991; Garvin, 1993). However, individuals’ levels of access to
formal MCS were determined by their positions within the organisational hierarchy.
Senior managers had full access to the information available in formal MCS and
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27,2
ARJ

176

Table III.
Correlations of

dimensions of OL
dimensions of MCS and
Variables 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

MCS design
Scope 1
Integration 0.501** 1
Timeliness 0.517** 0.474** 1
Aggregation 0.533** 0.584** 0.566** 1
MCS use
Improve 0.447** 0.470** 0.322** 0.465** 1
understanding
Focus 0.395** 0.438** 0.313** 0.443** 0.658** 1
attention
Scorekeeping 0.296** 0.245** 0.297** 0.404** 0.590** 0.559** 1
Improve 0.385** 0.304** 0.271** 0.329** 0.544** 0.600** 0.620** 1
learning
Reward 0.323** 0.303** 0.319** 0.342** 0.369** 0.396** 0.440** 0.415** 1
Feedback 0.347** 0.376** 0.349** 0.439** 0.431** 0.486** 0.482** 0.408** 0.491** 1
OL
Knowledge 0.293** 0.357** 0.312** 0.323** 0.439** 0.353** 0.410** 0.374** 0.399** 0.466** 1
acquisition
Information 0.303** 0.318** 0.373** 0.361** 0.352** 0.367** 0.325** 0.279** 0.429** 0.426** 0.624** 1
distribution
Information 0.275** 0.196** 0.284** 0.247** 0.360** 0.240** 0.295** 0.289** 0.430** 0.412** 0.562** 0.513** 1
interpretation
Organisation 0.252** 0.291** 0.346** 0.335** 0.359** 0.228** 0.343** 0.216** 0.403** 0.456** 0.517** 0.568** 0.630** 1
memory
Overall OL 0.334** 0.359** 0.396** 0.382** 0.454** 0.352** 0.406** 0.344** 0.500** 0.533** 0.804** 0.824** 0.818** 0.843** 1

Note: ** Correlation is significant at the 0.01 level (one-tailed)

 selectively released part of the information to low-level managers whom they deemed Management
were in need of the information.
control systems
We do not give standard information to everybody. For example, there is no reason to pass
sales information to other departments. Other departments may get general but not detailed
information.
In theory, it is good for employees to share ideas but, in practice, our employees are
“hand-tracked”. 177
Only senior management and no one else could retrieve official information stored by the
various departmental heads.
General Manager, GA
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Due to the restriction on access to formal MCS, lower-level managers normally did not
receive all available information. Consequently, they might not be able to make full use
of the information available on an MCS. As senior managers determined the levels of
access granted to lower-level managers based on their own perceptions, there might be
a mismatch between lower-level managers’ information needs and the information
available to them. In addition, managers might not be aware of the existence of some of
the information available on an MCS that is relevant to their decision-making and,
hence, might not ask for it.
The restrictions on the distribution of information via formal MCS were partly
mitigated by information sharing among individuals via informal MCS. Informal
exchange of information often took place through face-to-face committee meetings
(Chow et al., 1999). During committee meetings, individuals shared information with

Variables 1 2 3 4 5 6 7 8

MCS design 1
MCS use 0.562** 1
Overall MCS 0.850** 0.910** 1
Knowledge acquisition 0.397** 0.515** 0.508** 1
Information distribution 0.432** 0.458** 0.508** 0.624** 1
Information interpretation 0.335** 0.435** 0.423** 0.562** 0.513** 1 Table IV.
Organisation memory 0.390** 0.432** 0.460** 0.517** 0.568** 0.630** 1 Correlations of MCS
Overall OL 0.469** 0.554** 0.573** 0.804** 0.824** 0.818** 0.843** 1 characteristics, MCS use,
overall MCS, dimensions
Note: ** Correlation is significant at the 0.01 level (one-tailed) of OL and overall OL

Unstandardised
coefficients Standardised coefficients
Variables B Standard error Beta t Significance

Constant 1.665 0.217 7.668 0.000

MCS design 0.180 0.056 0.224 3.196 0.002
MCS use 0.403 0.067 0.420 5.990 0.000 Table V.
Regression of OL against
Notes: R2 ⫽ 0.33, F(2, 199) ⫽ 49.08, p ⫽ 0.001 MCS design and MCS use
 ARJ each other. When an individual was involved in more than one committee, information
acquired from one committee could be passed to another committee through the person’s
27,2 participation in meetings.
Information is shared through individuals working in teams. For example, when there was a
project to shift factory, it was normal for an individual to be on more than one committee or
team. The sharing of information took place when an individual shared what went on in other
178 teams.
General Manager, GA.
Information is distributed at the monthly head of department meetings, monthly departmental
meetings and the quarterly financial review meetings.
Financial Controller, KH.
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Beside face-to-face meetings, an informal exchange of information might also occur through
electronic means.
The directors in Singapore shared information with us. Additionally, information comes from
other branches from other countries. Knowledge was shared more on an informal basis
through telephone and email. Employees share ideas which are then used to bring about
improvements (in organisational processes and outcomes).
Information is distributed through email, at our quarterly meetings, product development
meetings, production planning meetings and during the annual budget review. Employees are
encouraged to share ideas and to a certain extent, their ideas are implemented. Finance
department provides input on finance, purchasing department provides financial and
non-financial input. Non-financial inputs are not systematically distributed.
Financial Controller, GC
The feedback from follow-up interviews provides supporting evidence for the findings
of the study. As pointed out in the second section, information distribution is a key
aspect of OL. Advances in information and communication technology enable
organisations to design and implement an MCS that is capable of collecting and
disseminating large volumes of information (Tse and Gong, 2009). However, as
highlighted by the feedback from follow-up interviews, the dissemination of
information in respondents’ organisations is strongly influenced by the ways that
individuals use formal and informal MCS. Individuals can use their positions and
networks with other members of the organisation to influence the flow of information
within an organisation. While the design of an MCS would determine the types
of information available in an MCS, it can influence OL only when the available
information is disseminated within an organisation. As dissemination of MCS
information is moderated by individuals’ use of MCS, the impact of MCS design on OL
would also be moderated by MCS’ use. In contrast, the impact of the use of MCS on OL
is not influenced by the design of MCS. As the use of MCS can influence OL on its own
and moderate the relationship between the design of MCS and OL, it would play a more
influential role than the design of MCS on OL.

5. Conclusion
In the current study, the effects of two aspects of MCS, design and use, on OL are examined.
Both the design and use of an MCS are found to be positively associated with levels of OL
activities in organisations but, comparatively speaking, the use of an MCS is found to be a
 more influential factor on OL. The association between the use of an MCS and OL is stronger Management
than that between the design of MCS and OL. Individuals’ abilities to use the information
available on an MCS in their decision-making depends on their position within the
control systems
organisational hierarchy and networks with other members of the organisation.
This paper contributes to the accounting literature by providing empirical evidence on
the relative impacts of the design and use of MCS on OL activities in organisations, and the
interaction between the two aspects of MCS in influencing OL. While prior studies on 179
relationships between MCS and OL have examined the effects of both the design and use of
MCS on OL, they tend to focus on only one of the two aspects of MCS. In practice, however,
the two aspects of MCS influence OL simultaneously. By examining the design and use of
MCS concurrently, this paper contributes to the knowledge of the relationship between the
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two aspects of MCS and their relationships with OL.

The findings of the study also have direct implications for practice. To facilitate OL, an
MCS needs to be designed with the ability to collect and disseminate relevant information to
individuals in a timely manner. However, a well-designed MCS is necessary, but not
sufficient for OL to occur. The ways that formal and informal MCS are used by different
members of organisations could have significant impacts on OL activities in organisations.
Senior managers of organisations should balance the needs to control information flows and
to facilitate OL in determining the ways that formal MCS are used by their subordinates.
Lower-level managers should acknowledge the fact that not all information that is relevant
to their decision-making is available to them via the formal MCS, and actively seek relevant
information for their decision-making from various sources.
A number of limitations originating from the adoption of the survey method are
acknowledged. As discussed in the theoretical development section, MCS and OL
influence each other over time. The current study can only examine the relationship
between MCS and OL at one point in time. Therefore, the long-term implications of
interactions between the two aspects of MCS and OL have not been studied. In addition,
the study suffers from the normal limitations of survey studies such as low response rate
and limited control over who have completed the questionnaires.
Future research could extend the current study by examining the two-way
interactions between the design and use of MCS and their relationships with OL from a
longitudinal perspective. While the findings of the current study show that the use of
formal and informal MCS moderates the effects of MCS design on OL, the long-run
interactions between the use of MCS and the design of MCS remain unknown. Does the
design of an MCS influence the ways that members of organisations use the systems in
the long-run? Do organisations change the designs of their MCS in light of the ways that
their members actually use the systems? It is also unclear how OL needs and OL
activities influence the relationships between two aspects of MCS in the long-run. A
longitudinal case-based study on multi-directional interactions between different
aspects of MCS and OL could help answer these questions.

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Corresponding author
Michael S.C. Tse can be contacted at: michael.tse@deakin.edu.au
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