Diffusion of management accounting practices in Bangladesh: Practitioners’ satisfaction towards sophistication

Abstract

Management accounting research has attained some behavioral dimensions in recent years. Today’s management accountants are entrusted with embedding different value dimensions in products and services offered by companies which made them more practical. Some contingent factors become very much operative to guide and lead management accountants in practical field. The extent of success of management accountants to integrate the value dimensions in establishing management accounting practices is an important area and necessitates an exploratory form of research. In Balanced Scorecard (BSC), the researchers have already linked internal business processes with profitability (Kaplan and Norton, 1992). Thus, management accountants should consider the satisfier of the end users that will ultimately bring their own satisfaction and the practices established by them will accommodate all requirements leading to goal congruence. The essence of the study is that employee satisfaction in general and management accountants’ satisfaction in particular will ensure demanded value in products and services if the satisfying factors are rightly identified and addressed. Management accountants’ satisfaction is also important to achieve sophistication in management accounting practices. Satisfaction of management accountants contributes towards the development of sophisticated management accounting practices. This research employs an exploratory form of research under contingency framework to explore contingent factors (both internal and external) that affect the satisfaction level of management accountants. How management accountants’ satisfaction may lead to sophisticated management accounting practices is the central focus of the research. The transition in Bangladesh from a state-owned industrial sector to a market-led industrial sector added extra momentum to the study of management accounting practices. These changes put immediate pressure on accounting practice to meet the demands of the new business environment. Strategic target of the country to bring it to the status of a developed country by 2041 refined the economic structure and political philosophy significantly. Bangladesh immediately needs a highly responsive and competitive manufacturing sector where the application of advanced management accounting tools becomes a priority. Thus, the research area is timely; however, it will work as a benchmark study. Institutions are developing as most of the companies are first generation companies demanding strong level of regulatory support. Thus, the current study failed to provide any promising results rather revealed different market inefficiencies like low level of diffusion, wide gap in theory and practices, different types of gaps, abundance of less sophisticated management accounting practices, sophistication-satisfaction mismatch, sophistication of firms having no relationship with contingent constructs etc. Still, there are hopes as demonstrated in different interview outcomes. Based on the findings of a semi-structured questionnaire-based survey, supplemented by 16 selected in-depth interview data, this study explores the diffusion of different management accounting practices (MAPs) in 113 manufacturing companies from different sectors. In addition, drawing off the existing literature on new institutional sociology and innovation diffusion theories, a model is developed to form the basis for investigating and evaluating the factors that influence the development and change of MAPs in Bangladeshi firms. This investigation is underlined with thorough statistical inference resulting from applying factor analysis and simple and multiple regression to the survey data as appropriate. The data collected from in depth interviews are codified and analyzed to provide more insight into MAPs in the responding firms. Although the responding companies have reported using most of the MAPs surveyed, the adoption rates of these practices are noticeably lower than the adoption rates of MAPs usually found in the management accounting literature in other countries. The findings also seem to confirm those of recent studies in other countries about the popularity of traditional practices over the much acclaimed advanced ones. However, respondents not only claim to derive higher benefits from traditional MAPs than from advanced MAPs, but they also express their intention to place greater emphasis on the former in the future. Thus, this study questions the exaggeration in the criticism of traditional MAPs that characterized the obsolescence campaign initially led by Kaplan (1986) and Johnson and Kaplan (1987) and the acclaimed superiority of the so-called advanced MAPs. This research concludes that the demand side perspective, which dominates the literature on innovation diffusion, is not adequate on its own and, therefore, the supply side and the institutional environment are also important factors in explaining the diffusion of MAPs. Institutional factors, especially those related to the fashion perspective (e.g. use of consultants) and the fad perspective (e.g. being in a joint venture with a foreign partner) appear to be essential in facilitating diffusion. Finally the main limitations of this study are outlined and opportunities for future research are discussed, particularly in relation to this study’s findings about the need to reconsider the usefulness of traditional MAPs and also the need for a multiple perspective approach for studying the diffusion of MAPs.