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Towards a contingency theory of corporate planning: a systematic literature review

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Abstract

A major research stream examines corporate planning in its context by drawing on the contingency approach, which forms a major theoretical basis for the fields of strategic management and management control. This research paper provides a comprehensive review of this research stream and identifies important contingency factors, recurring results, and commonalities with the theoretical basis of the contingency approach. It reviews 195 studies that investigate the context factors of corporate planning at the organizational level of analysis and were published in ranked academic journals since 1967. This review contributes three findings to a contingency theory of corporate planning. First, this research stream is highly fragmented, replication of findings is scarce, and the cumulative growth of knowledge is restricted. My review shows that 866 different causal models link 30 context factors and 54 design aspects of the corporate planning system, and yet 498 of these causal models are only addressed in one single study. Second, the majority of contingency studies employ the selection fit approach and cross-sectional data. The more rigorous tests of contingency hypotheses, interaction fit and system fit approaches based on longitudinal data, are relatively scarce. Third, this review highlights consistent results across divergent research settings and designs. Thus, it identifies four important context factors of a corporate planning system: (a) management and planning philosophy, (b) organizational size, (c) environmental uncertainty, and (d) task interdependence. This comprehensive set of context factors facilitates the development of a more pronounced contingency theory of corporate planning.

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Notes

  1. Throughout the research paper the terms planning and corporate planning are used synonymously.

  2. The distinction between systems and processes is important. Systems are complex units compounded from many diverse parts that are subject to a common purpose, whereas processes are facilitated by systems. That is, systems are the means by which processes occur (Anthony 1965).

  3. In addition, Miller et al. (1988) state: “Although the term ‘context’ is broad and ambiguous, we define it as the challenges and resources, economic as well as human, that surround an organization. Context usually represents a broad field of constraints, opportunities, and possibilities.”

  4. I am indebted to an anonymous reviewer, who highlighted the importance of this topic in association with a contingency theory of corporate planning.

  5. In management accounting research the distinction between decision-influencing and the decision-facilitating accounting information is also discussed (see Luft and Shields 2003). Decision-influencing information is employed for organizational control purposes, whereas decision-facilitating information is employed for organizational coordination (Nicolaou 2000). Thus, the latter type of accounting information is a basis of corporate planning in general as well as budgets in particular as defined in this paper. I would like to thank an anonymous reviewer for drawing my attention to this interesting topic in the management accounting literature.

  6. Grabner and Moers (2013) provide a distinction between management control as a system and as a package. In their definition the concept “system” is narrowly defined as a set of management control practices that is conscious decided upon in a design process upon by taking interdependencies between these practices into account. In contrast, management control as a package “represent the complete set of control practices in place” (Grabner and Moers 2013, p. 408). The system concept of the contingency approach is broader in its basic definition because systems are complex units compounded from many diverse parts that are subject to a common purpose (Anthony 1965).

  7. CP systems are thus defined as a complex unit in organizations compounded from many diverse parts subject to the common purpose of being concerned with decisions in organizations, alignment with the future, and changes in the behaviour of an organization’s members.

  8. The review protocol and results of the structured, computerized search are available from the author upon request.

  9. German scholars used to publish research mainly in the German language, forming a distinct market for scientific publication (Wagenhofer 2006). German language studies usually addressed corporate planning in a setting similar to the corporate planning framework shown in Fig. 1.

  10. The 31 journals, in alphabetical order, are Academy of Management Journal; Academy of Management Perspectives/Academy of Management Executive; Academy of Management Review; Accounting, Organizations, and Society; Administrative Science Quarterly; Betriebswirtschaftliche Forschung und Praxis; California Management Review; Contemporary Accounting Research; Decision Sciences; Die Betriebswirtschaft; Die Unternehmung—Swiss Journal of Business Research and Practice; European Accounting Review; Harvard Business Review; Journal für Betriebswirtschaft; Journal of Accounting and Economics; Journal of Accounting Research; Journal of International Business Studies; Journal of Management; Journal of Management Accounting Research; Journal of Management Studies; Long Range Planning; Management Accounting Research; Management Science; Organization Science; Review of Accounting Studies; Schmalenbach Business Review; Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung; Strategic Management Journal; The Accounting Review; Zeitschrift für Betriebswirtschaft; and Zeitschrift für Planung und Unternehmenssteuerung.

  11. The JOURQUAL2-Ranking is prepared and published by the German Academic Association of Business Research and covers–unlike international rankings–all leading German-language business administration-related periodicals and all leading international journals in one comprehensive ranking (Schrader and Hennig-Thurau 2009). The JOURQUAL2 shows statistically significant, positive, and moderately high correlations with other international journal rankings, such as the 2008 ISI Journal Citation Impact Factors (r \(=\) .57, \(p < .01\)), the British Association of Business Schools Academic Journal Quality Guide from 2009 (r \(=\) .64, \(p < .01\)), the French Centre National de la Recherche Scientifique ranking from 2008 (r \(=\) .70, \(p < .01\)), and the Dutch Erasmus Research Institute of Management Journals Listing from 2006 (r \(=\) .56, \(p < .01\)).

  12. Because German-language journals are not entered systematically into literature databases, publication analysis in German-speaking countries involves scanning all selected periodicals and recording relevant articles by hand (Schäffer and Binder 2008).

  13. Upon revision I included the study of Song et al. (2015) in my sample of studies. This article in press had been made available online at the Strategic Management Journal after I had finished my initial literature search. I am grateful to an anonymous reviewer, who recommended this study to me.

  14. A table of all 195 studies with key characteristics of each study as well as a reference list of the 193 articles is available from the author upon request.

  15. This finding is also evident in the management control literature on the diagnostic or interactive use of budgets. I was unable to identify studies, which fully comply with the inclusion criteria of this review. These studies focus either on the individual level of analysis (e.g., Chong and Mahama 2014), do not include any context factors (e.g., Grafton et al. 2010; Koufteros et al. 2014; Sponem and Lambert 2016) or are case studies of a single organization (e.g., Kober et al. 2007; Mundy 2010).

  16. The literature review of Otley (2016) provides an up to date examination of the state of art of contingency thinking in management accounting and control. The conclusions drawn there and in this review of a contingency theory of corporate planning correspond at many levels. I’d like to thank an anonymous reviewer, who highlighted this current article in press to me.

  17. Luft and Shields (2003) provide an extensive discussion of the different causal-model forms and shapes of the explanatory link.

  18. The coding manual including working definitions for all constructs and example definitions from sample studies is available from the author upon request.

  19. Derfuss (2009, 2015, 2016) has conducted three meta-analyses regarding (a) individual consequent variables, (b) context factors, and (c) the relationship with performance of participative budgeting. His results mirror the spurious and conflicting findings of the contingency studies regarding the involvement of low, middle, and top management in the planning process in my review.

  20. I would like to thank an anonymous reviewer for highlighting the limitation of endogeneity as well as providing ideas to address this limitation.

  21. Also it does not comply with the inclusion criteria of this review, the article of Chenhall and Langfield-Smith (1998) provides another outstanding example of a system fit study. In this study the system fit of an organization’s strategy, six different management techniques (encompassing also strategic planning techniques) and six different management accounting practices are examined with a cluster analysis. Organizational performance is compared across the resulting six clusters to examine system fit.

  22. I would like to thank an anonymous reviewer for these suggestions.

  23. Whereas the early contingency approach highlights the balance and selection of competing roles, uses or approaches, the paradox literature examines conditions in which these roles, uses or approaches can be attended to simultaneously (Gibson and Birkinshaw 2004; Smith and Lewis 2011). Thus, research examining planning or management control systems through a paradox lens may also enrich a contingency theory of corporate planning.

  24. Jarvis et al. (2003) offers guidelines with regard to and an encompassing discussion of different types of first order and second order constructs. In management accounting research a similar reasoning is applied to the construct of interactive control systems (Bisbe et al. 2007).

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Acknowledgements

I would like to thank Lucia Bellora, Joan Luft, Sally Widener, Jatinder N. D. Gupta, Frank Schiemann, Tobias Brux, and the participants of the WHU joint chair meeting, especially Erik Strauss, for their insightful comments on previous versions of this manuscript. I further appreciate the valuable support of Christian Ott, who provided indispensable feedback and assisted in coding the studies of this review. I am also grateful for the support of Johannes Stürmer, who assisted to set my review in contrast to previous reviews. I am indebted to two anonymous reviewers, which provided numerous valuable recommendations.

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  1. Faculty of Business Management and Economics, Chair of Business Management, esp. Management Accounting and Control, Technische Universität Dresden (TU Dresden), 01062, Dresden, Germany

    P. Maik Hamann

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Appendix

Appendix

See Tables 8, 9, 10 and 11.

Table 8 Design aspects of the corporate planning system
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Table 9 Context factors of the corporate planning system
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Table 10 Direction and consistency of causal models tested in selection fit studies
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Table 11 Direction and consistency of causal models tested in interaction fit studies
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Hamann, P.M. Towards a contingency theory of corporate planning: a systematic literature review. Manag Rev Q 67, 227–289 (2017). https://doi.org/10.1007/s11301-017-0132-4

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