Tony Davila

An empirical study on the drivers of management control systems' design in new product development

New product development has changed significantly over the last decade and management control systems have played an important role in this transformation. This study draws on Galbraith’s concept of uncertainty and investigates the relationship between project uncertainty, product strategy and management control systems. It also explores whether these systems help or, as argued in the innovation literature, hinder product development performance. Results support the relevance of the project uncertainty and product strategy to explain the design of management control systems. They also show that better cost and design information has a positive association with performance, but that time information has a negative eAect. # 2000 Elsevier Science Ltd. All rights reserved.

Management Accounting in the Manufacturing Sector: Managing Costs at the Design and Production Stages

This chapter analyzes the empirical research literature on management accounting in the manufacturing sector including the development as well and manufacturing phases of the product lifecycle. As managing product development has gained terrain in companies over the last 15 years, management accounting research has contributed to the advancement of this field of knowledge. Changes in the manufacturing environment, such as significant upfront investments and ongoing overhead costs, demanding performance criteria besides efficiency, or critical linkages across the value chain have contributed to a fruitful research in management accounting in manufacturing. The chapter identifies significant advances in this knowledge base and highlights future research opportunities.

An empirical test of inventory, service and cost benefits from a postponement strategy

Postponement of the point of product differentiation is a potentially powerful strategy to improve supply chain management. The literature offers theoretical arguments supporting the relationship between postponement and improved inventory turns and customer service quality, as well as lower operational costs. This study empirically examines these proposed benefits. Data from a disk drive manufacturer that applied postponement to simplify its supply chain are used to test the benefits of this strategy. During the time of the case study, the company implemented an initiative to create a generic product that needed less customization; what configuration remained could be delayed until the product was integrated at the customers’ sites, instead of at the companys distribution centres. Regression analysis is used to investigate whether higher levels of postponement are associated with better service, lower inventory, and lower cost. Our results indicate that higher levels of postponement—measured as the percentage of generic products shipped—are associated with better on-time delivery and lower variable costs. Our results also indicated the importance of redesigning products and processes and working together with customers.

Learning capabilities and the growth of technology-based new ventures

This study considers the impact of organisational learning as endogenous growth driver for technology-based new ventures. Over a period of up to 12 years, the growth path of 44 venture capital backed companies was analysed as critical event series, where the events were the adoption of 50 management control systems. The study shows that the adoption of eight bundles of these systems, which are used as proxies for the emergence of the dynamic capabilities strategic planning, financial planning, and evaluation, human resource planning, and evaluation, product development, marketing and sales, and partnering are positively associated to the growth of the venture. In addition, the growth path, i.e. the order of adoption, is associated with growth performance.

Startup Firms' Growth, Management Control Systems Adoption and Performance

Startup firms face a significant managerial challenge when they grow beyond the boundaries of informal interactions. This transition point has often been identified with a significant crisis in the growth path of these firms. An important aspect of this transition is the adoption of management control systems that leverage top management attention and provide the infrastructure to scale up the business model. Using a multi-method, multi-case field research design in a sample of 78 startup firms, we examine the relevance of the adoption of financial systems vis-a-vis other management control systems. We find that financial planning-including cash budget, operating budget and sales projections-are the earliest set of systems adopted. We also look at the association between the adoption of management control systems and startup firm growth. We model this association using a simultaneous equation specification to capture the theoretical arguments that posit the endogeneity of these variables. We find a positive and significant association in both equations among these variables. We further examine whether the often argued CEO replacement at this transition point is associated with the level of adoption of management control systems. We find that CEOs that have adopted fewer systems have shorter tenures. Taking advantage of the intimate knowledge that venture capital investors have about the management processes (and management systems in particular) of the firms they invest in, we examine the association between company valuation and the adoption of management control systems. We find evidence consistent with this association. Finally, we examine the association between the adoption of financial planning systems and the adoption of strategic and human resource planning systems.

Measuring the Benefits of Product Standardization and Postponement of Configuration in a Supply Chain

A strategy for improving supply chain management is to configure products late in the supply chain and to increase commonality across products. The extreme case is configuration by customers and standardization of end products. This paper presents the concepts required to measure the performance implications of changes in the supply chain strategy. It further describes the experiences of a company that implemented such a strategy. During the implementation of this new strategy, the old and the new supply chain operated in parallel because not all customers adapted to the new processes and products at the same time. The existence of two supply chains simultaneously provides a good example of the challenges that exist in designing measurement systems that would allow a useful comparison of performance across both supply chains.

Measuring Growth and Its Impact on Reported Growth Persistence

We identify a model of early-stage company growth persistence. Using seven commercial high growth company lists (either a Top 500 or Top 100 list of companies), we find that approximately 30% of companies remain on these lists two or more consecutive years. This transition probability holds constant over time: companies present for two years in a row have a 30% chance of showing three or more years, the same probability holds for showing more than four years conditional on being in the list for three consecutive years, and so on. To probe potential explanations for 70% failing to repeat, we examine the Inc.5000 list that Inc. magazine has published since 2007. We find that many of these companies have significant drops in their growth rates. Next, we examine how the definition of growth affects growth persistence. We build our own database comprising over 370,000 privately held companies from 11 different countries using ORBIS. We find that growth persistence, as defined by the transition probability, depends significantly on the definition of these growth metrics. In particular longer periods to estimate growth, average growth (rather than difference between first and last year), and minimum organizational size increase persistence. These results hold for both revenue and headcount.