The Business Strategy And Organizational Performance Accounting Essay

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The previous chapter thoroughly reviewed the literature relating to organizational performance and the factors affecting it. It also reviewed literature on the performance measures. This chapter presents a research framework to determine the relationships between the research variables: business strategy, organizational structure, competition, coercive pressure and organizational performance, and performance measures as mediating variable. This chapter also presents the variables measurement and the methodology.

3.2 Conceptual Framework

Contingency and institutional theory are the theoretical framework that is followed in this research to help explain the relationships among the contingent factors (business strategy, organisational structure and competition), institutional factors (coercive pressure) and organisational performance, and performance measures as mediating effects on the relationship between the contingency and institutional factors, and organizational performance. Scott (1987) points out that the sole use of contingency theory or institutional theory will not provide a complete insight into the role played by the "coordination and control" practices and the way these have interacted to affect the PMS, since contingency theory places attention on an organisational work environment, while institutional theory focuses on an institutional environment. In addition, Wu, Mahajan, and Balasubramanian (2003) suggest that effort should be made by the researchers to sufficiently combine the factors obtained from contingency and those taken from the institutional point of view of the firm in respect of organizational performance.

Contingency Theory

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More explanation and relation PM and OP(look Azizi thesis)_hoque,2004p486

contingency theories are a class of behavioral theory that contend that there is no one best way of organizing / leading and that an organizational, leadership style{Fiedler, 1964 #361}

contingency perspective use from management accounting research for attempting to relate a range of contextual variables such as strategy (e.g., Govindarajan and Gupta, 1985; and Simons,1987), organizational structure (Chia, 1995; Gosselin, 2005) ,and competition ( (Banker & Mashruwala, 2007; Lee & Yang, 2011) with the design of MAS. The use of performance measurement is derived from the MAS for performance evaluation (Kaplan, 1982). Other streams of study pay attention to the use of contingency factors in analysing the association of improved organizational performance with the design of accounting information systems (Otley, 1980). According to contingency theory, the fit between contextual factors (business strategy, organizational structure, competition) and the MCS design is very important to have better organizational performance (Chenhall, 2003; Ittner and Larcker, 1997; Langfield-Smith, 1997; Luft & Shields, 2003). In addition, contingency theory asserts that the optimum design of performance measure systems is dependent on the strategy of the organization (it is also dependent on other features of the organization), and that greater performance will be realized on the condition that they are both aligned (Chenhall, 2003).

In the review of literature on contingency theory, it is confirmed that the business environment in the area of an organization ought to affect the particular form of management accounting practices including PM (Ittner & Larcker, 2003; Otley, 1980). The contingency study is essential to the contribution of building up empirical literature associated with MCS. In addition, with the use of the contingency-theoretical view, the use of non-financial measurement for the evaluation of performance could perform an important role in the association of business strategy with organizational performance (Hoque, 2004). Most of the empirical works in the field of management accounting have been motivated by contingency theories by stressing the role of environment and strategy (Fakhr et al., 2009). Research based on contingency has suggested that a formal organizational structure influences the MCS design (Chenhall, 2003).

Based on the discussion above it appears as put forward by some of the researchers, that contingency theory offers an essential analysis of the contingency factors, PM and performance (e.g., Chenhall, 2003; Ittner and Larcker, 1997; Langfield-Smith, 1997; Luft & Shields, 2003). However, studies on contingency, particularly on balanced scorecards, life cycle costing, target costing, and a broad array of non-financial performance indicators are very few (Chenhall, 2003). Furthermore, Hoque (2004) noted that many factors in addition to contingency factors are likely to affect organizational performance. For this reason, this study tends to investigate how the contingency factors PM affect organizational performance.

3.2.2 Institutional Theory

More explanation and relation PM and OP

Institutional theory attends to the deeper and more resilient aspects of social structure. It considers the processes by which structures, including schemas, rules, norms, and routines, become established as authoritative guidelines for social behavior.{Scott, 1987 #362}. According to institutional theory, the survival of the organisation to realize an efficient production level requires that the organization abides by the social norms of acceptable behaviour (Hussain & Gunasekaran, 2002a). Specifically, the extension of institutional theory exceeds the contingency theory focus on an organisational work environment to its institutional environment (Scott, 1987). Institutional theory describes the way the particular social institutions affect the business practices, the behaviour of a firm, and organizational form including the choice of performance measures (Dimaggio & Powell, 1983). The institutional theory alerts the attentions of state and professional associations in an environment of organization's institutional to affect the shaping of legitimacy and performance of the an organization (Meyer & Rowan, 1977; Scott, 1987; Zucker, 1987). In addition, institutional theory provides better insights into the factors influencing the use of PMS in organizations and how these factors are related to the performance measurement practices by assuming that different factors (internal and external) constitute the organizational environment and that these have a considerable effect on the organizations' performance measurement (Gimzauskiene & Kloviene, 2011). Institutional theory is used to give better insights into the role of accounting systems in the organizations and society where the systems are in operation (Carpenter & Feroz, 2001; Scapens, 1994).

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Three branches of institutional theory have been identified in the literature old institutional economics (OIE), new institutional economics (NIE), and new institutional sociology (NIS) (Hussain & Hoque, 2002). The contribution of NIS to a better understanding of the association of organizational structure with the broader social environment where organizations are located has been very significant (Hussain & Hoque, 2002). It is the belief of researchers in (NIS) theory that the organisation's institutional environment determines the form of the practice design and operation, such as MCS (Powell & DiMaggio, 1991). In addition, the NIS uses a wider multi-dimensional method of focusing on external (macro) and internal (micro) issues in the context of organizations (Dimaggio & Powell, 1983; Scott, 1987). The view of NIS assists in developing an insight into how the phenomenon or behaviour of an organization results from internal and external institutions, although it has social and institutional make up (Dimaggio & Powell, 1983).

The factors that may assist in identifying PMS in line with the organization's environment and the reaction encountered by them are dealt with by institutional theory. Institutional theory, states that internal and external institutional factors assist in gaining insights into the phenomenon or behaviour of an organization (Hussain & Hoque, 2002). Furthermore, institutional theory will address the question of the nature of the factors and their effect on the organizations' internal and external environment, their characteristics and the component of PMS. The dimension of institutional theory that leads to a deeper analysis of relations between PMS and an organization's environment is essential in organizations today (Gimzauskiene & Kloviene, 2011).

3.3 Overview of the Model

The development of a theoretical framework is considered as an essential step in the research methodology because it clearly defines the directions and contributions of the study. Thus, the research framework provides a model, which spells out the logical associations among many identified factors as relevant to the research problem (Cavana, Delahaye, & Sekaran, 2001b).

The present research adapts a framework developed by many researches. Gosselin (2005) explores the effect of contingency factors on applying performance measures. The results show that there are some significant relationships between the type of performance measure (financial and non-financial) and the contingency factors like strategy and decentralization and environmental uncertainty. In addition, a case study was conducted by Hussain and Hoque (2002) to gain insights into and analyse the factors influencing the design and use of non-financial performance measure in the banking industry. They find that many institutional forces affecting the economic limitations seem to be forceful factors, including the regulatory control of the central bank on the implementation of a specific PMS.

Fakhr et al. (2009) investigate how the contingent factors (organizational structure, business strategy, bank's size, and competition) affect the use of financial and non-financial performance measurements. The findings reveal that the four contingent factors positively affect the use of PM. It was suggested that banks that have a more detailed system of PM, especially non-financial measurements, have greater performance, and, thus, recommend for consideration the way these contingency factors are related to organisational performance. Hoque and James (2000) investigate the association of organizational size, market position, and stage of product life-cycle, balanced scorecard (BSC) usage with the organizational performance by employing financial and nonfinancial measurements. It was suggested that greater BSC usage has a relationship with enhanced performance.

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Lee and Yang (2011) investigate how the organizational structure and competition are associated with the design of PMS and how their combination influences the performance. The findings show that the organizational structure has a significant relationship with the PMS design, and that the combined effects are partly supported on performance, which involves organizational structure, competition, and the PMS usage. In addition, the survey conducted by Hoque (2004) examines the role of choosing PMs as it influences how strategic priorities and environmental uncertainty are associated with organizational performance. The findings show that the strategic choice of the management has a significant positive association with organizational performance via the greater use of non-financial measurements for the evaluation of performance by the management.

Finally, Wu, Mahajan, and Balasubramanian (2003) investigate the effect of e-business adoption on the business performance and suggest that research efforts should sufficiently consider a combination of factors obtained from the contingency and institutional point of view of the firm in corresponding with organizational performance. In addition, proper insights into the changes at work in ensuring customer satisfaction will necessarily require more studies to investigate both institutional and contingency factors (Tapanya, 2004).

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In order to provide better insights into the organizational performance, the current study employs the contingency and institutional theoretical framework to investigate the association between contingency factors (business strategy, structure organizational, competition) and institutional factors (coercive pressure) in order to determine their impact on organizational performance, by using the performance measures as a mediating variable.

Independent Variable Mediating Variable Dependent Variable

Contingency Factors

Business strategy

Prospectors

Defenders

Analyser

Organizational Performance

Performance Measures

Financial

Non-financial

Organizational Structure

Decentralization

Competition

Institutional Factors

Coercive pressures

• Central Bank 'regulation control

Figure 3.1

Conceptual Framework: Contingency and Institutional Factors, Performance Measures with Organizational Performance.

Why choose these variables , The proportionality between variables

3.4 Explanation of Constructs

3.4.1 Dependent Variable - Organisational Performance

Organisational performance is the dependent variable in this study. It has been suggested in the accounting (Otley, 1980) and management accounting literature that any comprehensive contingency study should include performance (Hoque, 2004; Lee & Yang, 2011). This study focuses on the objective and subjective measures of organisational performance. Many contingency and institutional factors affect organizational performance, such as business strategy, organizational structure, competition and coercive pressure.

3.4.2 Independent Variable

This study focuses on the important factors of the institutional and contingency factors, which consist of contingency factors and (business strategy, organizational structure, and competition), and institutional factors (coercive pressure).

3.4.2.1 Business Strategy

Business strategy is one of the important variables in the contingency studies (Chong & Chong, 1997). PM should be aligned with the contextual factors, such as strategy and organizational structure (Gosselin, 2005). The role of strategy is dynamic involving managers in continually assessing the way combinations of environmental conditions, technologies and structures enhance performance (Chenhall, 2003). Furthermore, several studies have found significant relations between the organization's strategy and performance measurement system (Abernethy & Guthrie, 1994; Gosselin, 2005; Govindarajan & Gupta, 1985; Hoque, 2004; Van der Stede et al., 2006).

3.4.2.2 Organizational Structure

The important role of organizational structure in affecting performance (e.g., morale, efficiency, and effectiveness ) at the organizational levels (Chia, 1995). Organizational structure is considered to be one of the important factors influencing management accounting practices (Lorenzo, 2008; Waterhouse & Tiessen, 1978). Furthermore, the literature suggests an important link between organizational structure and performance measurement (Abernethy et al., 2004; Langfield-Smith, 1997; Luft & Shields, 2003). Contingency theory suggests that the effectiveness of organizational design depends on the match between organization design and contextual variables (Chapman, 1997). However, the extent to which the fit between PMS and organization structure affects organizational performance is not well understood (Lee & Yang, 2011)

3.4.2.3 Competition

Competition is a powerful contextual factor affecting both organizational design and performance (Lee & Yang, 2011). Growing competition lead to increase the appeal of non-financial performance measures, as these can be leading indicators of performance (Banker et al., 2000). Competition is one potential determinant of the use of multiple performance measures and has a significant impact on organizational performance (Agha et al., 2011; Majeed, 2011). Furthermore, competition has a significant relationship with the use of performance measures (Fakhr et al., 2009; Lee & Yang, 2011).

3.4.2.4 Coercive Pressures

According to institutional theory, some institutional fields (coercive pressure) contain powerful environmental agents who impose structural forms or practices on subordinate organisational units (Dimaggio & Powell, 1983). Furthermore, coercive pressure lead to a change in performance measurement practices (Munir. et al., 2011), while Oliver (2003) finds that the relationship between the institutional factors and performance is significant. Furthermore, Zhuand and Sarkis (2007) find that coercive pressure influence organizations to improve their environmental performance. According to Hussain and Hoque (2002), coercive pressure is the most forceful factor in institutional forces that influence the banks to implement a particular PMS. Accourding to Hussain and Hoque (2002) noted that the regulatory control exercised by the central bank is a forceful means entrenched in coercive pressures and institutional forces which impact on the commercial and specialized banks. The CBL examines and analyses the financial positions of commercial banks as well as issued the guidelines and laws governing the work of commercial banks (http://www.cbl.gov.ly/eg/index.php?option=com_content&view=article&id=152&Itemid 56) .

3.4.3 Mediating Variable - Performance Measures

Performance measures are the mediator variable in this study, in which the multiple performance measures (financial and non-financial) are used based on the four dimensions of the balanced scorecard - financial, customers, internal business process, learning and growth as a basic framework to define the multiple performance measures. Furthermore, the balanced scorecard approach to management has gained prominence in management accounting research as a way of integrating financial and non-financial performance measures (Kaplan & Norton 1992, 1996).

Several studies have found significant relations between the business strategy, organizational structure, and performance measurement system (e,g,.Abernethy & Guthrie, 1994; Gosselin, 2005; Govindarajan & Gupta, 1985; Lee & Yang, 2011; Maurice, 2005). In addition, competition is one potential determinant of the use of multiple performance measures in the marketplace (Lynch & Cross, 1992). Several studies deal with the relation between institutional forces and performance measures (Gimzauskiene & Kloviene, 2011; Hussain & Hoque, 2002; Munir. et al., 2011). Furthermore, several studies provide empirical evidence concerning the positive impact of performance measures on the organizations' financial performance in respect of long-term profitability (Banker et al., 2000; Van der Stede et al., 2006).

3.4 Hypotheses Development

This study represents the relationship between contingency factors (business strategy, organisational structure, and competition), institutional factors (coercive pressures) and organisational performance and performance measures as mediator variable.

3.4.1 Business Strategy and Organizational Performance

The organizational literature (e.g., Miles & Snow, 1994) suggests that improved business performance requires a management style that is related to a specific-firm strategy. In addition, the firms will achieve higher performance if they align managerial practices to the strategic priorities of the organization (Venkatraman et al., 1993). Furthermore, Hoque (2004) suggests that strategy is an important antecedent of organizational performance. Van der Stede et al. (2006) find a positive effect on performance from pairing a quality based manufacturing strategy.

Based on the discussion above, the main hypothesis is:

H1: Business strategy is positively related to organizational performance.

The main hypothesis (H1) is broken down into the following three specific hypotheses:

H1a: Prospector strategy is positively related to organizational performance.

H1b: Defender strategy is positively related to organizational performance.

H1c: Analyser strategy is positively related to organizational performance.

3.4.2 Organizational Structure and Organizational Performance

The organizational structure will have no impact on real activity choice or performance.(Lai & Limpaphayom, 2003). The organizational structure is one of the mechanisms used to control conflicts, it should have a significant impact on the firm's financial behaviour (Mayers & Smith Jr, 1981). Futhermore, the organizational structure has a significant positive impact on organizational performance {Lai, 2003 #260;Lee, 2011 #100}. Managers having information related to cause-and-effect relationships make a greater contribution to overall performance in organic organizations than in mechanistic structures because they have more authority to make decisions in such organizations (Lee, Yang, 2011). Decentralization is associated with organizational performance for aggregated and integrated information (Chenhall & Morris, 1986).

In view of this, this research hypothesize that:

H2: Organizational structure is positively related to organizational performance.

3.4.3 Competition and Organizational Performance

There is a good association between a company's competitive advantage and its performance (Majeed, 2011), the performance of firms in the presence of competition such as low cost of manufacturing and low price of goods are better (Neely, 2005). Furthermore, Agha, Alrubaiee, and Jamhour (2011) find that competitive advantage has a significant impact on organizational performance.

In view of this, this research hypothesize that:

H3: Competition is positively related to organizational performance.

3.4.4 Coercive Pressures and Organizational Performance

Institutional pressure will have important implications for the relative balance between various performance dimensions (Hussain & Gunasekaran, 2002b). The relationship between the institutional factors and performance is significant (Oliver, 2003). Furthermore, coercive pressure influences organizations to improve environmental performance (Zhu & Sarkis, 2007). The central bank is one of the coercive pressures that has a positive impact on economic performance, especially in achieving lower inflation rates; the impact of political cycles on economic cycles (Laurens, 2005).

Accordingly, this research hypothesizes that:

H4: Coercive pressures are positively related to organizational performance.

3.4.5 Business Strategy and Performance Measures

Many studies on PMS emphasize the linkage between business strategy and such measures (Ittner et al., 2003; Kaplan & Norton, 1996, 2001; Otley, 1999). There is a significant and positive association between strategy and management's use of non-financial measures performance (Hoque, 2004), while Stede et al. (2006) find that there is a positive relationship between business strategy and the use of performance measures (financial and non-financial). Several studies have found significant relations between the organization's strategy and the PMS (e.g., Abernethy & Guthrie, 1994; Govindarajan, 1988; Govindarajan & Gupta, 1985; Simons, 1987).

The nature of PMS differs according to the type of business strategy selected (Hussain, 2004; Lorenzo, 2008). Ittner et al. (1997) find that organisations following the prospector strategy make greater use of non-financial measures than organisations following the defender strategy, while Anderson and Lanen (1999) find that prospectors focus more on non-financial measures performance, such as customer satisfaction, market share and competitors' performance. In addition, Fakhr et al. (2009), find a positive association between prospectors and PM

The strategies characterized by defender are associated with formal PMS including objective budget performance targets (Chenhall, 2003). Furthermore, Simons (1987) find that firms that follow a defender strategy tended to rely more on financial measures, such as short-term budgets to compensate their managers (see Simons, 1995).

Based on the discussion above, the main hypothesis is:

H5: Business strategy is positively related to performance measures.

The main hypothesis (H5) is broken down into the following three specific hypotheses:

H5a: Prospector strategy is positively related to performance measures.

H5b: Defender strategy is positively related to performance measures.

H5c: Analyser strategy is positively related to performance measures.

3.4.6 Organizational Structure and Performance Measures

Organisational structure is one of the most important factors that impact on management accounting practices (Laitinen, 2006; Lorenzo, 2008). The change in organizational structure has an indirect effect on the management accounting practices (Fakhr et al., 2009). Contingency-based research suggests that the formal organizational structure affects the design of MCS (Gosselin, 1997). PMS is an integral part of an organization, interacting with the organizational structure to enhance control (Waterhouse & Tiessen, 1978). According to Gosselin (2005), organisational structure has a significant relationship with performance measures. Similarly, Lee and Yang (2011) find a significant association between organizational structure and PMS. Furthermore, there are some significant relationships between the type of measure and contextual factors like strategy and decentralization (Maurice, 2005). Decentralization is positively associated with the use of performance measures (financial and non-financial) (Fakhr et al., 2009).

Based on the previous discussion the hypothesis is as follows:

H6: Organizational structure is positively related to performance measures

3.4.7 Competition and Performance Measures

Review the more relation between variables --------look Hussain and Hoque (2002) p179

Competition is one of the potential determinants of the change in management accounting practices, such as PMS (Fakhr et al., 2009). Furthermore, Hussain and Hoque (2002) find increasing awareness of the performance measures, primarily due to competition between the services organizations. Furthermore, the relationship between competition and use of performance measures is a significant (Fakhr et al., 2009; Lee & Yang, 2011).

This leads to the following hypothesis:

H7: Competition is positively related to performance measures

3.4.8 Coercive Pressures and Performance Measures

Coercive pressure are one of the institutional factors that help to identify the environment and reaction of the organization and its reflection on PMS (Gimzauskiene & Kloviene, 2011). Furthermore, Hoque and Hopper (1997) find a significant relationship between environmental factors (coercive pressures) and budget-related behaviour. Hussain and Hoque (2002) find that the central bank's regulatory control and competition are influential on the implementation of PMS. Furthermore, the controls, regulations issued by the central bank to banks that affect their normal function/operation as well as PM (Hussain & Gunasekaran, 2002a).

Accordingly, this research hypothesizes that:

H8: Coercive pressures are positively related to performance measures.

3.4.9 Performance Measures and Organizational Performance

There is support for a positive relationship between the design of PMS (increased reliance on non-financial information) and performance (Baines & Langfield-Smith, 2003; Davila, 2000; Said et al., 2003; Scott & Tiessen, 1999). Furthermore, Hoque and James (2000), Scott and Tiessen (1999) find a positive relation between firm performance and increased use of different types of PM (Hoque & James, 2000; Scott & Tiessen, 1999). In addition, several studies provide empirical evidence concerning the positive impact of non-financial performance measures on the organizations' financial performance in the long-term (Al-Enizi et al., 2006; Anderson & Lanen, 1999; Fakhr et al., 2009). The theoretical support and prior empirical evidence in the literature are insufficient to justify a direct relationship between PMS use and performance at the organizational level (Bisbe & Otley, 2004). Companies that have a more comprehensive use of PM (financial and non-financial) lead to increased performance (Van der Stede et al., 2006). The use of an integrated set of financial and non-financial measures can lead to superior firm performance (e.g., Banker et al., 2000; Hoque & James, 2000). There is a positive and significant association between the use of performance measures and organizational performance (Lee & Yang, 2011).

Table 3.1 Condition of the Mediator

Constructs

Significant relationship with mediator (CEP)

Significant relationship with DV (COMP)

Green conventional practicies

Ahmad, et al. (1998), González-Benito and González-Benito (2005), Karagozoglu and Lindell (2000),

Environmental management systems

, Kamande (2011)

Darnall, et al. (2008), Henri and Journeault (2010), Melnyk et al. (2003)

Employees' involvements

Daily, et al. (2007), Rashid, et al. (2008)

Del Brío, Fenández, and Junquera (2007), Zutshi and Sohal (2004),

Stakeholders' integration

López-Gamero, et al. (2009)

Delmas (2001), Sharma and Vredenburg (1998)

Organizational practices

Levy (1995)

Wagner (2007)

Strategic planning process

Judge and Douglas (1998) Levy (1995)

Judge and Douglas (1998) "financial performance"

Corporate environmental performance

Guenster, et al (2006), Gamero, et al. (2008), Konar and Cohen (2001), King and Lenox (2001), López-Gamero, et al. (2009), Russo and Fouts (1997)

In view of this, this research hypothesize that:

H9: Performance measures are positively related to organizational performance

3.4.10 Performance Measures Positively Mediate the Relationship Between Business Strategy, Organizational Structures, Competition and Coercive Pressures and Organizational Performance.

The strategy and selection of performance measures in performance evaluation is necessary to enhance organizational performance (Govindarajan & Gupta, 1985; Ittner, Larcker, & Rajan, 1997; Simons, 1995). Furthermore, Hoque (2004) finds that the relationship between business strategy and organizational performance seems to be significantly indirect, while Van der Stede, Chow, and Lin (2006) find a positive relationship between the strategy, performance measures and their joint effect on firm performance. In addition, Hoque (2004) finds a significant and positive association between strategy and performance through management's high use of non-financial measures for performance evaluation.

A change in organizational structure has an indirect effect on the management accounting practices (Fakhr, Menacere, & Pegum 2009). Contingency-based research suggests that a formal organizational structure affects the design of the MCS (Foster and Swenson, 1997; Gosselin, 1997; Shields, 1995). Furthermore, Lee and Yang (2011) find a significant association between the organizational structure and the design of PMS, and that the relationship between the use of integrated PM and organizational performance is positively associated with organizational structure. According to Chia (1995) the greater the degree of decentralization the greater the positive impact of the sophistication of management accounting systems in terms of scope, timeliness, integration and the level of aggregation on managerial performance.

Banker and Mashruwala (2007) suggest that non-financial performance information has a stronger relation with financial performance in the presence of higher competition. In this regard, banks that face greater competition and use non-financial measures will lead to an improvement in their performance (Hussain & Hoque, 2002). Furthermore, Simons (1990) states that increased competition leads to increased use of management control processes, which affect the sophistication of accounting. According to Lee and Yang (2011), when there is greater competition among firms, the relationship between the PMS and performance is a positive.

Coercive pressure is one of the institutional factors that help to identify the environment and the reaction of the organization and its reflection on PMS (Gimzauskiene & Kloviene, 2011). Coercive pressure to change performance measurement practices could eventuate from other organisations upon which a particular organisation is dependent (DiMaggio & Powell, 1983; Munir, Perera, & Baird, 2011). The principles and guidelines laid down by the central bank influence them in the realization of main business decisions, such as pricing and planning for the long term (Powell & DiMaggio, 1991), which affect the revenue of banks, and thus their performance. Similarly, Oliver (2003) finds a significant relationship between the institutional factors and performance.

Based on the discussion above, the main hypothesis is:

H10: Performance measures positively mediate the relationship between business strategy, organizational structures, competition and coercive pressure and organizational performance.

The main hypothesis (H10) is broken down into the following four specific hypotheses:

H10a: Multiple performance measures positively mediate the relationship between business strategy and organizational performance.

H10b: Multiple performance measures positively mediate the relationship between organizational structure and organizational performance.

H10c: Multiple performance measures positively mediate the relationship between competition and organizational performance.

H10d: Performance measures positively mediate the relationship between coercive pressure and organizational performance.

Table 3.1

Summaries the Hypotheses Stated

Hypothesis

Hypothesis Statement

H1

Business strategy is positively related to organizational performance.

H2

Organizational structure is positively related to organizational performance.

H3

Competition is positively related to organizational performance.

H4

Coercive pressures is positively related to organizational performance.

H5

Business strategy is positively related to performance measures..

H6

Organizational structure is positively related to performance measures..

H7

Competition is positively related to performance measures

H8

Coercive pressures is positively related to performance measures

H9

Performance measures is positively related to organizational performance

H10

Performance measures positively mediate the relationship between business strategy, organizational structures, competition and coercive pressure and organizational performance

3.5 Research Design

Research design is the structure and strategy of investigation so conceived as to obtain answers to research questions or problems (Kerlinger, 1986). According to Davis (2000), the research design is a road map for the researcher to find answers for certain issues. Zikmund (2003) describes research design as a master plan specifying the techniques and procedures for collecting and analysing the needed information, which is considered important in any research.

3.6 Types of Research Design

The research design includes a series of rational decision -making tasks regarding the purpose of the study (i.e., descriptive, hypothesis testing, exploratory and case study) (Sekaran & Bougie, 2010). Since the purpose of this research is to investigate the relationship between contingency and institutional factors and the multiple performance measures with organizational performance, this study focuses on descriptive study and hypothesis testing. Descriptive study is undertaken in this study to identify the characteristics of the population. Hypothesis testing is undertaken to explain the relationship between the variables of study (Sekaran & Bougie, 2010).

3.7 Quantitative Design

Zikmund (2003) claims that the objectives, availability of information and cost for conducting the research are the factors affecting the choice of research design. The main objective of this research is to investigate the relationship between the factors influence on organizational performance with multiple performance measures. Hence, the research will adopt a survey strategy, because the data obtained from a survey are used to examine the relationships between the dependent and independent variables (Davis, 2000). Furthermore, inasmuch as the respondents are bank managers that are highly educated, a survey approach is the most suitable technique (Cooper, Schindler, & Sun, 2003). Another advantage of the survey strategy is the large amount of data that can be gathered from the respondents and the fact that the results can be generalized to the population at large.

The survey strategy has several approaches that are used to collect the data, such as personal interview, telephone interview, Internet survey and mail survey. The choice of survey method depends on three major issues, namely the nature of the investigation, the geographical distribution of the respondents and the respondent's characteristics (Kumar, 2005). In terms of geographical distribution, the respondents for this research are located in a wide geographical area, hence, a mail survey is deemed suitable. Furthermore, the targeted population consists of bank managers who are well educated, and, thus, it is assumed that they can understand and respond to the questionnaire.

3.8 Questionnaire Design

The development of the study instrument followed the general guides proposed by Oppenheim (2000), which stress that an instrument should meet two requirements. Firstly, relevancy, as the questionnaire is used to collect the information to meet the research objectives. Secondly, accuracy, as the questionnaire is used to collect information characterized by a high degree of reliability and validity (Zikmund, 2003).

The questionnaire is designed using a booklet type questionnaire. Sudman and Bradburn (1982) argue that using a booklet type questionnaire (1) prevents pages from being lost or misplaced, (2) makes it easier for the respondent to turn the pages, (3) looks more professional and is easier to follow, and (4) makes it possible to use a double page format for questions about multiple events or persons.

Consequently, the questionnaire is divided into four main sections:

Section one of the questionnaire consists of questions relating to the bank profile and information on respondents banks ( senior manager and branch manager).

Section two of the questionnaire is designed to assess the performance of banks.

Section three of the questionnaire is designed to determine the effect of contingency factors (strategic business, organizational structure and competition) and institutional factors (coercive pressure) on the performance in banks.

Section four of the questionnaire is to determine the type of performance measures used in the banks for performance evaluation.

In the study will be used five-point Likert scale to measure the concepts of the study. The five-point Likert scale which is designed to know extent of strongly the respondents agree or disagree with the statements (Cavana, Delahaye, & Sekaran, 2001a). The researcher preferred to use five-point Likert scale for it is one of the best ways to understood way of communicating with the respondents (Olakunke, 2003) .

3.9 Operational Definition

1.Organizational performance

2.Business strategy

3.Structure organizational

The organizational structure is a formal control framework that covers reporting relationships interactions between information flows, employees, and the distribution of authority with regard to implementing activities within the organization (Germain, 1996).

4. Competition

5.Coercive pressures

6.Performance measures

3.9 Measurement of Variables

3.9.1 Organizational Performance (Dependent Variable)

Why choose this measures , ang why do not choose other one

Measures of organizational performance depend on the managers' perception on the organizational performance (increase/decrease) measured by non-financial and financial indicators (subjective and objective). The non-financial (subjective) indicators range from customer services, service delivery and effective operations while the financial (objective) indicators include the financial growth and ratios. The performance measurement will be adopted from various sources. The respondents are required to rate their branch over the last three years indicating the extent of perceived performance, across twenty items.

Table 3.2

Measures of Organizational Performance

Factor

Variable

Items

Sources of items

Organizational Performance

-Non-

Financial Performance

- Financial Performance

1-Customer satisfaction.

2- Reactivation of account.

3- Customer service.

4- Customer relationship management.

5- Brand name .

6- Transaction cycle time.

7- Operating cost.

8- Error of operational processes.

9-New services development .

10 -Personnel development.

11- Number of performing loan.

12- Yearly profit.

13 Non-performing loans.

14- Deposit growth.

15- Recovered bad loan.

16- Fee on transaction services.

17- Current and saving account.

18- Volume of fixed deposit.

19- Financial performance targets.

20- Operating cost.

(Bontis, Keow, & Richardson, 2000; Khong & Richardson, 2003; Ringim, 2012; Ringim, Razalli, & Hasnan, 2012)

These items are measure using five point Likert-type scale, ranging from 1 (Decrease Significantly) to 5 (Increase significantly).

3.9.2 Contingency and Institutional Factors (Independent Variables)

3.9.2.1 Business Strategy

Following previous studies (Chenhall & Langfield-Smith, 1998; Hoque, 2004; Ittner et al., 1997), strategy is measured relative to the three extreme strategic postures (prospectors, defenders and analyser) of the Miles and Snow (1978) typology. Respondents are asked to indicate the degree of emphasis that their branches place on strategic activities, across eleven items.

Table 3.3

Measures of Business Strategy

Factor

Variable

Items

Sources of items

Business Strategy

*Prospectors

*Defenders

*Analyser

1- Provide high quality products

2- Provide fast deliveries

3- Make dependable delivery promises

4- Provide effective after-sales service and support

---------------------------------

5- Low price

6- Service availability

7-Customize services to customers' needs.

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8- Make changes in design and introduce new products quickly

9- Providing services distinct

10- Provide unique service features

11- Low service cost

Miles, et al.,( 1978);

Chenhall and Langfield-Smith (1998); Ittner et al., (1997);Hoque (2004).

These items are measure using a five-point scale ranging from 1 "Strongly Disagree" to 5 "Strongly Agree". It explains the degree of pressures on organization.

3.9.2.2 Organizational Structure

Decentralization facilitates information processing at the source of an event that requires decision-making (Galbraith, 1973). The instrument for measuring organizational structure (Decentralization) is adapted from the five items (the development of new services, selection of large investments, decision to enter new markets, decisions on major changes and pricing decisions) used to measure the degree of decentralization of decision-making (Gordon & Narayanan, 1984), across six items.

Table 3.4

Measures of Organizational Structure

Factor

Variable

Items

Sources of items

Organizational Structure

Decentralization

1-The development of new services.

2-Selection of large investments.

3- Hiring and firing of managerial personnel.

4-Decisions on major changes.

5-Pricing decisions.

6 -Budget allocation.

Chia, (1995); Gordon and Narayanan, (1984);

(Gosselin , 2005).(Fakhr et al., 2009)

These items are measure using a five-point scale ranging from 1 "Strongly Disagree" to 5 "Strongly Agree". It explains the degree of pressures on organization.

3. 9. 2.3 Competition

Competition refers to the degree of market participation. Hoque et al. (2001) summarize prior research relating to the level of competition (Hoque & Hopper, 1997; Libby & Waterhouse, 1996; Merchant, 1984) to develop the instrument (Lee & Yang, 2011) across six items.

Table 3.5

Measures of Competition

Factor

Variable

items

Sources of items

Competition

Services Price.

New service development.

Marketing or distribution channels.

Gaining market share.

Behaviors of competitors.

Number of competitors.

(e.g., Gordon and Narayanan, 1984; Hoque and Hopper, 1997; Libby and Waterhouse, 1996; Merchant, 1984; Hoque et al. 2001 ; Fakhr, et al., 2009; Lee & Yang, 2011 )

These items are measure using a five-point scale ranging from 1 "Strongly Disagree" to 5 "Strongly Agree". It explains the degree of pressures on organization.

3. 9.2.4 Coercive Pressures

The central bank's regulatory control is the most forceful factor in coercive pressures and all institutional forces influenced the banks (Hussain & Hoque, 2002). This study focuses on the measures of the central bank's regulatory control. The adapted six items: Legislation, litigation, fines, orders to conform, corrective actions, and regulation requirements from Cormier et al. (2005) are modified to suite the research settings which is in banking sector in Libya .

Table 3.6

Measures of Coercive Pressures

Factor

Variable

Items

Sources of items

Coercive pressures

Central Bank 'regulation control