The Effects Of Management Accounting And Control Systems Accounting Essay


This study investigates the effects of management accounting and control systems and organizational learning on business process agility and competitive advantage. Many industries previously considered as relatively stable have changed into rapidly aggressive and turbulent environments. These environmental changes are triggered by changes in consumer preference, competitors' actions, regulatory or legal, economic shifts, and technological advancements, which create more uncertain and unpredictable environments for firms. Researchers have proposed many alternatives as guidance to firms when facing these challenges. Recently, some researchers propose that firms must develop dynamic capabilities to renew, reconfigure, and adapt existing firm-specific resources in response to the fast changing environment (Teece et al., 1997; Eisenhardt & Martin, 2000; Teece, 2007). Since building dynamic capabilities requires internal processes and efforts rather than acquisitions from market transactions, they are the most unique and difficult-to-imitate assets that firm can use to achieve and sustain a competitive advantage (Teece, 2007).

One of the predominant focuses in dynamic capability perspective is the notion of "agility". Characterised by the capabilities to quickly sense and response to changes, agility has been recognized in information systems (IS) literature as a "higher-order" capability of firms (Raschke, 2007). An agile firm is argued as capable to deal with rapidly evolving situations, survive unexpected threats and succeed in competitive environments (Lu & Ramamurthy, 2011). Therefore, the understanding on how agility can be developed is crucial for firms. However, despite growing interest in agility, most studies remain theoretical and conceptual and call for more empirical research to examine this perspective (Raschke, 2007). As a result, research into how firms build agility as a dynamic capability remains scant.

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To deal with uncertainty, firm needs information (Galbraith, 1974). The greater the uncertainty means the greater amount of information is needed. Specifically, to be an agile firm, information is crucial, not only to facilitate management decision making, but also to assist management to quickly sense the changes and to response promptly. Management accounting systems (MAS) can play an important role in this situation. They can be designed to provide more sophisticated information that can encourage and facilitate the formulation of solutions and decision making; in addition to providing greater predictive ability to visualize strategic actions. Although research in IS has acknowledged information technology (IT) as a platform for agility (e.g. Bharadwaj, 2000; Sambamurthy et al., 2003; Xiaobo et al., 2006; Raschke, 2010), the discussion on the role of information for agility is merely focused on the technical capability rather than the attribute and quality of information that can facilitate management to make decision in uncertain situations, hence, assist in developing agility. Examination of MAS provides a potential to explore this issue. Following Agbejule (2005), Gerdin (2005), Bouwens and Abernethy (2000), Gul and Chia (1994), and Chenhall and Morris (1986), four characteristics of MAS information will be investigated: scope, integration, aggregation and timeliness.

There has been an increasing interest in accounting research in examining the role of management accounting and control systems (MACS) to support organisational effectiveness in dynamic environments. While researchers have extensively examined how MACS can facilitates strategic change (Bisbe & Malagueño, 2012; Arnold et al., 2011a; Arnold et al., 2011b; Srour et al., 2011; Chenhall & Langfield-Smith, 2003; Abernethy & Brownell, 1999; Simons, 2000, 1995), scant attention has been given to the role of MACS on operational capability especially agility in that facilitative process. Simons' (2000, 1995) levers of control (LOC) framework has been pivotal for most studies in management accounting that examine how MACS plays its role in dynamic environment. LOC framework states that the managerial use of four levers of control (i.e. belief systems, boundary systems, diagnostic control systems and interactive control systems) create dynamic tensions within the overall control package, thereby allowing firms to encourage organizational learning while simultaneously pursuing pre-established goals. In this vein of research, much interest was placed on the relevance of the style of use of formal MACS as a crucial factor influencing organizational learning (including within innovation context) and strategic change (e.g., Abernethy and Brownell, 1999; Bonner et al., 2002; Vaivio, 2004; Naranjo-Gil and Hartmann, 2007; Bisbe and Malagueño, 2009). This study takes one step further and asks whether as well as how MACS play a role in shaping agility through the influence of organizational learning.

The contribution of this study is of interest to both academics and practitioners. At an academic level, the study provides more comprehensive understanding on how MACS can influence firm performance by examining the effect at business process level. Since prior literature has extensively examined the relationship between MACS and firm performance at an aggregate level while circumventing the underlying business processes to simplify the research process, it tends to ignore the complex relationship on how MACS can affect performance. This approach of simplifying MACS and performance also neglect the possibility that MACS could be the conduit for the development of agility. For practitioners, this study provides insight into how MACS affects agility at the business process level. Understanding how MACS affects business process agility and the effects of business process agility on competitive advantage allows management to identify which processes should be exploited, developed, and protected (Ray et al., 2004).

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Using dynamic capability perspective as the underlying theoretical argument to develop the concept of agility, this study uses two theoretically derived agility models as recommended by Overby et al. (2006) to determine the influential role that MACS have on business process agility. The first model posits a direct relationship between MACS and business process agility whereas the second model posits an indirect relationship between MACS and business process agility through organizational learning. The adoption of both models allow for a more comprehensive study in identifying the effects of both enablers of agility, i.e. organizational systems and learning.

This proposal is organised as follows. Section 2 is a review of relevant literature on business process agility, MCS and organizational learning. Subsequent section discusses research model and hypotheses development. The final section is a discussion of methodology including the procedure of sampling and measurement development.



Agility as a Dynamic Capability

The agility concept has been studied widely in various disciplines such as information technology (e.g. Gong & Janssen, 2012; Zain et al., 2005; Sambamurthy et al., 2003), management and organizational studies (e.g. Roberts & Grover, 2012), and human resources (e.g. Breu et al., 2002) literatures. Each research tried to emphasize the importance of agility in the firm's survival and articulate how agility can influence the creation of competitive advantage. Research in information technology literature for example, has recognized agility as a "higher-order" capability of firms. In order to understand the agility concept, researchers have proposed several ways to define it. However, despite the differences in the range of definitions, a number of features of agility can be concluded from the literature. First, agility is best viewed as an organizational capability, which refer to a set of organizational routines and processes that produces a particular output (Roberts & Grover, 2012). Second, agility involves two crucial complementary dimensions of capability, i.e. sense and response (Overby et al., 2006). Third, agility is especially essential in dynamic, fast-paced environments (Yusuf et al., 1999; Dove, 2001). Fourth, agility emphasizes the speed and flexibility as its primary attributes (Gunasekaran, 1999; Sharifi and Zhang, 1999; Yusuf et al., 1999). Finally, a firm may be agile in one or more domains, such as customer-based processes, supply chain activities, and/or systems development (Sambamurthy et al., 2003). Consistent with these features, for this study, agility will be examined at the business process level. As indicated by Raschke (2010), to get better understanding on how and when agility can provide firm value, agility need to be defined at specific aspect of outcome measures because without such measures, it is difficult to compare the levels of agility and the truly gauge of outcome levels to derive meaningful business value assessment. Therefore, following Raschke (2010), business process agility can be defined as "the ability to add and/or reconfigure a business process by quickly adding new capabilities to the set of business process capabilities to accommodate the potential needs of the firm".

In order to obtain deeper understanding on how agility can truly reflect the quality of organizational capability portraits in the dynamic capability theory, it is noteworthy to distinguish agility with other dynamic capabilities examined in prior study. For example, in the recent years, numerous studies conceptualized the dynamic capability through 'flexibility' construct (e.g. (Grewal & Tansuhaj, 2001; Zhang, 2005, 2006; Arnold et al., 2011; Santos-Vijande et al., 2012). Flexibility refers to the firms' ability to keep pace with market evolution as well as to respond rapidly to changes in market. This definition seems almost identical to agility. However, several differences can be identified. First, agility implies sense and response dimensions, whereas flexibility can be one or the other or both (Baker, 1996). Indeed, to provide "agility" at the organisational and business network levels, flexible operations are needed. Therefore the two concepts should be seen as complementary rather than mutually exclusive. Moreover, agility combines all important notions from the adaptive and flexible organization concepts (Sherehiy et al., 2007). Second, it can be understood that when a business is agile, it can respond to a wide variety of unexpected external surprises, while, a flexible business may only be able to respond to already-hypothesized situations (Baker, 1992). In addition, being flexible leads to success when a predicted event occurs, while being agile will assist businesses who face unpredictable circumstances (Gong & Janssen, 2012). Besides that, when a business is flexible, it is able to make changes within the current organizational system, while agile businesses are able to change the overall system completely in response to an external force. Based on these differences, it is argued that "agility" is the better construct to cover broader aspect and elements of organizational capabilities.

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Agility in Business Process

Prior literature has organized business process into different typologies and frameworks. Perhaps the most well-known is the value-chain typology by Porter (1985). The value-chain divides business activities into two generic categories, primary and support activities. Primary activities involve inbound logistics, operations, outbound logistics, marketing and sales, and service support of the product. Support activities are the infrastructure that supports the primary activities along the value chain and include general management, human resource management, procurement, and technology development (i.e. research and development). Since primary activities cover main processes in every firm and contribute directly to firms' profitability, therefore the understanding business process agility for primary activities is an important contribution. For the purpose of this study, business process agility will cover all five primary activities and these activities will be examined in general terms as the overall business process.

There is an increasing interest on the issue of business process agility. Development of the issue can be seen in IT literature (such as Hepp et al., 2005; Rimassa & Burmeister, 2007; Tallon, 2007; Schatten & Schiefer, 2007; Raschke, 2010), operation management literature (such as Meade & Rogers, 1994; Burgess, 1994; Rosenzweig et al., 2003; Peng et al., 2008) and management literature (such as Roberts & Grover, 2012). Some of those studies focused on specific business process such as manufacturing or customer service, while some of it examined the agility of IT systems from the technical aspect. It can be concluded that sparse evident can be found in the literature in providing the understanding on how both sensing and responding abilities of agility can be developed.

As we understand, in hostile environment, managers make decisions under uncertainty. Since they are assumed as boundedly rational, they 'satisfice' rather than optimize in searching for and selecting solutions to problems (March and Simon, 1958). The implication is that firms should continually reconfigure their existing capabilities and one way to do it is through sensing and responding to any opportunity and threat (Roberts & Grover, 2012). Both activities require information that possesses certain quality. Sensing new opportunities activity for instance, involves scanning, learning, and interpretive activity (Teece, 2007). Thus, sensing activities require information that can facilitate manager in determining which research activities that should be invested, able to investigative the customer needs, provides understanding on latent demand, and assessing likely supplier and competitor responses (Teece et al., 1997). This understanding can be provided through the assessment on quality or attribute of information needed in performing activities that lead to agility capability. Research on management accounting, specifically in management accounting and control systems (MACS) provides a potential to explore this issue.


The definition of MACS has been progressed throughout the years in responding to the development in this research area. The earlier standpoint relates to the description of management control as a process of managers in the pursuit of organisation objectives via assuring that the resources acquired are effectively and efficiently utilized (Anthony, 1965). Anthony later extended the features of control into three main types, namely strategic planning, management control and operational control. This point of view had been criticized as it represents a narrow view of MCS which are lacking on the issues of MCS design and used within the organization context as well as focusing only on the formal control of the accounting function (Ferreira & Otley, 2009). Furthermore, MACS also had been defined in a more general term as a systematic practice of management accounting with the aim to achieve specific goals including also other types of controls, for instance personal and cultural control (Chenhall, 2003). This broader scope of MACS not only concentrate on the formal sources and financial information in order to aid the decision making process, but also take into consideration other external facts such as informal social control and nonfinancial information relating to decision support mechanisms, market environment, customers and competitors. This variety of information provided by MACS contributes a useful mechanism for managers in discharging their duty (Otley, 1999). As such, MACS had been perceived to serve as an active function in providing authority for personnel to accomplish organisation objectives as compared to the traditional view of passive role (Chenhall, 2003).

On the other hand, Simons (1995) had marked MACS as "the formal, information-based routines and procedures managers use to maintain or alter patterns in organisational activities". Simons further argues that if the information-based systems are not implemented for the purpose of sustaining or adjusting the pattern of business operation, they are not regarded as control systems. Otherwise, it is merely considered as information in assisting managerial decision making. In other words, MACS can be conceptualised to include all the mechanisms and systems used by the management to direct and monitor employee behaviour in order to be aligned with organisation goals excluding the pure decision support systems (Malmi & Brown, 2008). Hence, this study adopts the concept of MACS as a system that offers various forms of information for managers in discharging their duties as well as supporting the organisation in controlling, monitoring and facilitating organisation performance as a whole. It embraces the element of strategy formulation, management control and operational control since organisations nowadays are confronted with environment changes as well as business growth (Otley, 1999; Tuomela, 2005). This is an important aspect to be emphasized as it reflects a more comprehensive context and holistic overview of the business as a whole (Ferreira & Otley, 2009).

Two components of MACS that relate closely with the above argument will be examined separately, (1) four attributes of management accounting systems (MAS) suggested by Chenhall and Morris (1986), namely as scope, timeliness, aggregation and integration, and (4) four levers of control (LOC) framework developed by Simons (1994) consists of diagnostic, interactive, belief, and boundary systems. Both MACS components are well established and well tested frameworks (e.g MAS attributes were adopted by Gul & Chia (1994); Mia & Chenhall, 1994; Chong, 1996; Bouwens & Abernethy, 2000; Chong & Eggleton, 2003; Tillema, 2005; and LOC framework was adopted by Abernethy & Brownell 1999; Bisbe & Otley 2004; Henri 2006; Kober et al., 2003; Widener 2007; Peljhan, 2011). Specifically, the choice of Simons' LOC framework was made because of the suitability of the framework that concerned with strategy implementation rather than strategy formulation, which consistent with the focus of the study on the operational capability.

MACS and Dynamic Capabilities

In the recent year, some studies have been executed to reveal how MCSs play its role in the hostile environment as the strategic control tool. Few researchers combined LOC framework to the resource-based view (RBV) theory. Notable contributions are made by Bruining et al. (2004), Henri (2006) and Grafton et al. (2010). Bruining et al. (2004) suggest that an important aspect of interactive control systems is of providing firms with the strategic flexibility to adapt and evolve in changing environments through the development of firm's organizational capability, namely as absorptive capacity. Consistent with them, Henri (2006) suggest that performance measurement systems used in an interactive (diagnostic) fashion contribute positively (negatively) to the deployment of specific capabilities, namely, market orientation, entrepreneurship, innovativeness, and learning. Particularly, in Henri's study was that it reinforces LOC framework in the sense it relates the use of interactive control systems to the development of innovativeness capability. The study also challenges prior research that suggests interactive control systems are not always used by top managers to favour innovation. Related to these studies, Grafton et al. (2010) reconcile previous adverse findings by suggesting the extent to which decision-facilitating performance measures are used by managers for feedback (i.e. diagnostic use) and feed-forward control (i.e. interactive use) influence the ability of the organization to exploit its existing capabilities and identify new capabilities, respectively.

However, sparse evidence can be found in providing understanding on how MACS affect both firms' capabilities in sensing and responding quickly to changes which embedded in the notion of agility. This is because most of studies on the role of MACS in dynamic environments issue have largely focused on the organisation's engagement in strategy formulation and strategic change. Nevertheless, prior study has pay more focused on flexibility component rather than agility. As argued previously, flexibility only represents some part of agility as the organizational capability. As Henri (2006) and Grafton et al. (2010) argued, there is a need to shift the primary analytical focus from the strategic-choice level to the operational-capabilities level. By moving to the operational-capabilities context, the understanding on the role played by MACS in dynamic environment can be broadened.

This study tries to move toward this call and fill the gap in literature by examining capability at the operational-level constructed as business process agility.


Organizational Learning and Dynamic Capabilities

Research on organizational learning has grown extensively in recent years (Jiménez-Jiménez & Sanz-Valle, 2011). There is an increasing attention in literature to emphasize the importance and to address the benefits of OL. For instance, studies has found the positive effect of OL on organizational performance (Azadegan & Dooley, 2010; Bell, Mengüç, & Widing, 2010), business process (Hult et al., 2002; Prieto & Revilla, 2006), innovation (Camisón & Villar-López, 2011), and human resource performance (Bhatnagar, 2007). Moreover, recent situation shows that the issue of OL and the development of dynamic capabilities have become of pivotal interest to organization scholars as well as management practice. Some researchers argue that OL can strengthen a firm's ability to recognize opportunities and to achieve continuous alignment with its environment (Lumpkin & Lichtenstein, 2005), besides become a key strategic capability for firm's competitive advantage (Bapuji & Crossan, 2004). Indeed, according to Anand et al. (2009), OL is a primary source of dynamic capabilities. This is because through learning, firm can attain a continuous adaptation to rapidly changing environments, capable to generate customer value in the longer term (Kandemir & Hult, 2005), and enable to modify itself to continue producing efficiently and effectively (Santos-Vijande et al., 2012). Therefore, OL becomes the vital component in building the firm agility which embodied in dynamic capability concept.

However, the dynamics of these processes as well as their impact on organizational performance have yet to be fully understood (Dixon et al., 2009). This is a particular concern for firms who facing radical change in their external environment that must accelerate their learning and reconfigure their resources. In addition, empirical evidence on the OL - agility interface is extremely sparse. Study on OL within resource based view or dynamic capabilities frameworks are bounded to the view of strategic flexibility only (e.g. Santos-Vijande et al., 2012). As argued in previous section, since the business environments become more turbulent, firm also need to increase their capabilities by not only be flexible, but firm also need to be agile by able to sense changes in market as well as able to respond rapidly to unpredictable and unexpected market conditions. Therefore, there is an urgent need to extent the investigation on how OL can play its role and can impact the business process agility to have broader understanding on dynamic capabilities, rather than limit the impact on the strategic flexibility construct. Based on this reason, this study also examines the relationship between OL and business process agility to provide understanding on how OL may affect the agility.

Organizational Learning and MACS

When investigating the organizational learning in the field of strategic management (De Harlez et al., 2012; Bontis et al. 2002; Crossan et al. 1999; Huber 1991), it is often hard to clearly differentiate the definition of MACS with the definition of organizational learning since "the definitions of MACS and organizational learning display commonality of purpose: both are concerned with changing or adapting an organization to ensure its fit with its environment" (Kloot 1997). For example, the LOC theoretical framework by Simons' (1994) indicates that the interactive use of MCS, with its emphasis on surveillance, dialogues and debates, able to foster the development of some possible responses to the organizational change. When those responses result in organizational change, a 'generative' (Kloot 1997), 'single and double loop' (Argyris 1977) concepts of learning occur. Therefore, prior empirical research (e.g., Mikes 2009) often considers the role of interactive use of MCS to be a 'learning machine' since it helps "explore problems, ask questions, explicate presumptions, analyse the analysable and finally resort to judgement" (De Harlez et al., 2012). Indeed, Abernethy and Brownell (1999) suggest that, if the interactive use of MCS is a learning machine, then, it should facilitate the formulation and implementation of strategic change. Due to the difficulty to operationalize the organizational learning, they infer from their statistical results that the learning and adaptation role of interactive use of MCS is implicitly proven. Moreover, Henri (2006) views the organizational learning as a primary organizational capability to reach competitive advantage and finds empirical evidences that explicitly showing if the interactive use of MCS assists in the generation and dissemination of rare, valuable, inimitable and non-substitutable knowledge, the interactive use of MCS positively influences organizational capabilities such as organizational learning. Nevertheless, the results of Widener's (2007) empirical study do not suggest that the interactive use of MCS is positively associated with the orientation to learning. This is because there is possibility of one isolated lever of control such as the interactive use of MCS is probably not enough to facilitate organizational learning. Consistently, study by Mundy (2010) relies on a field study empirically show that an interactive use of MCS, regardless the balance with the other levers of control, is not sufficient for top-level managers to find the fruitful and dynamic trade-off between opportunistic innovation and predictable target achievement. Through various decisions and activities, top-level managers must identify the right interplay of the different uses of the levers of control in order to benefit from the effects of interactive use of MCS. For that reason, this study will examine all four levers of control suggested in Simons (1994) framework.

Besides that, diverse roles attributed to MACS indicate the use of those systems could guide firms towards higher levels of organizational learning. Several studies investigate the topic specifically from the innovation context. The earliest study executed by Davila (2000) who notices the role of MACS in new product development (NPD) projects as a mechanism to reduce uncertainty by providing a source of information that able to close the gap in information. Additionally, Ditillo (2004) observes MACS play a double role of coordination activities and fostering of specific mode of knowledge integration in knowledge-intensive firms. Finally, Mouritsen et al. (2009) show how MACS influence elements of innovation providing focus and mediating the relationship between innovation activities and firm concerns. To summarize, these systems allow organizations to filter and trim off creative efforts that are not in line with the managerial agenda (Malagueño & Bisbe, 2010). In overall, previous research indicates MACS could positively contribute to the firm's ability to translate an idea into a new or improved launched product. Without focusing to any organizational learning process or component, this study will concentrate on identifying the contributions of MACS to all process occur in organizational learning.



Studies on agility are consistently derived from theoretical concept in the dynamic capabilities perspective, which originated from the resource-based view (RBV) framework. The idea underlying in the dynamic capabilities theory emphasizes that in order to obtain competitive advantage, besides able to acquire a set of unique, tangible or intangible resources, organizations should also able to integrate and develop their internal and external competencies as capabilities in an inimitable way (Teece & Pisano, 1994; Teece et al., 1997; Eisenhardt & Martin, 2000; Ambrosini et al., 2009; Easterby-Smith et al., 2009). According to Zahra et al. (2006), the integration capability has been extensively referred in management literature as the most relevant competencies to the firm's success. Integration (which sometimes refer as coordination) capability is the ability to manage and synchronize businesses resources and tasks on a continuing basis. This integration capability can be developed with support from two main enablers, which are the systems developed by the firm and the ability of a firm to transmit knowledge within organizational participants which evolves in the organizational learning process (Zahra et al., 2006).

The above discussion recommends useful direction to understand the effect of MACS on agility. In order to build the two capabilities of resources acquisition and integration that embedded in agility concept, firms need support from two main important resources. These resources are the systems developed in the firms and organizational learning practiced in the firms. The importance of these two resources has also been mentioned in the agility definition proposed by Dove (2001). Dove defines the responding ability in agility as the firm's physical ability to act, and the sensing component as the intellectual ability to find appropriate things to act on, which refers to 'knowledge management' aspect. Again, he emphasized two elements which are physical enabler that can be considered as the systems and knowledge resources in firms. Following these arguments, this study examines the effects of these two resources, i.e. MACS and organizational learning on dynamic capability. Business process agility construct will be used to reflect the dynamic capability quality defined by Teece et al. (1997).

The study uses two theoretical models of agility recommended by Overby et al. (2006) to determine the influential role that MACS have on business process agility. The first model posits direct relationship between MACS and business process agility, whereas the second model posits indirect relationship between MACS and business process agility through organizational learning. The theoretical relationship between constructs can be depicted in the following research model (Figure 1). Six hypotheses were developed to conceptualize the relationships and the discussion is organised according to these two models of relationships (i.e. direct and indirect) between MACS and business process agility.

Figure 1 Research Model

MAS Attributes

Business Process Agility

Competitive Advantage




Organizational Learning



Levers of Control



The direct effect of MACS on business process agility and competitive advantage

The relationship between MAS attributes and business process agility

As discussed in previous section, four attributes of MAS as indicated by Chenhall and Morris (1986) will be examined, namely as the 'scope', 'timeliness', 'aggregation' and 'integration' of information. The 'scope' of information refers to the level of focus, quantification and time horizon possessed in the information (Chenhall & Morris, 1986) and this attribute can either refers as broad or narrow scope of information. The broad scope of information can be characterised as externally focused, non-financial and future-orientated, whereas 'narrow scope' information is internally focused, financial and historically based (Chenhall & Morris, 1986; Gul & Chia, 1994; Mia & Chenhall, 1994; Chong, 1996; Bouwens & Abernethy, 2000; Chong & Eggleton, 2003; Tillema, 2005). With regard to the effect on decision-making (and further on agility capabilities), broad scope information is argued as having greater predictive ability (Larcker, 1981) and encourages the formulation of alternatives to problem solution (Gordon & Narayanan, 1984). Moreover, the information provided assists the decentralisation of empowerment to the lower-level personnel (Gerdin, 2005a), along with interdepartmental planning and coordination (Gerdin, 2005b). These qualities of information foster the emergence of viable courses of action that are consistent with the objectives of interdependent departments that involved in the business processes (Bouwens & Abernethy, 2000; Gerdin, 2005b). Hence, broad scope information can reduce the uncertainty that impedes decision-making and restricts agility.

H1a: Broad scope of information is positively related to business process agility.

The 'timeliness' of information refers to the frequency and speed of information reporting (Robert H. Chenhall & Morris, 1986). By reporting on the most recent events and providing prompt feedback about decisions, timely information can reduce uncertainty and allow decision makers to continually modify their actions in response to environmental changes (Chenhall & Morris, 1986; Fisher, 1996; Srour et al, 2011). As timely responding to environmental change is one of the fundamental elements of agility, timely information provides real-time data that allowing decision makers to identify and address opportunities and threats sooner than other competitors (Fisher, 1996; Bouwens & Abernethy, 2000). Therefore, timely information can promote the enhancement of agility capability.

H1b: The timeliness of information is positively related to business process agility.

'Aggregated' information refers to information summarised by functional area or time period, or through decision models, such as incremental/marginal analyses and discounted cash flow analyses (Chenhall & Morris, 1986; Bouwens & Abernethy, 2000). The aggregation of information supports agility by increasing a decision maker's information processing ability and by allowing the decision maker to develop a better understanding of input-output relations within and across departments (Gul & Chia, 1994; Bouwens & Abernethy, 2000). As the result, decision maker able to consider other alternative of solutions to operational issues, and implement those solutions that consider as the best for the benefit of firm (Gul & Chia, 1994; Bouwens & Abernethy, 2000).

H1c: The aggregation of information is positively related to business process agility.

'Integrated' information reports the activities of other departments and specifies how the decisions made in one department may influence the performance of other departments or the particular departments that constitute it (Chenhall & Morris, 1986). This information could include inputs, outputs, technologies and operating processes employed by the departments (Bouwens & Abernethy, 2000; Weißenberger & Angelkort, 2011). As interdependencies between departments increase in business processes, the decisions made in one department increasingly affect the outcomes of decisions made in other departments (Chenhall & Morris, 1986). Besides that, by allowing decision makers to effectively evaluate trade-offs among alternative courses of action, integrated information leads to the generation of feasible ideas which are suited to, and maintain coordination between interdependent departments (Bouwens & Abernethy, 2000).

H1d: The integration of information is positively related to business process agility.

The relationship between levers of control and business process agility

Another perspective of MCS that will be tested is four levers of control developed by Simons (1994), namely as diagnostic, interactive, belief, and boundary systems. Simons (2000) emphasises that an effective control environment is achieved by integrating all the four levers of control, since "the power of these levers in implementing strategy does not lie in how each is used alone, but rather in how they complement each other when used together". Diagnostic and interactive control systems both refer to feedback and measurement systems but the difference between these systems lies in how they are used by managers. The diagnostic control systems are defined as "the formal information systems used to monitor organizational outcome and correct deviations from pre-set standards of performance" (Simons, 1994). In other word, diagnostic systems are designed to ensure the achievement and implementation of intended strategies (Simons, 1994, 2000). When information is used diagnostically, it is used on an exception basis as formal feedback to monitor organisational outcomes relative to predetermined expectations and to address deviations (Henri, 2006; Abernethy & Brownell, 1999; Simons, 1994). Moreover, these systems allow managers to reward the achievement of pre-established goals through the review of critical performance variables. Diagnostic systems also, in other way, intend to constrain employees' behaviour and allocate scarce attention (Simons, 2000). Thus, diagnostic use is particularly useful for coordinating the effective implementation of chosen strategies which usually occur in business processes operations (Kober et al., 2007; Henri, 2006).

Contrary to the diagnostic control systems, Simons (1994) defines the interactive control systems as "formal information systems managers use to involve themselves regularly and personally in the decision activities of their subordinates". Generally, the issues addressed by interactive control systems relate with the definition of strategy as a stream of actions and how the systems can be used in decision making processes. With regard to business processes, operating managers at all levels are expected to pay frequent and more attention to interactive control systems and, hence, are usually involved personally in the systems (Simons, 1995). This attention is expected to foster active and frequent dialogue and debate on strategic uncertainties. Furthermore, interactive use of control systems implies an increased and persistent flow of information throughout the organisation, as well as informal control emphasising cooperation, face-to-face communication and action among decision makers at all levels and across departments (Widener, 2007; Henri, 2006; Abernethy & Brownell, 1999; Simons, 1994).

Another two levers of control are beliefs and boundary systems. Simons (1994) defines beliefs systems as "the explicit set of organizational definitions that senior managers communicate formally and reinforce systematically to provide basic values, purpose, and direction for the organization". In developing beliefs systems, firms require several years in an effort to eloquent the values and direction that top-level managers want their employees to embrace. The systems are considered as successfully developed when the employees understand the firm's mission and believe that the company's stated beliefs represent deeply rooted values through their personal observation on the actions of managers (Simons, 1994). Indeed, an effective manager seeks to inspire people throughout their firms by actively communicating core values and missions. Complementing these systems is the boundary systems. The boundary systems "delineate the acceptable domain of strategic activity for organizational participants", which embedded in standards of ethical behaviour and codes of conduct which developed to ensure that employees do the right thing and act ethically even though facing any temptation or pressure in workplace (Simons, 1994). For example, Simons (1995) has illustrated that strategic boundaries is useful in ensuring that people steer clear of opportunities that could diminish a business' competitive position. As the boundary and beliefs systems working together, these systems establish direction, motivate and inspire, and protect against potentially damaging opportunistic behaviour (Simons, 1994).

Based on the above arguments, all levers of control are predicted as positively influence agility, as stated in the following hypothesis:

H2: The diagnostic, interactive, belief and boundary systems are positively related to business process agility.

The relationship between MACS and organizational learning

The relationship between MAS attributes and organizational learning

Information is a flow of messages or meanings which might add to, restructure or change knowledge (Machlup, 1983). Knowledge is created and organized by the actual flow of information, anchored on the commitment and beliefs of its holder (Choe, 2004). Information is a necessary medium or material in organizational learning for knowledge creation (Nonaka, 1994). Individuals obtain and interpret information and learn by updating their mental models that consist of the interpretive schemes or cognitive models on which managers rely in order to understand various environments (Bartunek, 1984). The linking pin between individual learning and organizational learning is the organization's shared mental models. Thus, organizational learning can be considered as the process of updating and changing the organization's shared mental models (Lee et al., 1992; Barr et al., 1992). The organization's shared mental models are the knowledge base or belief structure of an organization that guides individual actions and ultimately organizational actions (Kim, 1993). Through the sharing and integration of individual mental models, the organization's shared mental models are newly formed, changed and updated (Kim, 1993). Hence, the provision of information is the beginning and a necessary condition of organizational learning. Information generated from MAS is also utilized in organizational learning as the raw materials of learning which plays a critical role in creating new knowledge and updating the organization's shared mental models (Ouksel et al., 1997). Young and Selto (1993) found that an information shortage in JIT operation facility causes many problems in the manufacturing process because of ineffective learning. Based on the above discussion, organizational learning process itself is closely related with the requirement of all attributes of MAS. Thus, the following hypotheses are developed to express the relationship:

H3a: The broad scope of information is positively related to organizational learning.

H3b: The timeliness of information is positively related to organizational learning.

H3c: The aggregation of information is positively related to organizational learning.

H3d: The integration of information is positively related to organizational learning.

The relationship between MCS uses and organizational learning

Based on previous arguments, the primary purpose of using control systems diagnostically is to provide motivation and direction to achieve organisational goals, whereas an interactive use of control systems intends to stimulate knowledge dissemination and exchange. In respect of the organisational learning, Simons (1995) argues that diagnostic control systems facilitate single-loop learning (which occurs when the process enables the organisation to carry on its present policies or achieve its objectives), whereas interactive control systems facilitate double-loop learning (which occurs when learning encompasses not only detecting errors, but also questioning underlying policies and goals). To illustrate, the process of setting goals, measuring outcomes, remedying variances and assigning rewards, which occurred in diagnostic control systems clearly implicate innovation and learning. As for interactive control systems, when senior managers use the interactive control process as a catalyst to force the organisation to monitor changing market dynamics and motivate debate about data, assumptions and action plans, both learning and innovation activities have been dominated. Over time, the information and learning generated by interactive control systems can be embedded in the strategies and goals that are monitored by diagnostic control systems (Simons 2000). Therefore, both styles of uses do promote organizational learning.

Same conclusion can be made to belief and boundary systems. Even though boundary systems are weighted heavily to controls and limits, however, they also reflect learning through competitors' past mistakes and tactical moves which dictate the adjusting business conduct and strategic boundaries (Simons 2000). As for belief systems, Woodman et al. (1993) indicate that organizational creativity outcomes (that may lead to new knowledge creation) may benefit by informal controls that have been an object of interest for contributing to the development of innovative initiatives. Therefore, the following hypothesis was developed:

H4: The diagnostic, interactive, belief and boundary systems are positively related to organizational learning.

The indirect relationship between MACS and business process agility through organizational learning

The relationship between organizational learning and business process agility

Organizational learning enables firms to attain a competitive advantage by improving information processing activities. Learning organizations are able to capture the relevant timely and precise information, besides able to anticipate business environment tendencies and remove any firm's practice that are no longer effective (Santos-Vijande et al., 2012). Furthermore, organizational learning also allows faster and more effective adjustment to changing environments which rooted in the concept of agility. Through generative forms of learning (that encourage innovation activities) for example, firms able to deal with the reality of external environment that constantly evolving by allowing greater strategic flexibility in responding to any opportunity or threat (McNiff, 2000). Indeed, organizational learning can result in firms changing the business environment, rather than just adapting to changes. Therefore, the greater a firm's accumulated knowledge, the greater its ability to continually restructure and respond effectively to the dynamic environment (Kenny, 2006). The flexibility inherent in learning-oriented firms also allows them to act promptly when detecting new business opportunities (Beer et al., 2005). Therefore, a greater learning capacity permits firm to compete to any changes in markets and technologies by having the great diversity of information (Santos et al., 2005). In this sense, organizational learning is deemed to have a relevant role in strategy implementation that allows to rapid sensing and responding to changes as well as to generate and continue perform efficiently and effectively.

H5: Organizational learning is positively related to business process agility.

The mediating effect of organizational learning on the relationship between MACS and business process agility

As argued previously, both MACS components have positive influence on organizational learning as well as on the abilities of firm to sense and respond to changes. The impact on those abilities is expected to be greater when the control systems simultaneously promote organizational learning processes. The effect can be understood by the double roles played by MACS in allowing managers to maintain a focused view of organizational direction, as well as developing the organizational capability (Chenhall & Morris, 1995). Basically, organizational learning occurs through organizational routines that are repeated and modified (Levitt and March, 1988). One mechanism that directly related to organizational routines is MACS. In addition, organizational learning also represents the process of improving actions through better knowledge and understanding (Fiol and Lyles, 1985). To demonstrate, as argued earlier, the interactive control systems can provide an appropriate environment for top managers to offer guidance for employees on where to look for new innovation ideas and encourage them to look for new opportunities (Bisbe & Otley, 2004). Accordingly, Henri (2006) supports the functions of interactive use as stimulus for actions and guidance, arguing that of interactive use of MACS "stimulates the development of new ideas". Also, as the consequence of the interplay of ICS with the other levers of control, it eventually adds to foster the development of innovation activities (Malagueño & Bisbe, 2010). These benefits encourage organizational learning and hence, increase the ability of firm to be agile (Beer et al., 2005).

For MAS information, study by Chenhall (1997) partially proved that in production systems of TQM, the organizational learning effects of the TQM-related performance information increase the firm's performance. He asserted that performance information gives rise to organizational learning in the operational and strategic control process. Sim and Killough (1998) also anticipated that when AMT is utilized, more frequent reporting of nonfinancial performance information such as quality and customer satisfaction can increase organizational performance through learning. Therefore the abilities of sensing and responding by firm will increase when the MAS information gives high impact on organizational learning.

H6a: The positive and significant effects of broad scope, timely, aggregated and integrated information on business process agility will be more salient for firms with higher organizational learning.

H6b: The positive and significant effects of belief systems, boundary systems, diagnostic control systems and interactive control systems on business process agility will be more salient for firms with higher organizational learning.