The impact of the extent of activity-based costing use and the extent of ISO 9000 implementation on organisational performance

• Main Author: Vetchagool, Witchulada
• Other Authors: Augustyn, Marcjanna ; Mukhuty, Sumona
• Published: University of Hull 2016
• Subjects: 658.5; Business
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.717059

Activity-based costing (ABC) is one of the most-researched management accounting areas that can improve organisational performance (OP). However, the studies on ABC and its impact on OP were still deficient and contradictory. Furthermore, ABC might be the most advantageous approaches used concurrently with ISO 9000. This study aims to investigate the impact of the extent of ABC use and the extent of ISO 9000 implementation on OP in order to identify the role of ABC and ISO 9000 in improving OP, and, in addition, to assess the combined effects of ABC and ISO 9000 on OP. Two conceptual models were developed to illustrate the relationships between variables. There were 601 usable questionnaires (19.36 percent) received; 191 organisations that adopted both ABC and ISO 9000 compared to 410 organisations that adopted only ISO 9000. Three data analysis techniques were employed: exploratory factor analysis (EFA), confirmatory factor analysis (CFA), and structural equation modelling (SEM). EFA and CFA results provide evidence that the extent of ABC use (CA: cost analysis, CS: cost strategy, CE: cost evaluation), the extent of ISO 9000 implementation (MP: management principle, CP: Cooperation principle) and organisational performance (OPP: operational performance, FP: financial performance) are multidimensional. SEM results indicate the extent of ABC use directly improves OPP and subsequently indirectly improves FP through OPP. On the other hand, the extent of ISO 9000 implementation of organisations that adopted only ISO 9000 improves neither OPP nor FP. However, the management principle (MP) of organisations that adopted both ABC and ISO 9000 can directly improve both OPP and FP, and subsequently indirectly improve FP through OPP. The result implies a potential synergy effect of ABC and ISO 9000, which extends the body of knowledge of management accounting and quality management research.