| In this dissertation I analyze the types of Management Control Systems (MCS) that firms introduce when they first start investing in controls, as well as the determinants and performance implications of this choice. Focusing on a sample of young U.S. retailers in an early stage of their growth, I develop a classification of their first MCS based on the purpose of their introduction, resulting in four groups of initial MCS. The first one, "Basic MCS," is adopted by most firms and includes budgets, pricing and inventory systems. The introduction of the other three groups of MCS is contingent on specific company needs: "Cost MCS" is a set of managerial controls focused on enhancing operating efficiencies, minimizing costs, and establishing financial and internal controls; "Revenue MCS" is a more flexible set of controls, focused on gathering non-financial information and responding to customers; and "Risk MCS" describes a set of systems introduced to avoid risks and protect asset integrity. I hypothesize and find that the choice among these groups of initial MCS reflects the type of strategy and organizational structure adopted by the firm. For example, firms emphasizing differentiation strategies place greater emphasis on the use of Revenue MCS and tend to adopt sales productivity controls, marketing databases, and controls on employee behavior and development among their initial MCS. Also, decentralized firms and firms offering a more diverse assortment of products tend to place more emphasis on Risk MCS than on Revenue MCS. After discussing reasons for these choices, I analyze their performance implications. I find robust evidence that a better fit between the set of initial MCS most emphasized and the firm strategy and organizational structure is associated with superior firm performance and greater usefulness of its initial MCS. |
