The strategic use of human capital and the design of the management control system

Previous research shows that the management control system (MCS) differs based on firm-level strategy. This study extends these findings by investigating the relation between the MCS and a resource-based strategy: the strategic use of human capital. This study integrates strategy theory and transaction cost economics (TCE), a branch of agency theory, to empirically investigate the design of the MCS.; This study models and tests hypotheses regarding how a firm's resource-based strategy affects the MCS. Specifically, this study predicts that both the relative use of human capital as a strategic resource and the diffuseness of strategic human capital within the firm will be positively associated with non-traditional results controls which emphasize non-financial measures, negatively associated with traditional results controls which emphasize financial measures, and positively associated with personnel controls.; Data obtained from a survey of 800 public companies is used to construct final variable measures and test the hypothesized relationships. The results show that both the use of strategic human capital and the diffuseness of strategic human capital is positively associated with the use of non-traditional results controls and use of personnel controls. Convergent validity for these results is provided through a synthesis of qualitative interview data conducted with senior executives of four firms.; Two additional insights are drawn from the statistical results. First, firms are linking their key performance indicators collected in the information system to the incentive system. Second, firms who rely on strategic human capital are not replacing traditional controls with non-traditional controls. Rather, firms appear to be adding non-traditional controls to their MCS.; This study makes several contributions to the accounting literature. The accounting literature is extended through the integration of several literature streams and theories. The study investigates multiple control components and both traditional and non-traditional results controls. Finally, this study introduces a focus on a resource-based strategy: strategic human capital.