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family-led firms from making the investments needed to develop the economies of scale andscope to the same extent as managerially-led enterprises. Other researchers identify a varietyof other mechanisms that are used as MCS at family-controlled firms (Villalonga and Amit,2006).

The concept of MCS can include management accounting systems, budgetarypractices, performance measurement systems, project management systems, planningsystems, and reporting systems (Simons, 1990).Several empirical studies have shown thatthere are differences in the instrumentation and use of the MCS between family and non-family businesses (Kotey, 2005; Moilanen, 2008; Laitinen, 2008; Acquaah, 2013). MCS plays animportant role in the performance of family businesses where MCSs are converted intoprioritary tools that the managers should adopt for suitable decision making (Davila andFoster, 2005; Duhan, 2007).

These may be due to certain characteristics that differentiate family from non-familyfirms, and constitute what Habbershon& Williams (1999) have called “familiness”, which theydefine as a set of resources particular to the business that are attributable to the presence of

the family in company management. These resources and capabilities are unique, inseparableand synergetic. They derive from the family’s involvement and interaction with the businessand are a source of long-term competitive advantage (Zellweger, Eddleston&Kellermanns,2010).

The objective of this study is to examine the extent to which family firms use MCS andhow their use of MCS enables them to gain competitive advantages by affecting theimplementation of their business strategy and performance relative to non-family businessesin a developing economy, in particular in a Latin-American country like Chile.

2. Theoretical Framework and Hypotheses

From business strategy points of view, and according to Porter (1980), firms canchoose cost leadership strategy (characterized by tight cost and overheads control, EOS,efficient facilities usage and high market shares) or differentiation strategy , (characterized byproduct and service uniqueness through brand and customer loyalty, innovativeness, andmarketing).

According to Simons (2000), MCS can be categorized into four: (a) belief systems; (b)boundary systems; (c) diagnostic control systems (DCS); and (d) interactive control systems(ICS). Belief and boundary systems are used to frame the strategic choice; while DCS and ICS

are the feedback and performance management systems (PMS) used to elaborate andimplement strategy (Bisby&Otley, 2004). Management accounting and strategy researchers,therefore, argue that MCSs are crucial to the formulation and implementation of businessstrategy (Bruining, Bonnet, and Wright, 2004; Kober, Ng, and Paul, 2007; Marginson, 2002).

Our study focuses on DCS and ICS. The DCSs are the formal feedback mechanisms usedto monitor and reward the achievement of pre-determined outcomes, serving to review andmonitor outputs, correcting deviations from preset measures, and discouraging opportunity-seeking behavior associated with tight control of operations, highly structured communicationchannels, and restricted flows of information (. On the other hand, the ICSs are the formalmechanisms that managers use to personally involve themselves in the decision-makingactivities of subordinates. These lead to exchanges between top management and lower levelmanagement and organizational members. ICSs also provide the opportunity to debate and


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challenge underlying assumptions; they focus attention on strategic uncertainties andencourage opportunity-seeking behavior and experimentation.

The unique characteristics exhibited by family businesses such as the unification offamily life and business activities; the desire to preserve the family’s socioemotional wealth;the perpetration of cohesive clan cultures, and the pursuit of both financial and nonfinancialgoals (Gomez-Mejia, Cruz, Berrone, and De Castro, 2011; Habbershon and Williams, 1999;Miller & Le Breton-Miller, 2005) distinguishes family businesses from non-family businesses.These differences would be manifested in the way MCS would be used to support theimplementation of business strategy and their subsequent impact on performance in familyand non-family businesses.

The relationships between MCS, business strategy and performance are expressed interms of four hypotheses, formally stated below and depicted in Figure 1:

H 1: The influence of DCS on business strategy will be greater for Non-FamilyBusiness than for Family Business.

H 2 : The influence of ICS on business strategy will be greater for Family Businessthan for Non-Family Business.H 3 : The total effect of DCS on performance through business strategy will begreater for Non-Family Business than for Family Business.H 4 : The total effect of ICS on performance through business strategy will begreater for Family Business than for Non-Family Business.

[Insert Figure 1 here]

Data Set

The data used to test the model’s hypotheses is drawn from a database of 183 Chileanfirms who responded to the survey conducted for this study, between January and March2013. The average age of these businesses was 46 years. To be included in the database a firmhad to be controlled by a single family (i.e., with an ownership more than 50%) and have anofficial Board of Directors or be in the process of appointing one. 31 of them (17%) were listedon the Santiago Stock Exchange while the rest were privately held. In 89% of cases, the CEOwas a member of the controlling family, and 8.2% had a Family Council. Of the 1,239 directors,senior managers and other executives at these firms, 14.7% responded to the survey. We usedpreviously validated measures of MCS in the Western world (e.g., Henri, 2006; Widener, 2007)and Simon’s (2000) description of MCS to operationalize it. We further relied on Dess andDavis (1984) conceptualization of Porter’s (1980) business strategy typology which has been

used in several studies to measure business strategy. Performance was measured using bothfinancial (e.g., profitability) and non-financial (productivity, growth, market share) measures.More detailed demographic characteristics are shown in Table 1.

[Insert Table 1 here]

3. Expected Findings and Contribution

We expect to corroborate the hypothesized relationships that we have proposed. First, theexpected findings to confirm the results obtained by Acquaah (2013) using data from Ghanaand enhance the generalizability of the findings in other developing countries with different

cultural and institutional environments. Second, the findings will provide top managers infamily businesses the opportunity to alter the behavior of employees towards performance


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measurement and control; and communicate and ensure continual attention to strategicinitiatives. Moreover, family business managers would be able to focus employees’ attentiontowards the implementation of strategy; and the allocation of the limited resources effectivelyand efficiently in mitigating the weaknesses they face in the complex, and uncertain businessenvironment. Thus this proposed research will contribute to both the strategy and family

business literatures in filing the gap on the utilization and role of MCS in influencing businessstrategy and performance.

References

Acquaah, M. (2013). Management control systems, business strategy and performance: Acomparative analysis of family and non-family businesses in a transition economy in sub-Saharan Africa. Journal of Family Business Strategy, 4(2): 131-146

Anthony, R. N. (1965). Planning and Control Systems: Framework for Analysis. BostonGraduate School of Business Administration, Harvard University.

Berger, P. &Lukmann, T. (1967). The Social Construction of Reality; a TreauseIn the Sociology ofKnowledge, Penguin, Harmondsworth (Original: Doubleday, Garden City, N. Y. 1966)

Bisbe, J., &Otley, D. (2004). The effects of the interactive use of management control systemson product innovation. Accounting, Organizations and Society, 29, 709 –737.

Bruining, H., Bonnet, M., & Wright, M. (2004). Management control systems and strategychange in buyouts. Management Accounting Research, 15, 155 –177.

Chandler, A.D. (1962). Strategy and structure: chapters in the history of the industrialenterprise. M.I.T. Cambridge, MA: Press

Chandler, A.D. (1990). Scale and Scope: The Dynamics of Industrial Capitalism, Cambridge, MA:Harvard University Press

Dávila, A., & Foster, G. (2005). Management accounting systems adoptions decisions: Evidenceand performance implications from early stage/startup companies. The AccountingReview, 80(4): 1039-1068.

Dess, G. G., & Davis, P. S. (1984).Porter’s (1980) generic strategies as determinants of strategicgroup memberships and organizational performance. Academy of Management Journal,27, 467 –488.

Duhan, S. (2007). A capabilities based toolkit for strategic information systems planning inSMEs”, International Journal of information Management, 27: 352 -367.

Gomez-Mejia, L. R., Cruz, C., Berrone, P., & De Castro, J. (2011). The bind that ties:Socioemotional wealth preservation in family firms. The Academy of Management Annals,5(1), 653 –707.Habbershon, G. T., & Williams, M. L. (1999).A resource-based frameworkfor assessing strategic advantage of family firms. Family Business Review, 12, 27 –39.

Henri, J.-F. (2006). Management control systems and strategy: A resource-based perspective.Accounting, Organizations and Society, 31, 529 –558.

Jordán H. (1995). Control de gestión. DEADE, ComisiónEuropea, 1995/1996Kober, R., Ng, J., & Paul, B. J. (2007).The interrelationship between management control

mechanisms and strategy. Management Accounting Research, 18, 425 –452.Kotey, B. (2005). Goals, management practices, and performance of family SMEs. International

Journal of Entrepreneurial Behaviour& Research, 11 (1): 3-24.Laitinen, E. (2008). Value drivers in finnish family- owned firms: Profitability, growth and risk”,

International Journal of Accounting and Finance, 1(1): 1-41.Marginson, D. E. (2002). Management control systems and their effects on strategy formation

at the middle-management levels: Evidence from a UK organization. StrategicManagement Journal, 23, 1019 –1031.

Miller, D., & Le Breton-Miller, I. (2005).Managing for the long run: Lessons in competitiveadvantage from great family businesses. Boston, MA: Harvard Business School Press.


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Moilanen, S. (2008). The role of accounting in the management control system: a case study ofa family-led firm, Qualitative Research in Accounting & Management, 5(3): 165-183.

Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries andcompetitors. New York: Free Press.

Simons, R. (1990). The role of management control systems in creating competitive advantage:

New perspectives. Accounting, Organizations and Society, 15(1 –2), 127 –143.Simons, R. (2000). Performance measurement and control systems for implementing strategy.Upper Saddle River, NJ: Prentice-Hall.

Villalonga, B. and R. Amit. (2006). How Do Family Ownership, Control, and Management AffectFirm Value? Journal of Financial Economics 80, 385-417

Widener, S. K. (2007).An empirical analysis of the levers of control framework. Accounting,Organizations and Society, 32, 757 –788.

Zellweger, T. M., Eddleston, K. A., &Kellermanns, F. W. (2010).Exploring the concept offamiliness: Introducing family firm identity. Journal of Family Business Strategy, 1(1), 54-63.


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Figure 1: Relationships between set-ups and hypotheses

Table 1: Demographic characteristic of Sample

Demographic characteristic# of firms /frequency Per cent # of firms Per cent # of firms Per cent

Fi rm Sec tor

State-owned enterprises 31 17%

Private Enterprises 152 83%

Total 183 100%

Busin ess sector

Manufacturing 28 15% 17 18% 11 13%

Service 155 85% 79 82% 76 87%

Total 183 100% 96 100% 87 100%

Family v ersus nonfami ly businesses

Family businesses 96 52%

Nonfamily businesses 87 48%

Total 183 100%

Firm size (num ber of emp loyees)

Less than 27 15% 18 19% 9 10%50–99 3 2% 2 2% 1 1%100–199 15 8% 10 10% 5 6%200–499 34 19% 22 23% 12 14%

500 and over 104 57% 44 46% 60 69%

Total 183 100% 96 100% 87 100%

Firm age (years)

Less than 10 16 9% 14 15% 2 2%10–20 40 22% 27 28% 13 15%21–30 34 19% 22 23% 12 14%

30 and over 93 51% 33 34% 60 69%

Total 183 100% 96 100% 87 100%

Public versus privately owned

Public (listed on stock market) 31 17% 12 13% 19 22%

Privately owned 152 83% 84 88% 68 78%

Total 183 100% 96 100% 87 100%

Non-fami ly businesses Overal l Fam i ly b u sin esses

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