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Extending Contingency: the impact of strategy, technology, size and business environment on the organisational form of small Chinese firms

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  • Gavin C Reid
  • Julia Smith
  • Zhibin Xu

Abstract

This paper is inspired by articles in the last decade or so that have argued for more attention to theory, and to empirical analysis, within the well-known, and long-lasting, contingency framework for explaining the organisational form of the firm. Its contribution is to extend contingency analysis in three ways: (a) by empirically testing it, using explicit econometric modelling (rather than case study evidence) involving estimation by ordered probit analysis; (b) by extending its scope from large firms to SMEs; (c) by extending its applications from Western economic contexts, to an emerging economy context, using field work evidence from China. It calibrates organizational form in a new way, as an ordinal dependent variable, and also utilises new measures of familiar contingency factors from the literature (i.e. Environment, Strategy, Size and Technology) as the independent variables. An ordered probit model of contingency was constructed, and estimated by maximum likelihood, using a cross section of 83 private Chinese firms. The probit was found to be a good fit to the data, and displayed significant coefficients with plausible interpretations for key variables under all the four categories of contingency analysis, namely Environment, Strategy, Size and Technology. Thus we have generalised the contingency model, in terms of specification, interpretation and applications area.

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Bibliographic Info

Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 1205.

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Handle: RePEc:san:crieff:1205

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Related research

Keywords: contingency theory; ordered probit; small firms; Chinese data; contingency variables;

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  1. Otley, David T., 1980. "The contingency theory of management accounting: Achievement and prognosis," Accounting, Organizations and Society, Elsevier, vol. 5(4), pages 413-428, October.
  2. Naranjo-Gil, David & Hartmann, Frank, 2007. "Management accounting systems, top management team heterogeneity and strategic change," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 735-756.
  3. Hoque, Zahirul, 2004. "A contingency model of the association between strategy, environmental uncertainty and performance measurement: impact on organizational performance," International Business Review, Elsevier, vol. 13(4), pages 485-502, August.
  4. Tsai, William Ming-Hone & MacMillan, Ian C. & Low, Murray B., 1991. "Effects of strategy and environment on corporate venture success in industrial markets," Journal of Business Venturing, Elsevier, vol. 6(1), pages 9-28, January.
  5. Romme, Georges & Dillen, Ron, 1997. "Mapping the landscape of organizational learning," European Management Journal, Elsevier, vol. 15(1), pages 68-78, February.
  6. Chapman, Christopher S., 1997. "Reflections on a contingent view of accounting," Accounting, Organizations and Society, Elsevier, vol. 22(2), pages 189-205, February.
  7. Gavin C Reid & Lowell R Jacobsen., . "The Small Entrepreneurial Firm," Hume Papers 8, David Hume Institute.
  8. Gordon, Lawrence A. & Miller, Danny, 1976. "A contingency framework for the design of accounting information systems," Accounting, Organizations and Society, Elsevier, vol. 1(1), pages 59-69, January.
  9. Anderson, Shannon W. & Lanen, William N., 1999. "Economic transition, strategy and the evolution of management accounting practices: the case of India," Accounting, Organizations and Society, Elsevier, vol. 24(5-6), pages 379-412, July.
  10. Aaron J. Shenhar, 2001. "One Size Does Not Fit All Projects: Exploring Classical Contingency Domains," Management Science, INFORMS, vol. 47(3), pages 394-414, March.
  11. Gavin C Reid, 2000. "Information System Development in the Small Firm," CRIEFF Discussion Papers 0002, Centre for Research into Industry, Enterprise, Finance and the Firm.
  12. Hartmann, Frank G. H. & Moers, Frank, 1999. "Testing contingency hypotheses in budgetary research: an evaluation of the use of moderated regression analysis," Accounting, Organizations and Society, Elsevier, vol. 24(4), pages 291-315, May.
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