Relationships between differentiation strategies, innovation and management control systems

The goal of this study is to investigate the relationship between product differentiation strategies, innovation and Management Control System designs, which consist of social network dimensions, innovative organic cultures and formal controls in Brazilian textile companies. The research is characterized as descriptive and was conducted through a survey of a sample of 101 companies associated with the Brazilian Association of Textile Industry. These companies' managers answered a questionnaire extracted from Chenhall, Kallunki and Silvola (2011). Descriptive statistics and Structural Equation Modeling (SEM) were used to examine this study's replicated hypotheses. The results show consistent evidence of connections between product differentiation strategies, innovation and MCS design; a relationship confirmed by the use of formal controls and product innovation. However, the research did not confirm that companies which adopt differentiation strategies achieve higher levels of product innovation. Social networks were seen to encourage innovative organic culture, but did not reinforce the relationship with product innovation. The results and conclusions are consistent with Chenhall et al. (2011), except for the relationship between differentiation and innovation, in which no statistical significance was observed.