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Linking Strategic Cost Management Practices to Organizational Performance: Evidence from SMEs

In: Entrepreneurship and Human-Centric Business Strategies for Social and Economic Resilience

Author

Listed:
  • Jeremiah Palmiano

    (FEU Diliman)

  • Jose Barcela Jr.

    (FEU Diliman)

Abstract

Strategic cost management practices are critical for SMEs in today's dynamic environment. While their benefits are acknowledged, empirical evidence on their influence on SME organizational performance remains limited. This study investigates the influence of activity-based costing (ABC), target costing (TC), and life cycle costing (LCC) on the organizational performance of SMEs, aiming to evidence their effectiveness in improving financial efficiency, promoting cost reduction, and ensuring long-term sustainability. Employing structural equation modeling, this research analyzes survey data from 390 participants in various SMEs to examine the influence of ABC, TC, and LCC on organizational performance. The results confirm that ABC, TC, and LCC significantly enhance organizational performance within SMEs. ABC improves financial efficiency, TC enables competitive pricing, and life cycle costing promotes long-term financial sustainability. These findings highlight the critical role of strategic cost management in optimizing SME performance. Integrating ABC, TC, and LCC into financial planning is essential for SMEs aiming to improve operational efficiency and achieve sustainable growth. The researcher found that the constructs accounted for a modest 16.4% of the variation in organizational performance. It is determined that this highlights the complex nature of organizational performance and the need to consider other, unmeasured factors.

Suggested Citation

  • Jeremiah Palmiano & Jose Barcela Jr., 2026. "Linking Strategic Cost Management Practices to Organizational Performance: Evidence from SMEs," Springer Proceedings in Business and Economics, in: Singha Chaveesuk & Seungwoo Shin & Sebastian Kot & Bilal Khalid (ed.), Entrepreneurship and Human-Centric Business Strategies for Social and Economic Resilience, pages 483-496, Springer.
    • Handle: RePEc:spr:prbchp:978-981-95-6415-6_31
    DOI: 10.1007/978-981-95-6415-6_31
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