Differences in the Role of Job-Relevant Information in the Budget Participation- Performance Relationship among U.S. and Mexican Managers: A Question of Culture or Communication (Maria A. Leach-Lopez, William W. Stammerjohan, Frances M. McNair) Journal of Management Accounting Research, Vol. 19, 2007, pp presented by: Wulandari Fitri Ekasari

Research Background U.S. companies continue to move operations into Mexico (Lindquist, 2001; The Economist, 2000) and maquila exports from Mexico growing at 20%/yr since NAFTA implementation U.S. multinationals export U.S.-based management control systems to manage their foreign operations (Harrison, 1992; Harrison & McKinnon, 1999)

What is “maquiladora”? factories that import materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then re-exports the assembled product

This study is important for several reasons... To answer the unanswered questions from findings of Frucot & Shearon (1991) Some refinements to the existing literature by concentrating on the management environment faced by U.S.-controlled maquiladoras

Research Questions Can parent companies expect budget participation to be associated with performance among their Mexican managers in U.S.- controlled maquiladoras? (H1 – H5) Are there significant cultural differences between Mexican managers currently employed by U.S.-controlled maquiladoras and their U.S. counterparts? (H6) Do these cultural, or other, differences lead to differences in the basic level of correlation between budget participation and performance and/or any differences in the causal mechanisms connecting budget participation to performance between U.S. managers working in the U.S. and Mexican managers working for U.S.-controlled maquiladoras? (H7 – H8)

Theoretical Backgrounds Budget participation & performance; Budget participation & job satisfaction (Brownell 1981, 1982, 1983; Frucot and Shearon 1991) Job-relevant information as intervening variable (Kren, 1992) Satisfaction as intervening variable (Shields & Shields, 1998)

Path Relationships Path A: PART  PERF (Shields & Shields, 1998; Frucot & Shearon, 1991) Path B: PART  SAT (Frucot & Shearon, 1991) Path C: SAT  PERF Path D: PART  JRI (Kren, 1992) Path E: JRI  SAT (Lau & Tan, 2003) Path F: JRI  PERF (Kren, 1992)

The Path Model

PART – PERF Hypotheses H1: Increased budget participation leads directly to increased performance. (A) H2: Increased budget participation leads directly to increased performance. (A) H3: Increased budget participation leads to increased job satisfaction and increased job satisfaction leads to increased performance. (B&C) H4: Increased budget participation leads to increased job-relevant information and increased job-relevant information leads to increased performance. (D&F) H5: Increased budget participation leads to increased job-relevant information, increased job-relevant information leads to increased job satisfaction, and increased job satisfaction leads to increased performance. (D, E, & C)

U.S. & Mexico Cultural Differences Hofstede: - Power Distance - Individualism vs. Colectivism - Uncertainty Avoidance - Masculinity vs. Femininity Measurement Instability (Fernandez et al., 1997) Selection Bias & Training

Cultural Differences & Effects Hypothesis H6: There are differences on Hofstede’s national-culture dimensions between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S. H7: There is a difference in the basic budget participation- performance relationship (as hypothesized in H1) between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S. H8: There are differences in the complex budget participation- performance relationships described in H2–H5 between Mexican managers working for U.S.-controlled maquiladoras in Mexico and U.S. managers working for U.S. companies in the U.S.

Variables Operationalization and Measurement (1) 6-item scale (Milani, 1975), each item score measured with 7-point Likert scale Ind. Var. Participation (PART) 8-dimension scale (Mahoney et al., 1963) Dep. Var. Performance (PERF) SAT  the short-form of Minnesota Satisfaction Questionnaire (Weiss et al., 1976) JRI  3 questions answered on a scale of 1 to 5 (Kren, 1992) Int. Var. Satisfaction (SAT); Job-Relevant Info (JRI)

Variables Operationalization and Measurement (2) Measured by Hofstede’s VSM94 Cultural Variables Bilingual or Non-bilingual Bilingual ability Supervisor’s Nationality Communication Variables

Sample Design 143 mid-level managers from: - 45 U.S. managers working in the U.S Mexican managers working for U.S.- controlled maquiladoras in Mexico:  Border (Nuevo Laredo)  58 people  Interior (Puebla)  40 people Survey instrument written in English/Spanish For U.S. subjects were distributed by , for Mexican were hand-delivered

Path Coefficients Model To test H1: To test H7: To test H2 – H5:

Demographic Statistics

Path Variable Simple Correlations

Test of Cultural Differences (H6) H6 is supported for UAI & IDV

Hypoteses Testing Results

Conclusions from Hypotheses Testing H1 is supported, H7 is not supported H2 is supported for sample U.S. H3 and H5 is not supported for both sample H4 is supported for sample Mexico H6 is supported H8 is supported for path C, E, and F

Ex-Post Analyses: Culture vs. Communication Cultural difference explanation was rejected due to similarity for both regions 3 additional tests regarding communication: - Bilingual vs. non-bilingual - Bilingual ability - Supervisor nationality

Communication Tests Result Path F, JRI  PERF, sig. larger for non- bilingual Mexican managers Hypothesis 4, PART  JRI  PERF marginally supported for every level of bilingual ability other than “very well” (least physic distance) Hypothesis 4 is supported, however path F, sig. larger for Mexican supervised by U.S. nationals

Conclusions While there are strong associations between budget participation and performance for both U.S. managers working in the U.S. and Mexican managers working for U.S.-controlled maquiladoras in Mexico, the causal mechanisms connecting budget participation with performance are quite different The importance of the information-communication aspect in Mexico may be related to the psychic distance, the level of difficulty our Mexican managers face in communicating with their U.S. parent companies Management tools that provide additional job-relevant information to foreign managers may help improve performance

Limitations the lack of temporal precedence between the independent and dependent variables any limitations imbedded in the scales used to measure the variables the generalizability of the samples

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