The purpose of this study is to investigate the effects of misfits between business strategy and management control systems on performance. We address the following research question: Do firms that align their management control systems with the specific requirements of their business strategy perform significantly better than those that do not achieve the required match? We define a misfit as the degree to which management control systems deviate from empirically derived optimal configurations for a given type of business strategy. We use the two-stage approach proposed by Ittner and Larcker (2001) to measure misfit and to investigate the impacts of misfit on performance. Based on a questionnaire survey of executives from 109 banks, we hypothesize and find that the strategy-control systems misfit has a significantly negative correlation with both self-rated and publicly available performance measures.
- Business strategy
- Management control system