NATIONAL CULTURE AND MANAGEMENT CONTROL SYSTEMS USING LEVERS OF CONTROL FRAMEWORK: AN EMPIRICAL ANALYSIS

Abstract

In today borderless international economy, businesses across nations are increasing dramatically. Under such case, importing or exporting control mechanisms across culture without adjustment is packed with risk. Hence, the relationship between national culture and management control systems (MCS) is inseparable and complex. Therefore, cultural differences across countries are supposed to influence the preferences and differences in the philosophies and approach of MCS design. Based on the Hofstede (1980) cultural dimensions, (i.e. Collectivism, high uncertainty avoidance, and high power distance) and Simons (1995) levers of control framework (LOC) (beliefs, boundary, diagnostic, and interactive control), this study empirically examined the association between national culture and MCS. Using a survey of 79 top managers of the Palestinian listed firms, this study examines the influence of national culture on MCS design. The evidence suggests that collectivism and high uncertainty avoidance are the main cultural dimensions that influencing the philosophies of MCS design in the Arab countries, whereas high power distance has no effect on MCS. Finally, findings provide suggestions for potential directions of future cultural research in MCS.