Factors influencing the alignment of accounting information systems in small and medium sized Malaysian manufacturing firms
Keywords:
Accounting information system, management accounting system, alignment, fit, organisational information processing theoryAbstract
The concept of alignment or fit between information technology (IT) and business strategy has been discussed for many years, and strategic alignment is deemed crucial in increasing firm performance. Yet few attempts have been made to investigate the factors that influence alignment, especially in the context of small and medium sized firms (SMEs). This issue is important because results from previous studies suggest that many firms struggle to achieve alignment. Therefore, this study sought to identify different levels of alignment and then investigated the factors that influence alignment. In particular, it focused on the alignment between the requirements for accounting information (AIS requirements) and the capacity of accounting systems (AIS capacity) to generate the information, in the specific context of manufacturing SMEs in Malaysia. Using a mail questionnaire, data from 214 firms was collected on nineteen accounting information characteristics for both requirements and capacity. The fit between these two sets was explored using the moderation approach and evidence was gained that AIS alignment in some firms was high. Cluster analysis was used to find two sets of groups which could be considered more aligned and less aligned. The study then investigated some factors that might be associated with a small firm’s level of AIS alignment. Findings from the study suggest that AIS alignment was related to the firm’s: level of IT maturity; level of owner/manager’s accounting and IT knowledge; use of expertise from government agencies and accounting firms; and existence of internal IT staff.References
Abernethy, M.A. and Guthrie, C.H. (1994) ‘An empirical assessment of the “fit” between strategy and management information system design’, Accounting and Finance, vol. 34, pp. 49-66.
Adekoya, A.A., Eyob, E., Ikem, F.M., Omojokun, E.O., Quaye, A.M. and Bada, A.O. (2005) ‘Dynamics of information technology (IT) successful implementation in development countries: A Nigerian case study’, The
Journal of Computer Information Systems, vol. 45, no. 3, pp. 107-112.
Bergeron, F., Raymond, L. and Rivard, S. (2001) ‘Fit in strategic information technology management research: An empirical comparison of perspectives’, OMEGA The International Journal of Management Science, vol. 29, pp. 125-142.
Bergeron, F., Raymond, L. and Rivard, S. (2004) 'Ideal patterns of strategic alignment and business performance', Information & Management, vol. 41, no. 8, pp. 1003-20.
Bolon, D. S. (1998) ‘Information processing theory: Implications for health care organizations’, International Journal of Technology Management, vol. 15, pp. 211-221.
Breen, J. and Sciulli, N. (2002) Use of Computerized Record Keeping in Small Business, Small Business Research Unit, Victoria University.
Chan, Y.E., Huff, S.L., Barclay, D.W. and Copeland, D.G. (1997) ‘Business strategic orientation, information systems strategic orientation, and strategic alignment’, Information Systems Research, vol. 8, no. 2, pp. 125-150.
Chang, C.H. and Jevons Lee, C.W. (1992) ‘Information acquisition as business strategy’, Southern Economic Journal, vol. 58, no. 3, pp. 750-761.
Chenhall, R.H. and Langfield-Smith, K. (1998) ‘Adoption and benefits of management accounting practices: an Australian study’, Management Accounting Research, vol. 9, pp. 1-19.
Chenhall, R.H. and Morris, D. (1986) ‘The impact of structure, environment, and interdependence on the perceived usefulness of management accounting systems’, The Accounting Review, vol. LXI, no. 1, pp. 16-35.
Chong, V.K. and Chong, K.M. (1997) ‘Strategic choices, environmental uncertainty and SBU performance: a note on the intervening role of management accounting systems’, Accounting and Business Research, vol. 27, no. 4, pp. 268-276.
Cragg, P.B., King, M. and Hussin, H. (2002) ‘IT alignment and firm performance in small manufacturing firms’, Journal of Strategic Information Systems, vol. 11, no. 2, pp. 109-132.
de Guinea, A.O., Kelley, H. and Hunter, M.G. (2005) ‘Information systems effectiveness in small businesses: Extending a Singaporean model in Canada’, Journal of Global Information Management, vol. 13, no. 3, pp. 55-
Davis, M. (1997) ‘Transforming your firm: Tools for successful technology consulting’, The Practical Accountant, vol. 30, no. 8, pp. S-3.
Dillman, D.A. (1978) Mail and Telephone Surveys: The Total Design Method, John Wiley & Sons, New York.
El Louadi, M. (1998) ‘The relationship among organization structure, information technology and information processing in small Canadian firms’, Canadian Journal of Administrative Sciences, vol. 15, no. 2, pp. 180-199.
Fuller, T. (1996) ‘Fulfilling IT needs in small businesses: A recursive learning model’, International Small Business Journal, vol. 14, no. 4, pp. 25-44.
Gable, G.G. and Raman, K.S. (1992) ‘Government initiatives for IT adoption in small business: experiences of the Singapore small enterprise computerization program’, International Information Systems, vol. 1, no. 1, pp. 68-93.
Galbraith, J.R. (1973) Designing Complex Organizations, Addison-Wesley, Reading, Mass.
Green, P.E., Tull, D.S. and Albaum, G. (1988) Research for Marketing Decisions, 5th Ed., New Jersey: Prentice Hall
Gul, F.A. (1991) ‘The effects of management accounting systems and environmental uncertainty on small business managers’ performance’, Accounting and Business Research, vol. 22, no. 5, pp. 57-61.
Gul, F.A. and Chia, Y.M. (1994) ‘The effects of management accounting systems, perceived environmental uncertainty and decentralization on managerial performance: a test of three-way interaction’, Accounting,
Organizations and Society, vol. 19, no. 4/5, pp. 413-426.
Hartcher, J. (2003) Small Business Survey Program: Financial Management, Insolvency and Fraud, CPA Australia.
Henderson, J.C. and Venkatraman, N. (1993) ‘Strategic alignment: Leveraging information technology for transforming organizations’, IBM Systems Journal, vol. 32, no. 1, pp. 4-16.
Huber, G.P. (1990) ‘A theory of the effects of advanced information technologies on organizational design, intelligence, and decision making’, Academy of Management Review, vol. 15, no. 1, pp. 47-71.
Hussin, H., King, M. and Cragg, P.B. (2002) ‘IT alignment in small firms’, European Journal of Information Systems, vol. 11, pp. 108-127.
Igbaria, M., Zinatelli, N., Cragg, P.B. and Cavaye, A.L.M. (1997) ‘Personal computing acceptance factors in small firms: A structural equation model’, MIS Quarterly, vol. 21, no. 3, pp. 279-305.
International Federation of Accountants (2006) Micro-Entity Financial Reporting: Perspectives of Preparers and Users, Small and Medium Practices Committee, International Federation of Accountants, New York.
Ismail, N.A., Tayib, M. and Abdullah, S.N. (2003) ‘Computer-based accounting systems: The case of manufacturing-based small and medium enterprise in the northern region of peninsular Malaysia’, Jurnal
Teknologi, vol. 39, pp. 19-36.
Ismail, N.A. and King, M. (2005) ‘Firm performance and AIS alignment in Malaysian SMEs’, International Journal of Accounting Information Systems, vol. 6, no. 4, pp. 241-259.
Jarvenpaa, S.L. and Ives, B. (1991) ‘Executive involvement and participation in the management of information technology’, MIS Quarterly, vol. 15, no. 2, pp. 205-227.
Khazanchi, D. (2005) ‘Information technology (IT) appropriateness: The contingency theory of “fit” and IT implementation in small and medium enterprises’, The Journal of Computer Information Systems, vol. 45, no. 3,
pp. 88-95.
King, W.R., Grover, V. and Hufnagel, E. (1989) ‘Using information and information technology for sustainable competitive advantage: some empirical evidence’, Information and Management, vol. 17, pp. 87-93.
Lertwongsatien, C. and Wongpinunwatana, N. (2003) ‘E-commerce adoption in Thailand: An empirical study of small and medium enterprises’, Journal of Global Information Technology Management, vol. 6, no. 3, pp. 67-83.
Lesjak, D. (2001) ‘Are Slovene small firms using information technology strategically?’ Journal of Computer Information Systems, vol. 41, no. 3, pp. 74-81.
Levy, M., Powell, P. and Yetton, P. (2001) ‘SMEs: Aligning IS and the strategic context’, Journal of Information Technology, vol. 16, pp. 133-144.
Lindner, J.R., Murphy, T.H. and Briers, G.E. (2001) ‘Handling nonresponse in social science research’, Journal of Agricultural Education, vol. 42, no. 4, pp. 43-53.
Marriot, N. and Marriot, P. (2000) ‘Professional accountants and the development of a management accounting service for the small firm: Barriers and possibilities’, Management Accounting Research, vol. 11, pp. 475-492.
McMahon, R.G.P. (2001) ‘Business growth and performance and financial reporting practices of Australian manufacturing SMEs’, Journal of Small Business Management, vol. 39, no. 2, pp. 152-164.
Mia, L. (1993) ‘The role of MAS information in organisations: an empirical study’, British Accounting Review, vol. 25, pp. 269-285.
Mia, L. and Clarke, B. (1999) ‘Market competition, management accounting systems and business unit performance’, Management Accounting Research, vol. 10, pp. 137-158.
Mitchell, F., Reid, G. and Smith, J. (2000) Information system development in the small firm: The use of management accounting, CIMA Publishing, United Kingdom.
Morikawa, M. (2004) ‘Information technology and the performance of Japanese SMEs’, Small Business Economics, vol. 23, no. 3, pp. 171-177.
Perren, L. and Grant, P. (2000) ‘The evolution of management accounting routines in small businesses: A social constructive perspective’, Management Accounting Research, vol. 11, pp. 391-411.
Ravarini, A., Tagliavini, M. and Buonanno, G. (2002) Information system check-up as a leverage for SME development, in: Managing IT in Small Business, (Ed. S. Burgess), pp. 63–82 (Idea Group).
Raymond, L. and Pare, G. (1992) ‘Measurement of information technology sophistication in small manufacturing businesses’, Information Resources Management Journal, vol. 5, no. 2, pp. 4-16.
Raymond, L. and St-Pierre, J. (2005) ‘Antecedents and performance outcomes of advanced manufacturing systems sophistication in SMEs’, International Journal of Operations & Production Management, vol. 25, no.
/6, pp. 514-533.
Rhee, J.H. (2001) ‘Does digitization enhance firm competitiveness? E-business strategies based on information processing theory’, Journal of E-Business, vol. 1, no. 1, pp. 1-11.
Seyal, A., Rahim, M.N. and Rahim, N. (2000) ‘An empirical investigation of the use of information technology among small and medium business organizations: a Bruneian scenario’, The Electronic Journal of Information
Systems in Developing Countries, vol. 2, no. 7, pp.1–17.
Seyal, A.H. and Abd Rahman, M.N. (2003) ‘A preliminary investigation of e-commerce adoption in small and medium enterprises in Brunei’, Journal of Global Information Technology Management, vol. 6, no. 2, pp. 6-26.
Shiels, H., McIvor, R. and O’Reilly, D. (2003) ‘Understanding the implications of ICT adoption: Insights from SMEs’, Logistics Information Management, vol. 16, no. 5, pp. 312-326.
Temtime, Z.T., Chinyoka, S.V. and Shunda, J.P.W. (2003) ‘Toward strategic use of IT in SMEs: a developing country perspective’, Information Management and Computer Security, vol. 11, no. 5, pp. 230-237.
Thong, J.Y.L. and Yap, C.S. (1995) ‘CEO characteristics, organizational characteristics and information technology adoption in small businesses’, OMEGA International Journal of Management Science, vol. 23, no. 4,
pp. 429-442.
Thong, J.Y.L., Yap, C.S. and Raman, K.S. (1996) ‘Top management support, external expertise and information systems implementation in small businesses’, Information Systems Research, vol. 7, no. 2, pp. 248-267.
Thong, J.Y.L. (1999) ‘An integrated model of information systems adoption in small business’, Journal of Management Information Systems, vol. 15, no. 4, pp. 187-214.
Thong, J.Y.L. (2001) ‘Resource constraints and information systems implementation in Singaporean small business’, OMEGA International Journal of Management Science, vol. 29, pp. 143-156.
Van de Ven, A.H. and Drazin, R. (1985) ‘The concept of fit in contingency theory’, Research in Organizational Behavior, vol. 7, pp. 333-365.
Venkatraman, N. (1989) ‘The concept of fit in strategy research: toward verbal and statistical correspondence’, Academy of Management Review, vol. 14, no. 3, pp. 423-444.
Weill, P. and Olson, M.H. (1989) ‘An assessment of the contingency theory of management information systems’, Journal of Management Information Systems, vol. 6, no. 1, pp. 59-85.
Winston, E.R. and Dologite, D.G. (1999) ‘Achieving IT infusion: A conceptual model for small business’, Information Resources Management Journal, vol. 12, no. 1, pp. 26-38.
Yap, C.S. and Thong, J.Y.L. (1997) ‘Programme evaluation of a government information technology programme for small businesses’, Journal of Information Technology, vol. 12, pp. 107-120.
Zarowin, S. (1998) ‘Accounting software: The road ahead’, Journal of Accountancy, January, pp. 67-69.
