Does consistency in management control systems design choices influence firm performance? An empirical analysis

This study examines the impact on firm performance of theoretically consistent relationships between three management control systems (MCS) design choices - delegation, performance measurement, and incentive compensation. Based upon the 'three-legged stool' model and agency theory, the hypothesis is that theoretically consistent MCS design choices are associated with enhanced firm performance. Using survey data from large Australian firms, the findings support the hypothesis, suggesting that an appropriate MCS design is a determinant of firm performance. The study contributes to the literature by moving beyond a focus on the antecedents of the three key MCS design choices to the consequence of alignment of those choices.