CHAPTER 6: DATA ANALYSIS AND DISCUSSION
6.6. Empirical results – testing of the associations of strategic management accounting
Table 6.6 summarizes the association of SMA practices such as strategic cost management, competitor accounting, strategic accounting and customer accounting with the three main components of intellectual capital and shows the key concepts of the questions loaded on to each factor.
Regarding strategic cost management, this study indicates that strategic cost management approaches such as “Attribute costing, Life cycle costing, Quality costing, Target costing, Value chain costing and Activity-based costing” linked to value are strongly associated with high levels of structural (β = 0.605, p value = 0.000) and relational capital (β = 0.342, p value = 0.003) as the relationships are positive and significant at 1 percent level. These results support H6b and H6c in terms of strategic cost management approaches. However, looking at the strategic cost management approaches used by the sample firms, the author observes that there is no association between its adoption and the degree of human capital in firms (β = 0.251, p value = 0.303). Thus, it reveals that strategic cost management facilitates the implementation of how structural and relational capital consumed to generate a firm’s development by the application of cost data to identify structural and relational capital with the aim of generating a better operating performance.
For example, the quality costing technique includes the measures of external failure cost to deliver a quality product or service which in turn ensure that customers are happy with such a product or service to result in an increase in relational capital. Another example, if a firm apply more contemporary systems such as value chain costing, activity-based costing and others, it means that such firm’s knowledge is increasing, in other words a firm’s structural capital is improving. However, it is evident that strategic cost management approaches such as attribute costing, life cycle costing, quality costing and others are not typical techniques which should be used to measure human capital efficiency because the relationship between strategic cost management and human capital is not affirmed statistically.
In terms of whether the level of IC within firms are influenced by strategic accounting-based approaches, this study finds that firms with higher levels of human and structural capital attach greater importance to strategic costing approaches such as
“Strategic costing, Strategic pricing, Brand valuation and Capital budgeting”, as shown in Table 6.6. Strategic accounting shows a marginally positive relationship with human capital (β = 0.342, p value = 0.072) and with structural capital (β = 0.342, p value = 0.011), which support the H6a and H6b. However, relational capital effect is not significant (β = 0.044, p value = 0.697), indicating no support for H6c in terms of strategic accounting approaches. As a result, strategic accounting approaches appear to have potentially role to play in human capital and structural capital management. As for an accounting style, the result indicates that the differences exist between conventional accounting emphasis and strategy orientation emphasis, the latter focusing on concerns for cost effectiveness, quality, handling staff, job effort and long-term investment. The outcomes of this study demonstrate that firms with high level of human capital are associated with the use of regular brand valuation, strategic costing and strategic pricing. Additionally, the strategic orientation accounting style such as strategic costing and capital budgeting or priority- based budgeting is associated with high levels of structural capital. It indicates that many of the new techniques, besides the techniques of traditional accounting, prove to be better knowledge management in an organization and thereby structural capital will be improving. This supports earlier argument that the typical strategic orientation focus is consistent with high IC firms (Johanson, Mồrtensson, & Skoog, 2001).
As regards the competitor accounting-related results, in Table 6.6 - the impact of competitor accounting approaches on both structural capital and relational capital of the respondent firms are considered. Although both β-path coefficients are positive and statistically significant with results as follows; structural capital (β = 0.286, p value = 0.058) and relational capital (β = 0.237, p value = 0.056), the significant values of both propositions are weak. Regarding the remaining component of IC, it also proposes that competitor accounting is positively associated with human capital but not statistically significant (β = 0.199, p value = 0.336). These findings confirm H6b and H6c hypotheses.
It means that where firms have invested heavily in competitor accounting approaches such as “Benchmarking, Competitive position monitoring, Competitor cost assessment, Competitor performance appraisal, Integrated performance measurement”, they should be in a good position to manage unanticipated economic events. When firms combat uncertainty, they are less susceptible to stock market fall, competitive pressure or investor overreaction. It is because better management of relational capital i.e. better relations with
the investors and competitors facilitates to understand the external reactions before the changes of turbulent business environment. Actually, Lev and Zarowin (1999) argument may hold among Malaysian firms, the greater relationship between investors and the board in high IC firms means that there is less scope for surprise resulting in less stock market volatility and stock price overreaction.
Finally, Table 6.6 examines the same relationships but in the context of the impact of customer accounting approaches such as “Customer profitability analysis, Life-time customer analysis, The valuation of customer group”. In relation to human capital, the β- path coefficient is negative but not statistically significant (β = -0.067, p value = 0.483) whereas the propositions are statistically significant and positively associated with both structural capital (β = 0.808, p value = 0.000) and relational capital (β = 0.302, p value = 0.000). These results are somewhat surprisingly similar with competitor accounting-based results, indicating support for H6b and H6c in terms of customer accounting approaches.
These outcomes reveal that customer accounting appears to be the most widely referred to strategic management accounting practices to manage relational capital and structural capital. With respect to relational capital such as the relations with customers, customer accounting provides techniques of identifying customer groups who are of value to the firm, allowing the sample firms to decide which customers may be worth additional expenditure to retain and thereby relational capital will be increasing. Moreover, the customer accounting approaches are provided then marketing decisions are more easily made on such matters as discounts policy, special credit terms, special after-sales servicing or whether any efforts are required on a sector given its lack of profitability. It provides techniques for assessing and improving financial value of marketing and product development expenditure to contribute into the efficiency of operating management system which in turn enhance a firm’s structural capital.
In general, the study highlights only strategic accounting approaches are used to manage human capital. Remarkably, the findings validate the usefulness of all groups of strategic management accounting practices as techniques to manage structural capital.
Except for strategic accounting approaches, three remaining groups of SMA practices (strategic cost management, competitor accounting, customer accounting) are most appropriately situated as techniques of relational capital management in Vietnamese publicly traded enterprises.
Table 6.6. Summary of the results of the sixth hypothesis testing
The importance of the use of
Path coefficients
Variables loaded on factors t value (bootstrap)
HCE SCE RCE
Strategic cost management (SCM)
0.251 (1.031)
0.605***
(4.088)
0.342***
(2.983)
Attribute costing, Life cycle costing, Quality costing, Target costing, Value chain costing, Activity-based costing
Strategic accounting (STR)
0.193*
(1.806)
0.337**
(2.555)
0.044 (0.389)
Strategic costing, Strategic pricing, Brand valuation, Capital budgeting
Competitor accounting (COM)
0.199 (0.963)
0.286*
(1.898)
0.237*
(1.915)
Benchmarking, Competitive position monitoring, Competitor cost assessment, Competitor performance appraisal, Integrated performance measurement
Customer accounting (CUS)
-0.067 (0.702)
0.808***
(7.960)
0.302***
(3.744)
Customer profitability analysis, Life-time customer analysis, The valuation of customer group
Note: Significant at: *10, **5 and ***1 percent levels (2-tailed)
Source: Calculated by the author in SmartPLS 3.1