The Differential Effect of Environmental Dimensionality, Size, and Structure on Budget System Characteristics in Hotels

Posted: 14 Feb 2002

See all articles by Divesh Sharma

Divesh Sharma

Kennesaw State University, School of Accountancy

Abstract

Whilst the service sector is a major component of world economies, research into, and thus our understanding of, how management control systems function in the service environment is limited. To advance our knowledge and understanding of the role of budgets in service organisations, this organisational level study extends prior manufacturing context research investigating the influence of contextual variables on budget system characteristics (BSC) to hotels. Since the nature of service firm operations is highly dependent on the external environment, perceived environmental uncertainty (PEU) is likely to be a key contextual variable. Consistent with the organisational theory literature, this study conceptualises PEU more correctly as a multi-dimensional construct and seeks to ascertain the influence of components of PEU on the BSC of hotels, the chosen service industry. Based on a smaple of 106 hotels and using path analyses, the results indicated that: (1) different dimensions of PEU have differential effects on BSC and organisational structure, (2) hotel size has a significant effect on BSC, (3) hotel size does not significantly influence structure, and (4) hotel organisational structure has significant influences on BSC. The finding for PEU raises implications for future researchers studying PEU.

Keywords: Contingent variables; Service organisations; Path analysis; PEU; Budget system characteristics

JEL Classification: M40, M46

Suggested Citation

Sharma, Divesh Shankar, The Differential Effect of Environmental Dimensionality, Size, and Structure on Budget System Characteristics in Hotels. Available at SSRN: https://ssrn.com/abstract=297944

Divesh Shankar Sharma (Contact Author)

Kennesaw State University, School of Accountancy ( email )

Kennesaw, GA 30144
United States

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