The impact of the adequacy of resources on cost system sophistication and performance outcomes

Prior research into cost system sophistication (CSS) (or complexity) has found that the size of an organisation is related positively to CSS. This has been confirmed when size is measured by the sales revenue and CSS is measured by the number of cost pools or the number of cost drivers (Drury and Tayles, 2005; Brierley, 2007; Al-Omiri and Drury, 2007) and when size is measured by the number of employees and CSS is measured by the number of cost pools (Brierley, 2007). The explanation for this is that larger firms have the resources necessary to invest in more sophisticated cost systems. Prior research, however has not taken this issue further by testing the extent to which the adequacy of resources influence CSS. A research model can be developed to assess the extent to which management knowledge and awareness of management accounting innovations, and management support for the introduction of such innovations influences the adequacy of resources available for investment. Given the above, this PhD project relates to the application of contingency theory to develop and test a model of the relationship between the constructs described above as well as the influence of control variables like cost structure and industry on CSS. The model then examines the influence of CSS on performance outcomes, such as satisfaction with the cost system, and the usage of the cost system in cost management and decision making.