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8; Jones and Dugdale, 1994).
Cross-country research suggests that these differencesmay
be associated with the national context (Carr and Harris,
2004; Carr and Tomkins, 1996, 1998; Jones et al., 1993;
Shields et al., 1991). Additionally, documented differences
in the emphasis on strategic versus financial considerations
among companies from the same country contexts suggest
that these differencesmaybe associated with other contextual
variables, as well (e.g. Alkaraan and Northcott, 2006 cf.
Butler et al., 1991; Sandahl and Sjögren, 2003). Hitherto, the
SID literature has provided only scant evidence on which
contextual variables, besides the country context, could be
1044-5005/$ – see front matter © 2010 Elsevier Ltd. All rights reserved.
doi:10.1016/j.mar.2010.03.004
168 C. Carr et al. / Management Accounting Research 21 (2010) 167–184
associated with these differences (Chen, 2008; Verbeeten,
2006).
This paper aims to address this void by proposing a
systematic contextual framework for explaining differences
in SID making practices. The framework developed
encompasses important, but neglected contingencies that
are derived from the broader strategic management and
strategic management accounting (SMA) literatures. These
contingencies are integrated to construct a general contextual
framework that explains SID making practices in terms
of a company’s ‘market orientation’ and its ‘performance in
relation to shareholder expectations’.2 The framework developed
gives rise to a fourfold categorization of companies
comprising market creators, value creators, refocusers and
restructurers.
The framework’s potential for explaining differences
in SID making practices is subsequently tested on an
exploratory basis through 14 case studies of U.K., U.S. and
Japanese companies operating in vehicle component (10)
and telecommunications (4) sectors. Potential differences
in SID making practices are explored initially, in regard to
the use of capital budgeting techniques, and then in regard
to companies’ overall SID approaches.3
The results of the 14 case studies indicate substantial
differences in SID approaches across the 4 contextual categories.
These are evident from the extent to which decisions
are made based on strategic versus financial considerations,
the thoroughness and rigidity of financial analysis,
and attitudes towards incorporating less easily quantifiable
factors such as synergies into calculations.Anexpected tendency
for hurdle rates to rise as we move from the most
strategically orientated market creator category towards
the most financially orientated restructurer category is also
clearly observed.
The remainder of the paper is organised as follows.
An overview of research related to SID making practices
is presented. Then the explanatory contextual framework
for SID making practices is constructed and followed by a
description of the research method. The research findings
are presented, first in respect of potential contextual differences
in the use of capital budgeting techniques, and
second in respect of the companies’ overall approaches to
SIDs. The conclusion comprises a summary of the findings,
a discussion of their broader implications, and a suggestion
of areas for further research.
2. Literature overview on SID making practices
2.1. Ca