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ABSTRACT
A developing area of research interest is the relationship between control systems and strategy. This topic has been covered in the professional literature with anecdotal case studies, and in the academic literature several normative papers have been published. However, there has been little empirical research that has studied explicitly management control systems (MCS) and specific small and medium size enterprises' (SME's) strategies. This study also observes the relationship between the use of MCS and learning system to reach competitive advantage that will finally create sustainable organizational performance. There are many studies observing the relationship between strategy and control system (CS), however there are lack of studies that observe the influence of strategy formation process and the use of CS. The purpose of this study is to observe the relationship between strategy process and control system to improve organizational performance. Data is collected through direct interview. Total questionnaires used in this study is 450. Structural Equation Modeling (SEM) is the tool to analyze model in this study. This study applied AMOS 21 program to solve any problems in covariance based SEM. The study finds out that if strategy changes control system will adapt itself with the changes. The result from this study has also succesfully explained the influence of strategy formation process on diagnostic control that had not been previously discussed.
JEL Classifications, D23; D83; L10.
Keywords: Strategy; Control System; Learning; Organizational Performance.
1. INTRODUCTION
Management control was defined as the process by managers which ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization's objectives. There are two uses of control mechanism (Simon, 1995). The result from qualitative method finds out that the use of interactive control system will not only adapt it self with the strategy (Kober et al., 2007), but also improve organizational capability (Henri, 2006; Tubagus, 2016). If control system is used independently, it will not provide strength for an organization (Simons, 1995; Henri, 2006). The purpose of this study is to observe the relationship between strategy formation process and the use of control system (CS), interactive and diagnostic control system, by using quantitative method. The use of both control systems will provide more optimum result (Simon, 1995). Strategy used in this study is...