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In the last decade many firms have designed and implemented activity-based costing (ABC) systems. There is growing evidence, however, that many of these firms are experiencing problems with implementing ABC and, in the extreme, are not having success with it. An important reason is that the introduction of ABC in many firms has focused on the architectural and software design of ABC, with insufficient attention being given to behavioral and organizational factors involved (Cooper et al. 1992; Hankinson and Lloyd 1994; Argyris and Kaplan 1994). In many firms, ABC is treated as a technical innovation and not the administrative innovation that it is. Technical design issues are of value so as to ensure that appropriate cost information is provided to support decisions and actions. The literature on implementing ABC typically provides detailed, technical instructions on ABC design but little coverage of how to actually implement it in terms of dealing with human issues.(1)
Achieving architectural and software elegance, however, is not sufficient for the general or long-term success of an ABC system. Since ABC is embedded in a behavioral and organizational context that defines the programs and innovations that are implemented and succeed and fail, it is important that an ABC implementation strategy be focused on these behavioral and organizational variables. Shields and Young (1989, 1994) have identified behavioral and organizational variables which they posit are important to making the implementation of cost management systems such as ABC successful. Unfortunately, little empirical information exists about firms use of these and other variables and how they correlate with the success of an ABC system. Such information could be useful in helping to identify how companies are implementing ABC and the implementation strategies that are successful.
The purpose of this paper is to provide empirical evidence on the degree to which various behavioral, organizational and technical factors are associated with the success of ABC implementations. The empirical evidence is based on a survey of 143 firms, in contrast to the predominately small-sample, case study and interview approach of the prior research. The remainder of this article is organized by first providing a framework for the survey based on a review of the extant literature on implementing ABC. Next, the survey and a statistical analysis of it...