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INTRODUCTION
The purpose of this article is to examine the relevance of contingency theory for management control systems. The focus of this article is control at the manager level (i.e., profit center, division and strategic business unit managers). Management control is defined as the control managers exercise over other managers. It is the process by which corporate-level managers ensure that mid-level managers carry out organizational objectives and strategies (Merchant 1989). Control can be applied at multiple levels in an organization and control requirements may differ among the organizational levels. Prior research has found systematic differences between control at the corporate, management and operational levels (Ansari 1977; Anthony 1965; Walsh and Seward 1990). Corporate control applies to the CEO and other corporate officers. Operational control is applied at lower echelons of the organization to ensure task performance. The control issues at the corporate and operational levels differ significantly from managerial control issues (Anthony 1965). For example, managerial control tends to focus more on financial measures than control at the operational level and tends to be more infrequent (Atkinson et al. 1997).
Although many corporate executives may desire to make all decisions centrally, it may not be possible (desirable) to do so because managers often have access to more decision-relevant information than executive levels. Therefore, many business decisions are typically made at lower organizational levels (Arrow 1964). Effective control encourages managers to make decisions that accomplish organizational objectives. Without proper control, managers may make detrimental firm decisions because their personal goals may diverge from corporate objectives, they may not understand what is expected of them, or the task may be beyond their training or...