Interactive profit-planning systems and market turbulence: A dynamic capabilities perspective

This article describes, theorizes and empirically investigates the concept of interactive profit-planning systems (PPS) through the lens of the dynamic capabilities logic. With this conceptualization: interactive PPS capabilities comprise budgeting, forecasting and results-reporting routines, in whi...

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Bibliographic Details
Published in:Long range planning 2019-06, Vol.52 (3), p.386-405
Main Authors: Peters, Matt D., Gudergan, Siegfried, Booth, Peter
Format: Article
Language:English
Subjects:
Business performance
Cybernetic management control systems
Dynamic capabilities
Hyper market turbulence
Interactive profit-planning systems
Organizational (culture) flexibility values
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Summary:This article describes, theorizes and empirically investigates the concept of interactive profit-planning systems (PPS) through the lens of the dynamic capabilities logic. With this conceptualization: interactive PPS capabilities comprise budgeting, forecasting and results-reporting routines, in which top and middle managers interact to create knowledge for sensing, seizing, and business model reconfiguring (to manage strategic business change). Survey data from 331 Australian firms is analyzed employing partial least squares structural equation modeling. The data provides support for two hypotheses: (1) greater market turbulence strengthens the positive effect of interactive PPS capabilities on business unit performance; and (2) greater market turbulence strengthens the positive effect of flexibility values (of organizational culture) on interactive PPS capabilities. Our findings show that interactive PPS capabilities function according to the salient tenets of the dynamic capabilities logic, and clarify the beneficial roles of formal cybernetic control systems and the intertwined involvement of top and middle managers in using dynamic capabilities.
ISSN:0024-6301
1873-1872
DOI:10.1016/j.lrp.2018.03.004