Exploring the Relationships between Strategy, Innovation, and Management Control Systems: The Roles of Social Networking, Organic Innovative Culture, and Formal Controls

ABSTRACT:  This paper is concerned with the relationship between strategy, management control systems (MCS), and innovation. MCS are described in terms of a package of controls that is comprised of social networking, organic innovative culture, and formal controls. We develop a path model that proposes that product differentiation is associated with more extensive innovation. It is argued that this association is explained, in part, by paths from product differentiation to the three dimensions of MCS, and then paths from these MCS dimensions to innovation. Using a survey of Russian enterprises we confirm that product differentiation is associated with innovation. Also, product differentiation is associated with each dimension of the MCS. Organic innovative culture and formal controls have direct paths to innovation, while social networking has an effect on innovation by acting indirectly through its connection with organic innovative culture. JEL Classification: M41.

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