dK

Zeal

Activity-based costing

Diffusion of innovation

Contextual factors

Adoption processes

he l

ove

er a

ABC have reported inconsistent and mixed results. This could cause uncertainty for many potential

d costtivity aasoglu

technique for improving organisational performance, productivity

ionalhan-theand

et al., 2005). However, the results are not consistent.

Contents lists available at SciVerse ScienceDirect

w.e

Int. J. Productio

Int. J. Production Economics 135 (2012) 430439process, see Baird et al., 2004; Gosselin, 1997). So, it is not clearE-mail address: d.askarany@auckland.ac.nz (D. Askarany).However, the majority of studies which have reported mixedresults have either failed to provide a clear denition for ABC orused different adoption processes (e.g. considering ABC as apractice, see Cobb et al., 1993; Innes and Mitchell, 1991, or as a

0925-5273/$ - see front matter & 2011 Elsevier B.V. All rights reserved.

doi:10.1016/j.ijpe.2011.08.017

n Corresponding author. Tel.: 64 9 9235785; fax: 64 9 3737406

or 64 93737444 or 64 9 3737019.(Innes and Mitchell, 1991; Madison and Power, 1993). Thissituation could cast doubt on ABCs capability as a suitable

Drury, 2007a; Askarany and Yazdifar, 2009b; Berling, 2008;Englund and Gerdin, 2008; Qian and Ben-Arieh, 2008; YazdifarCobb et al., 1993; Innes and Mitchell, 1991, 1995; Innes et al.,2000; Langeld-Smith, 1997; Pierce, 2004). This inconsistencycould become more complex by the fact that some adopters ofABC decided to stop the implementation after a short period

organisational strategy, organisational culture, organisatstructure, characteristics of innovations, communication cnels, environmental factors, etc.) may have an impact ondiffusion of innovations (Adam and Fred, 2008; Al-OmiriBen-Arieh and Qian, 2003; Gunasekaran and Sarhadi, 1998; Kee,2008; Qian and Ben-Arieh, 2008; Singer and Donoso, 2008;Tornberg et al., 2002; Tsai et al., 2008). However, research onthe diffusion of ABC has produced inconsistent results, rangingfrom less than 10% up to 78% both within and between countries(Al-Omiri and Drury, 2007a; Baird, 2007; Baird et al., 2007;

have been used to describe the processes by which new ideas(innovations) travel between the members of a social system(Rvik, 1996). As with the fashion perspective, the diffusioninnovation theory (Rogers, 2003) has been used to describe thediffusion of innovations (including ABC) in organisations. Thistheory suggests that a wide range of contextual factors (such as1. Introduction

The positive role of activity-baseorganisational performance, producdemonstrated in the literature (Baykadopters of ABC (especially for those who follow the fashion and fads approaches) and inuence their

tendencies towards the adoption of ABC in the future. Addressing the diffusion process as a contextual

factor, this study simultaneously investigates the adoption of ABC from the perspectives of different

diffusion processes. Using two commonly adopted diffusion processes (the stages of adoption and the

levels of adoption), this study examines the relationship between the reported adoption rates for ABC

and the diffusion process approaches chosen to measure its adoption rates in three western countries:

Australia, New Zealand and the UK. A similar questionnaire was used and more than 2000 qualied

CIMA members (via a survey study and follow-up interviews) were targeted. The ndings suggest a

signicant association between the reported adoption rates for ABC and the diffusion process

approaches chosen to measure the adoption rates. The ndings further suggest that the lack of a

common understanding of ABC systems may have also contributed to the mixed reported adoption

rates for ABC, as many ABC adopters have considered themselves adopters of traditional accounting

systems by mistake (especially when they are dealing with facility costs as one of the main cost

hierarchies under ABC systems).

& 2011 Elsevier B.V. All rights reserved.

ing (ABC) in improvingnd protability is welland Kaplanoglu, 2008;

and protability especially in organisations that follow the fash-ion and fads approaches (Abrahamson, 1991, 1996; Rvik, 1996)and might inuence their willingness towards the adoption ofABC in the future.

A number of metaphors like translation, imitation and fashionKeywords:An investigation into the mixed reportefrom Australia, New Zealand and the U

Davood Askarany a,n, Hassan Yazdifar b

a Business School, School of Accounting and Finance, The University of Auckland, Newb University of Glasgow, Glasgow, G12 8QQ, Scotland, UK

a r t i c l e i n f o

Article history:

Received 25 February 2010

Accepted 21 August 2011Available online 31 August 2011

a b s t r a c t

An accumulated body of t

lead to a substantial impr

therefore encourages furth

journal homepage: wwadoption rates for ABC: Evidence

and

iterature conrms that the adoption of activity-based costing (ABC) can

ment in organisational performance, productivity and protability, and

doption of the technique. However, studies investigating the diffusion of

lsevier.com/locate/ijpe

n Economics

tanado

repis i

dif4 e

2.

important role of ABC in improving organisational performance,

2008b,a; Homburg, 2005; Qian and Ben-Arieh, 2008; Satogluet al., 2006; Thyssen et al., 2006).

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439 431 To facilitate optimal joint product mix decisions (Tsai et al.,2008); pricing, product mix and capacity expansion decisions(Kee, 2008).

To offer cost-estimation models (Kingsman and de Souza,1997; Ozbayrak et al., 2004; Qian and Ben-Arieh, 2008), toprovide more accurate product-cost information and toimprove decision quality (Charles and Hansen, 2008b).

To improve efciency by identifying and eliminating areas ofnon-value added activities in supply chain processes (Whickeret al., 2009).

To improve performance measurement systems (Kim et al.,1997) and the quality of the products protability information(Pirttila and Sandstrm, 1996) and to predict the economicconsequences of production and processes actions (Salafatinos,1996).

However, despite the above contributions of ABC to organisa-tional performance (which lead to relatively high expectation andconsistent adoption for ABC), research on the diffusion of ABC hasreported mixed and generally low adoption rates (commonly lessthan 30% with a few exceptions of over 70% adoption rates) bothin manufacturing and service sectors (Al-Omiri and Drury, 2007a;productivity and protability, the adoption of ABC has been saidto be inconsistent and relatively behind that of the traditionalones over the past two decades (Al-Omiri and Drury, 2007a;Baird, 2007; Baird et al., 2007; Cobb et al., 1993; Innes andMitchell, 1991, 1995; Innes et al., 2000; Langeld-Smith, 1997;Pierce, 2004). This is despite the fact that the ABC literatureprovides convincing evidence for the signicant role of ABC inimproving organisational performance, productivity and prot-ability including the following:

To help managers make important strategic business decisions(Lin et al., 2001) or to assist them with: cost reduction(Baykasoglu and Kaplanoglu, 2008; Charles and Hansen,AskBackground

While an accumulated body of the literature highlights theemfusion of ABC from theoretical perspectives (Section 3). Sectionxplains the adopted research method, Section 5 discusses ourpirical results and Section 6 concludes the study.proorted diffusion rates for ABC and the country in which ABCmplemented.The remainder of the paper is organised as follows: Section 2vides a background to the research questions, followed by theABCts (CIMA) and then examines the level of association betweenpted diffusion processes and the reported diffusion rates for. It also examines the level of association between thequaif these studies have examined and measured the same thing. Thisis the main impetus for the current study to examine if there is arelationship between the adopted diffusion processes and thereported diffusion rates for ABC. No study has been reported toexamine the above relationship; therefore, current study is therst to address this gap in the literature.

Addressing the gap in the literature identied above, this studysimultaneously investigates the diffusion of ABC both as apractice and as a process through two different diffusionapproaches in three western countries: Australia, New Zealandand the UK. It targets (more or less similar respondents) 2041

lied members of Chartered Institute of Management Accoun-arany et al., 2010; Baird, 2007; Baird et al., 2007; Innes et al.,2000; Langeld-Smith, 1997; Pierce, 2004). There is also someevidence that a number of rms which had started to implementABC decided to stop the implementation after a short period(Innes and Mitchell, 1991; Madison and Power, 1993). Thissituation may cast doubt on ABCs capability as a suitabletechnique and might have an impact on the attitudes of potentialadopters of ABC and reduce their willingness towards the adop-tion of the technique in the future.

Given the above, investigations into the adoption of ABC havebeen popular during the past two decades. While many studieshave investigated the impact of different contextual factors on thediffusion of ABC in different industries, the implemented adoptionprocesses and the ndings (especially in terms of adoption rates)have not been consistent (Al-Omiri and Drury, 2007a; Anderson,1995; Askarany and Smith, 2004; Baird et al., 2007; Langeld-Smith, 1997; Yazdifar et al., 2008b).

Until now, the speed and scope of the diffusion of ABC havebeen the major focus and concern in most of the publishedstudies in the eld of ABC (Al-Omiri and Drury, 2007b;Anderson and Young, 1999; Askarany, 2003; Baird, 2007;Gosselin, 1997; Langeld-Smith, 1997; Yazdifar et al., 2008a).One of the common messages of these published studies is thatthe adoption of ABC still lags behind those of traditional manage-ment accounting techniques. For example, Pierce (2004) reportsthat in terms of the extent of adoption of management accountingtechniques in Ireland, the adoption of ABC ranks behind mosttraditional accounting techniques such as budgeting, cost mod-elling and product/service pricing.

As another example, Chenhall and Langeld-Smith (1998)have found that besides ABC, the level of adoption of most othernew management accounting techniques in Australia were rela-tively lower than those of the traditional techniques. For instance,the ranking in terms of the extent of adoption of some of the newtechniques were as follows: activity-based costing ranked (24),activity based management (21), product life cycle analysis (20)and target costing (27). Given the above, they found the follow-ing rankings in terms of the extent of adoption of some oftraditional management accounting techniques: analysis forbudgeting and for planning nancial position (1), capital budget-ing (2) and performance evaluation using return on investment(3). Other studies have also reported relatively low adoption ratesfor ABC in Australia such as 10% (Warwick and Reeve, 1997), 12%(Booth and Giacobbe, 1997) and 28% (Askarany et al., 2007a).

Likewise, the published studies on the diffusion of manage-ment accounting innovation in the UK depict a similar picture. Forexample, Abdel-Kader and Luther (2006) suggest that in terms ofranking, the adoption of ABC ranks 32nd in the British food anddrinks industry. Similarly, another survey suggests that theadoption rate for ABC by UK organisations is still fairly low, atapproximately 15% (Al-Omiri and Drury, 2007a).

As with Australia and the UK, the adoption of ABC in NewZealand is reported to be low (Cotton et al., 2003a). Conducting acomparative analysis, Cotton et al. (2003a) report an average of a20.3% adoption rate for ABC users (both in manufacturing andnon-manufacturing sectors) in New Zealand and 17.5% for the UKcompanies. Recent studies on the diffusion of ABC in New Zealandindicate the adoption of ABC in New Zealand is still lower than23% (Askarany et al., 2010).

Nevertheless, some studies suggest that the majority of ABCusers are still using traditional management accounting techni-ques. For example, Innes et al. (2000) report that while 17.5% ofthe UKs largest companies have adopted ABC, only 6.2% havereplaced their traditional accounting techniques with ABC and therest of ABC users are using ABC alongside their traditionalaccounting techniques. This could imply that the adopters of

ABC are not quite convinced that ABC is a perfect replacement for

diffusion of ABC and whether these studies have examined andmeasured the same thing. What is clear is that they haveproduced inconsistent and mixed results for the adoption ofABC in different countries over the past two decades. Table 1provides a summary of the variations for the diffusion of ABC inthe three targeted countries (Australia, New Zealand and the UK) andsome other countries for almost the past two decades (19912009).

The main impetus for the current study is to examine if thereis a relationship between adopted diffusion processes and thereported diffusion rates for ABC. No study has been reported toexamine the above relationship; therefore, the current study isthe rst to address this gap in the literature. In this study weexamine the diffusion of ABC both as a practice and as a process atthe same time by targeting the same respondents. Furthermore,this study compares the adoption rates of ABC among the threesurveyed countries; Australia, New Zealand and the UK to seewhether (or not) there is any association between the diffusion ofABC and the countries where the diffusion of ABC is investigated.The following section discusses the diffusion of ABC from theore-tical perspectives.

Table 1A summary of the diffusion of ABC during the past two decades.

Author, date Adoptionrate (%)

Country

Drury and Tayles (2000) 4 UK

Cobb et al. (1993) 6 UK

Innes and Mitchell (1991) and Innes and

Mitchell (1995)

6 UK

Warwick and Reeve (1997) 10 Australia

Nicholls (1992) 10 UK

Cinquini et al. (1999) 10 Italy

Armitage and Nicholson (1993) 11 US

Chen et al. (2001) 11 Hong Kong

Sartorius et al. (2007) 11.60 South Africa

Clarke et al. (1999) 11.80 Ireland

Chongruksut (2002) 11.90 Thailand

Booth and Giacobbe (1997) 12 Australia

Corrigan (1996) 12 Australia

Groot (1999) 12 Netherlands

Nguyen and Brooks (1997) 12.50 Australia

Clarke and Mia (1995) 13 Australia

Armitage and Nicholson (1993) 14 Canada

Al-Omiri and Drury (2007a,b) 15 UK

Askarany and Yazdifar (2009a,b) 15.20 UK

Cotton et al. (2003a,b) 17.50 UK

Innes et al. (2000) 17.50 UK

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439432traditional management accounting techniques. This may discou-rage potential adopters of ABC who follow the fashion and fadsapproaches to replace their traditional accounting systems withABC (Abrahamson, 1991, 1996; Rvik, 1996).

Given the above, some studies suggest that any furthersignicant increase in the number of ABC adopters is unlikely(Cotton et al., 2003a; Pierce, 2004). Other studies have gone evenfurther and suggested that there has been a reduction in theadoption of ABC after the rst decade of its introduction. Forexample, Innes et al. (2000) argued that from 1987 to 1994 therewas a considerable growth (from nil to over 20%) in ABC adoptionin the U.K.s largest companies but this rate of growth had notbeen maintained. According to their ndings, the adoption ratefor ABC in the U.K.s largest companies has dropped to 17.5%(from 20% in 1994) by 1999.

However, while many published studies on the adoption ofABC have reported a relatively lower adoption rate for ABC(compared with those using traditional costing systems), thendings are inconsistent. The majority of reported adoption ratesrange from 10% to 30% with a few exceptions of over 70% (Al-Omiriand Drury, 2007a; Baird, 2007; Baird et al., 2007; Innes et al., 2000;Langeld-Smith, 1997; Pierce, 2004). For instance, the reportedadoption rates for ABC in Australia vary from 10% (Warwick andReeve, 1997) to 56% (Chenhall and Langeld-Smith, 1998) in almostthe same period and up to 78% after 6 years (Baird et al., 2004).However, others reported an adoption rate of less than 30% for ABCin Australia at the same time that a 78% adoption rate was reported(Askarany et al., 2007a; Booth and Giacobbe, 1997; Clarke and Mia,1995; Corrigan, 1996).

It might be argued that such variations could be normal assome of the studies with the low adoption rates of 10% and 12%(such as those of Warwick and Reeve and Booth and Giacobbe)occurred in 1997, whereas Bairds studies that reported higheradoption rates were published in 2004 and 2007. While this couldbe a legitimate argument for comparing studies that occurred invery different time periods, reporting very different adoptionrates for the same countries in the same time-period somehowneeds justication. For instance, different reported adoption ratesof 10% (Warwick and Reeve, 1997) and 56% (Chenhall andLangeld-Smith, 1998) in almost the same time period (19978)in Australia followed by other quite different adoption rates ofless than 20% (Askarany and Smith, 2004; Booth and Giacobbe,1997; Clarke and Mia, 1995; Corrigan, 1996) to 78% (Baird et al.,2004) in the same country (Australia) in the same time period(2004) raise an important question: Are these studies examiningthe same thing and is there any relationship between adopted

diffusion processes and the reported diffusion rates for ABC?

A careful examination of the published results in the literaturesuggests that part of the above variation (mixed results) could berelated to the following factors: using different diffusion processapproaches for studying the adoption of ABC such as referring toABC as a whole practice in some studies (Al-Omiri and Drury,2007a; Anderson, 1995; Pierce, 2004) but breaking down ABC intoa set of different processes and activities in other studies (Bairdet al., 2004; Brown et al., 2004; Gosselin, 1997; Krumwiede,1998); using different questionnaires, or targeting differentpopulations with different understanding of ABC; or comparingthe ndings of different studies carried out in different periods.

However, the majority of these studies fail to provide a clearexplanation to show how they have measured the process of thediffusion of ABC. In other words, they have either failed to providea clear denition or diffusion process for ABC or they have useddifferent adoption processes (e.g. considering ABC as a practice,see Cobb et al., 1993; Innes and Mitchell, 1991, or as a process,see Baird et al., 2004; Gosselin, 1997). So, it is unclear if the

targeted respondents had a common understanding regarding theGroot (1999) 17.70 US

APQC/CAM (1995) 18 US

Askarany and Smith (2004) 19 Australia

Kip and Augustin (2007) 19 Germany

Hosseini et al. (1997) 20 Canada

Joshi (2001) 20 India

Cotton et al. (2003a,b) 20.30 New Zealand

Innes and Mitchell (1995) 21 UK

Kip and Augustin (2007) 21 US

Askarany and Yazdifar (2009a,b) 22.50 New Zealand

Askarany and Yazdifar (2009a,b) 23.40 Australia

Pavlatos and Paggios (2009) 23.50 Greek

Ittner et al. (2002) 26 US

Fawzi (2008) 26.30 Ireland

Pierce and Brown (2004) 27.90 Ireland

Askarany et al. (2007a,b) 28 Australia

Hosseini et al. (1997) 28 US

Maelah and Ibrahim (2007) 36 Malaysia

Bjornenak (1997) 40 Norway

Cohen et al. (2005) 40.90 Greek

Gosselin (1997) 47.8 Canada

Yakhou and Dorweiler (1995) 48 UK

Duffy and McCahey (2002) 55 Ireland

Chenhall and Langeld-Smith (1998) 56 Australia

Baird et al. (2004) 78 Australia

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439 4333. The diffusion of ABC from theoretical perspectives

According to diffusion theory (Rogers, 2003), an innovationcan be an idea, practice, or object that is perceived as new by anindividual or other unit of adoption. Likewise, Damanpour andGopalakrishnan (1998) dene innovation as the adoption of anidea or behaviour new to the organisation. Wolfe (1994) explainsthe diffusion of an innovation as a way the new ideas are accepted(or not) by those to whom they are relevant. Rogers (2003)extends this denition to consider diffusion as a process by whichan innovation is communicated through certain channels overtime among the members of a social system. The members of asocial system could be organisations, societal sectors or nations.According to Rogers (2003), the diffusion of an innovation in aparticular population is usually measured by its rate of imple-mentation. Diffusion rates are often measured in terms of theproportion of rms using a new technique (an innovation) ascompared with those using the old ones.

As with the diffusion of innovation theory (Rogers, 2003),imitation, fashion and fads have also been introduced to explainthe diffusion process of innovations (Abrahamson, 1991, 1996;Rvik, 1996). Rvik (1996) introduces fashion as an inuencingfactor, which can play an important role in the diffusion processof an innovation. He argues that the process of the diffusion of aninnovation follows a selective perception, which adjusts to thesocial environment and copes with what is in fashion and what isout of fashion. This implies that usually the innovations chosenare those which seem to be more fashionable. According to Rvik(1996), fashion is a human made and dynamic phenomenon thatspreads by drawing attention to it. Fashion can present itself inmany ways: as ideas, social organisations, specic structures andprocesses in organisations, etc. Rvik refers to fashion as aninstitutionalised standard for implementing a new idea, andchange/innovation, in order to organise successfully, be up-to-date and be efcient. According to Rvik (1996, p.159), fashionalso refers to the notion that organisations are torn betweensignalling a common identity and belonging to a group oforganizations and the motive of distinguishing themselves fromthe other organisations and attracting attention. From thisperspective, fashionable ideas and innovations/changes spreadby imitation, but, after a while, they will be so common, thatsome organisations may wish to demonstrate their uniqueness bydeveloping new ideas or implementing new innovations, which inturn become fashionable, and so the process starts all over again.The fashion perspective leads to imitating certain technologiespromoted by fashion-setting organisations or fashion setters,such as consultants, irrespective of whether or not such technol-ogies are efcient (Malmi, 1999). Finally, the fad perspectiveexplains that innovations are adopted for legitimacy rather thanrational purposes.

In line with the above argument, we can assume that someorganisations may follow fashion and fads approaches in pursuingABC adoption. In this case, the low level of acceptance and the lowdiffusion rate of ABC may have an impact on its further diffusionin organisations, especially for organisations that follow fashionand fads approaches (Abrahamson, 1991, 1996; Rvik, 1996). So,from this perspective, an investigation into the mixed andrelatively low adoption rates of ABC in organisations may con-tribute to the further diffusion of ABC in practice.

Proposing the diffusion of innovation theory, Rogers (2003)identies a wide range of contextual factors inuencing the diffusionof innovations in organisations. Addressing the major contextualfactors identied by Rogers, Askarany (2003) classies all inuen-cing factors into three main categories: characteristics of innova-tions, characteristics of adopters, and factors external to both

innovations and adopters (such as social and environmental factors).Adopting the diffusion of innovation theory, an accumulatedbody of literature has examined and conrmed the impact ofdifferent contextual factors on the diffusion of managementaccounting innovations including ABC (Adam and Fred, 2008;Al-Omiri and Drury, 2007a; Askarany and Yazdifar, 2009b;Berling, 2008; Englund and Gerdin, 2008; Qian and Ben-Arieh,2008; Yazdifar and Askarany, in press). According to the diffusionof innovation theory (Rogers, 2003), there are a number ofcontextual factors which could inuence the diffusion of innova-tions: characteristics of innovations (e.g. relative advantage,complexity, compatibility, observability and trialibility of innova-tion/s), characteristics of adopters (e.g. organisational structure,organisational culture, organisational strategy, etc.) and otherinuential factors related to a particular country or environmentsuch as the level of development of the country, local regulationsand policies, communication channels, roads, networks, etc. Giventhe above, it can be argued that the variation of the above factorsin different countries or societies may inuence the diffusion ofABC and lead to different adoption rates for ABC in differentcountries. So, in line with the diffusion of innovation theory, wemay suggest the following proposition:

There is a signicant association between the reported adop-tion rates for ABC and the country where the diffusion of ABCis investigated.

Studies investigating the diffusion of ABC have used differentapproaches to examine the status and the extent of the diffusionof ABC in organisations (Askarany and Yazdifar, 2009b; Baird,2007; Chenhall and Langeld-Smith, 1998; Gosselin, 1997; Innesand Mitchell, 1991; Yazdifar and Askarany, 2009). Some studieshave examined the level of the diffusion of ABC based on thepurpose for which it has been used: activity analysis, activitycost analysis and the allocation of costs to costs objects (Bairdet al., 2007, 2004; Gosselin, 1997). Some studies have examinedthe extent of the adoption of ABC based on the following scales:relatively high adoption, relatively moderate adoption andrelatively low adoption (Chenhall and Langeld-Smith, 1998),or small extent, moderate extent and great extent (Baird, 2007;Baird et al., 2007), Other studies have used further scales toexamine the status and the extent of the diffusion of ABC inorganisations including: adoption and implementation processes(Gosselin, 1997; Rogers, 2003); initiation, adaption, adoption,acceptance processes (Anderson, 1995; Cooper and Zmud, 1990);not considered, considering, considered then rejected, approvedfor implementation, analysis, getting acceptance, implementedthen abandoned, acceptance, routine systems and integratedsystem (Krumwiede, 1998); no consideration/decision or introduc-tion, decided not to adopt or decided to reject, consideringadoption in the future or given some consideration into theintroduction of ABC, implemented on a trial basis and implemen-ted and accepted (Al-Omiri and Drury, 2007a; Askarany et al.,2007a; Pierce, 2004).

Given the above, we can classify all implemented diffusionprocesses in the literature (for examining the diffusion of ABC)into two main groups: studies that look at ABC as one wholepractice (Al-Omiri and Drury, 2007a; Anderson, 1995; Pierce,2004) and studies that look at ABC as a process or as a set ofevents or activities (Baird et al., 2007, 2004; Gosselin, 1997) andtherefore identify two diffusion approaches. Depending on theselected approach, the diffusion of ABC follows different steps.Considering the diffusion of ABC as a practice may includestudies which use any of the following stages or scales addressedin the literature: implementation, initiation, adaption, adoption,acceptance, (Anderson, 1995; Cooper and Zmud, 1990)not con-

sidered, considering, considered then rejected, approved for

to cost objects (Baird et al., 2007, 2004; Gosselin, 1997).Considering the diffusion of ABC as a process, Baird et al.

puanApper

Examining the diffusion process approaches, the two most

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439434(2004) report relatively higher adoption rates for all three levelsof ABC in private sectors in Australia as follows: 86.2% for AA(activity analysis) users, 82.1% for ACA (activity cost analysis)users and 78.1% for ABC users. In a comparative study, Baird(2007) reports similarly higher adoption rates for all three activitylevels of ABC in public sectors in Australia.

However, considering the diffusion of ABC as a practice(looking at ABC as one whole practice), some studies have(generally) recorded relatively much lower adoption rates forABC, such as 10% (Warwick and Reeve, 1997), 12% (Booth andGiacobbe, 1997) and 28% (Askarany et al., 2007a). Furthermore, asdiscussed earlier, while some studies report a positive trend (anincrease) in the adoption rates for ABC over the years, otherstudies suggest the opposite (Innes and Mitchell, 1991, 1995;Innes et al., 2000). The literature review presented in this studyhighlights the possible impact of using different diffusion processmodels on the reported adoption rates of ABC and suggestsfurther investigation to examine the level of association betweenthe reported adoption rates for ABC and the implemented diffu-sion models. However, no study has been reported to examine theabove relationship; therefore, the current study is the rst toaddress this gap in the literature. Given the above, we maysuggest the following proposition:

There is a signicant association between the reported adop-tion rates for ABC and the adopted diffusion approaches toinvestigate the diffusion of ABC.

4. Research method

A survey questionnaire was mailed to 2041 registered CIMAmembers in Australia, New Zealand and the UK in 2007 (1175 inAustralia, 366 in New Zealand and 500 in the UK) followed by 56interviews. The selection of the total number of CIMA membersfor each country and also the selection of each individual memberin each country was based on the total numbers of registered andqualied CIMA members in each country who were working inmanagerial accounting sections of organisations in 2007. Thehead ofce of CIMA in the UK provided the authors with a listof names and addresses of qualied and registered CIMA mem-bers who were working in a managerial accounting position inAustralia, New Zealand and the UK in 2007. Hard copies of similarquestionnaires were sent out to all targeted members in thesethree countries followed by a general announcement on CIMAwebsite (after three weeks) encouraging those CIMA membersimplementation, analysis, getting acceptance, implemented thenabandoned, used as routine systems, used as integrated system,decided not to adopt, or decided to reject, considering adoption inthe future, or given some consideration into the introduction ofABC, implemented on a trial basis and implemented and accepted.

Considering the diffusion of ABC as a process (as a sequence ofevents) does not look at the adoption of ABC as a yes or nooption but makes a distinction between full adoption and partialadoption of ABC by dividing the adoption process of ABC into afew levels. The main commonly adopted diffusion levels reportedin the literature for this approach can be summarised as follows:activity analysis (AA), which is the rst level used for identifyingthe activities and procedures performed to make the nal pro-ducts/services; activity cost analysis (ACA), which is the secondlevel used for identifying the costs of each activity and costdrivers and nally activity-based costing (ABC), which is theallocation of the costs of different activities and cost hierarchieswho had received the hard copies of the questionnaires but didcommonly used diffusion processes in the ABC literature thatwere identied and implemented follows: the stages of diffusionand the levels of diffusion.

The stages of diffusion approach looks at ABC as one wholepractice and examines the diffusion of ABC through differentstages such as decided not to use ABC, decided to use ABC,etc. (Al-Omiri and Drury, 2007a; Anderson, 1995; Pierce,2004).

The levels of diffusion approach looks at ABC as a process or aset of different activity levels such as AA, ACA and ABC (Bairdet al., 2004; Gosselin, 1997; Krumwiede, 1998).

Under the rst diffusion approach, respondents were asked toindicate the extent to which ABC was used in their organisations,using a 5-point Likert-type scale (Abdel-Kader and Luther, 2006;Innes et al., 2000) as follows: with anchors of 1. discussions havenot taken place regarding the introduction of ABC; 2. a decisionhas been taken not to introduce ABC; 3. some consideration isbeing given to the introduction of ABC in the future; 4. ABC hasbeen introduced on a trial basis and 5. ABC has been imple-mented and accepted. Under the second diffusion approach, therespondents were asked to identify the level of the adoption ofABC in their organisations as follows: activity analysisAA(identication of activities and procedures performed in theirorganisations to make the nal products/services); activity costanalysisACA (identication of cost drivers and allocation ofcosts to cost pools) and activity-based costingABC (allocationof costs of activities to products/services). However, we have alsoprovided respondents with a denition for ABC as follows: anapproach to costing that focuses on activities as the fundamentalcost objects and uses the cost of these activities as the basis forassigning costs to other cost objects such as products, services, oralitcust six of the interviews lasted between 1 and 2 h. For validityrposes, these were also followed-up by some telephone callsd emails to clarify some issues that had emerged subsequently.art from three, all the interviews were tape recorded with themission of the interviewees, and then transcribed (condenti-y was assured both externally and internally).bunot complete them to complete an online version of thequestionnaire.

Although the limitations of surveys are well documented inthe literature (Birnberg et al., 1990; Runkel and McGrath, 1972;Young, 1996), a survey instrument was considered appropriate atthis rst stage as it could provide the large amount of cross-sectional data needed for this study. It was followed by inter-viewing those who expressed their willingness for this in thesurvey. The interviews aimed at eliminating uncertainty, validat-ing responses and examining answers to open ended questions indetail, as well as gathering additional qualitative interpretations.The respondents were the CIMA qualied management accoun-tants who had expressed their interest in participating in aninterview by checking a box in the questionnaire and providedthe researchers with their contact details. Consequently, 56interviews were conducted with CIMA members: 34 in Australia,13 in New Zealand and 9 in the UK (face-to-face and over thephone interviews). These interviews took place in 2008 and 2009.

The comments received from respondents to the initial, open-ended questions drew our attentions to an important, butunexplored issue in the ABC literature (e.g. the misunderstandingregarding the concept of ABC). Although semi-structured ques-tions were set, the interviews took a exible form along withfollow-up questions aimed at clarifying some of the practices. Alltomers.

5. Findings

The nal number of useable survey responses (both hardcopies and online replies) was 584 for all three countries (310completed questionnaires plus 88 not-completed or not deliveredfor Australia; 142 completed questionnaires plus 10 not-com-pleted or not delivered for New Zealand and 132 completedquestionnaires plus 45 not-completed or not delivered for theUK). The nal completed questionnaires provided the authorswith the satisfactory response rates of 28.5%, 39.5% and 29% forAustralia, New Zealand and the UK, respectively. According toKrumwiede (1998), the normal response rate for these surveys isapproximately 20% though there are many published surveyswith lower response rates such as 12.5% (Brown et al., 2004) or

in New Zealand and 19.7% in the UK), and some introduced it on atrial basis (5.2% in Australia, 4.2% in New Zealand and 12.1% in theUK). Nevertheless, the percentage of organisations which haveimplemented and accepted the adoption of ABC in their organisa-tions is still low (23.4% in Australia, 22.5% in New Zealand and 15.2%in the UK). If we add to these (implemented and accepted category)the percentages of organisations which have introduced ABC on atrial basis, the total adoption rates are still lower than 29% for allthree countries (28.6% in Australia, 26.7% in New Zealand and 27.3%in the UK).

Given the above, the ndings of the current study are con-rmatory of the results of the majority of previous studies whichhave reported relatively low adoption rates (of less than 30%) inthe above countries (Al-Omiri and Drury, 2007b; Askarany et al.,

es a

side

he in

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439 43519.6% (Al-Omiri and Drury, 2007a).Non-response bias was examined both using the aggregated

data provided by CIMA (such as the total number of CIMAmembers working in manufacturing and non-manufacturingorganisations, the average length of experiences of CIMA mem-bers and their average ages as qualied CIMA members) andcomparing them with the same information gathered by thesurveys, and through a comparison between early and lateresponses. The former showed responses to be representative,the latter that there was no perceived difference between theseresponses, suggesting that non-response bias would not inuencethe outcomes.

Besides using two different diffusion processes at the sametime, the study used a similar questionnaire (for all 3 surveyedcountries) and targeted similar respondents.

5.1. The diffusion of ABC based on stages model

Using the rst diffusion approach, the diffusion of ABC in allthree targeted countries: Australia, New Zealand and the UK, isshown in Table 2 under the following stages: discussions havenot taken place regarding the introduction of ABC; a decision hasbeen taken not to introduce ABC; some consideration is given tothe introduction of ABC; ABC has been introduced on a trialbasis and nally ABC has been implemented and accepted.

According to Table 2, a signicant number of organisations inall three surveyed countries have not even discussed the intro-duction of ABC in their organisations (39.6% in Australia, 45.1%New Zealand and 34.8% in the UK). Furthermore, the ndingsshow a considerable number of organisations have decided not tointroduce ABC in their organisations (13.0% in Australia, 15.5% inNew Zealand and 18.2% in the UK). The sum of the two gures showsthat the adoption of ABC has not been an option for the majority oforganisations (more than 50%) in all three surveyed countries.However, some organisations have given some consideration to theintroduction of ABC in their organisations (18.8% in Australia, 12.7%

Table 2The diffusion process of ABC in Australia, New Zealand and the UK (using the stag

Countries Discussions have not taken

place regarding the

introduction

A decision has been taken

not to introduce this

practice

Some con

given to t

this

Count % Count % Count

Australia 122 39.6 40 13.0 58

New Zealand 64 45.1 22 15.5 18

UK 46 34.8 24 18.2 26

Value

Pearson Chi-Square 17.500

Likelihood ratio 16.8262007b; Booth and Giacobbe, 1997; Cotton et al., 2003a; Warwickand Reeve, 1997).

5.2. The diffusion of ABC based on levels model

Using the second diffusion process approach, the latest levelsof adoptions of ABC in all three targeted countries: Australia, NewZealand and the UK are shown in Table 3.

Examining the extent of the adoption of ABC (using the levelsof adoption rather than the stages of adoption), Table 3 indicatesa much higher adoption rate for ABC in all three countries.According to Table 3, 42.6% (6.524.511.6%) of organisationsin Australia are adopting some of the levels of ABC. This gure isnearly twice as much as the percentage (23.4%) of the rms whichhave implemented and accepted the ABC (as a practice). This isthe case for New Zealand and the UK as well. Using the secondapproach, the extents of the adoption of ABC in New Zealand andthe UK are as follows: 38% (4.216.916.9%) and 36.4%(1.515.219.7%), respectively.

A comparison between the above reported adoption rates forABC (resulted from two diffusion approaches) for the threetargeted countries in this study can help us to explain somevariations between reported adoption rates for ABC in theliterature as follows: according to the ndings, more than 19%(42.623.4%) of the variation in adoption rates for ABC inAustralia, more than 15% (3822.5%) of the variation in theadoption rates for ABC in New Zealand, and nally more than21% (36.415.2%) variation in adoption rates for ABC in the UK aredue to the implementation of different diffusion approaches(using the stages of adoption and the levels of adoption). Thesendings may provide us with some insights to explain how andwhy some studies (Baird, 2007; Baird et al., 2004; Chenhall andLangeld-Smith, 1998) have reported relatively high adoptionrates for ABC in the past.

According to Vincent (2005), Chi-Square is one the beststatistics for the analysis of categorical (ordinal) and nominal

pproach).

ration is being

troduction of

This practice has been

introduced on a trial

basis

This practice has been

implemented and

accepted

Total

% Count % Count % Count %

18.8 16 5.2 72 23.4 308 100

12.7 6 4.2 32 22.5 142 100

19.7 16 12.1 20 15.2 132 100

df Asymp. sig. (2-sided)

8 0.025

8 0.032

ls approach).

cati

itie

nt

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439436Table 3The diffusion process of ABC in Australia, New Zealand and the UK (using the leve

Countries Activity analysis (AA) Allocation of costs

to activities (ACA)

Allo

activ

Count % Count % Cou

Australia 20 6.5 76 24.5 36

New Zealand 6 4.2 24 16.9 24

UK 2 1.5 20 15.2 26

Value

Pearson Chi-Square 15.436(a)

Likelihood ratio 16.387data. Given the nature of data in this study, we would considerour data as categorical (in terms of the levels and the stages ofadoption of ABC) and nominal (in terms of the names ofcountries) rather than interval and ratio data.

Conrming our rst stated proposition, descriptive informa-tion as well as the data analysis presented in Tables 2 and 3suggest a signicant association between the reported adoptionrates for ABC (both the stages model and the levels model) andthe countries where the diffusion of ABC was investigated (sig-nicant at 0.025 level-Pearson Chi-Square for the stages modeland signicant at 0.017 level-Pearson Chi-Square for the levelsmodel). These ndings suggest a need for further studies toinvestigate the impact of contextual factors (constituting theindividual characteristics of the country where the study is done,such as the extent of the development in the country, govern-ments support for the diffusion of innovations, the levels of

Table 4The extent of association between two diffusion approaches for ABC in Australia, New

The levels of the diffusion of ABC

The stages of the diffusion of ABC Activity analysis (AA) Allocationto cost po

Discussions have not taken place regarding the introduction

Count 0 0

% 0.0 0.0

A decision has been taken not to introduce this practice

Count 0 0

% 0.0 0.0

Some consideration is being given to the introduction of this

Count 14 48

% 2.4 8.2

This practice has been introduced on a trial basis

Count 6 24

% 1.0 4.1

This practice has been implemented and accepted

Count 8 48

% 1.4 8.2

Count 28 120

% 4.8 20.6

Value

Pearson Chi-Square 578.523

Likelihood ratio 702.039on of costs of

s to products/service (ABC)

Total ABC adopters Total

% Count % Count %

11.6 132 42.6 308 100

16.9 54 38 142 100

19.7 48 36.4 132 100

df Asymp. sig. (2-sided)

6 0.017

6 0.012edudiffactrib

asasstheand

vardifsce

Zea

of

olscation, communication channels and networks, etc.) on thefusion of ABC. Examining the impact of such hindering andilitating factors on the diffusion of ABC is expected to con-ute to the adoption of ABC in the future.Supporting our second stated proposition, descriptive informationwell as the data analysis presented in Table 4 show a signicantociation (signicant at 0.000 level-Pearson Chi-Square) betweenadopted diffusion models (for measuring the diffusion of ABC)the reported adoption rates.In interpreting the above ndings, (especially in terms of theiation between the adoption rates for ABC when using twoferent diffusion models), we may suggest a few possiblenarios as follows:

Some organisations (e.g. those who have given some consid-eration to the introduction of ABC at primary levels) may have

land and the UK.

Total

costs

(ACA2)

Allocation of cost pools

to products/services (ABC)

Not used

0 232 232

0.0 39.9 39.9

0 86 86

0.0 14.8 14.8

10 30 102

1.7 5.2 17.5

8 0 38

1.4 0.0 6.5

68 0 124

11.7 0.0 21.3

86 348 582

14.8 59.8 100.0

df Asymp. sig. (2-sided)

12 0.000

12 0.000

exalar

ABaccwhABwethe

weaskthe

(warbsysacctiotheadoaccaccallo

expected to contribute to the adoption of ABC in the future.

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439 437ar that they were considering the allocation of facility costshich is one of the cost hierarchies under ABC and uses anitrary allocation base the same as traditional accountingtemsrather than activity bases) as the adoption of traditionalounting systems. This may be regarded as a signicant addi-n to the current literature that can explain an important part ofreason why the literature suggests that the majority ofpters of ABC have not replaced ABC with their traditionalounting techniques and use ABC alongside their traditionalounting techniques. In other words, given that using arbitrarycleir traditional accounting techniques with ABC and the rest ofC users are using this technique along with their traditionalounting techniques. We selected our interviewees form thoseo had adopted management accounting innovations includingC. We asked our interviewees who had adopted ABC if theyre using traditional cost accounting alongside ABC or whetherir old costing systems were replaced by ABC.Surprisingly, the majority of interviewees (72%) stated theyre using traditional cost accounting alongside ABC. When weed our interviewees to provide us with more details aboutir use of ABC alongside traditional costing systems, it becametheC adopters have not replaced traditional systems with ABC. Formple, Innes et al. (2000) report that while 17.5% of the UKgest companies have adopted ABC, only 6.2% have replacedABconsidered themselves as ABC adopters under the seconddiffusion model (the levels of adoption model) but not underthe rst diffusion model (the stages of adoption model). Thiscould be the case if some organisations have actually startedpractising some kinds of activity analysis or allocation ofcosts to cost pools, which are considered the rst and thesecond levels of ABC adoption under the levels diffusionmodel but would not make them ABC adopters under thestages diffusion model.

Some organisations might have been using Time-Driven ABCbut not considered themselves as ABC adopters. As withtraditional accounting systems, time-driven ABC uses a pre-determined rate for allocations of costs during a speciedperiod. This rate is xed for the whole period and dependsonly on two parameters: (1) the unit cost of supplying capacityand (2) the time required performing a transaction or anactivity (Askarany, 2012). Having a predetermined rate (simi-lar to those of traditional allocation systems) may misleadsome adopters of time-driven ABC to think that they are usingtraditional accounting systems rather than ABC.

There is also a possibility that some respondents might haveanswered yes for ABC adoption while thinking of the ABCclassication of goods stocked in warehouses.

In the case of reporting higher adoption rates (when using thelevels diffusion model), it is also possible that the higheradoption rates are representing the organisations that areusing ABC on a trial basis as well as those that are using ABCas an accepted practice and even some of the organisationswhich have indicated giving consideration to the introductionof ABC in the future.

In order to verify our ndings, we further performed someinterviews (face-to-face and telephone interviews with CIMAqualied management accountants) following our surveys andafter some data analyses. While questionnaires proved to be veryeconomic in collecting a large volume of primary data, we realisedthat we would gather some signicant insights through a numberof follow-up interviews. Our interviews with 56 accountants inorganisations revealed a very important key factor explaining partof the reason why the adoption of ABC has always been reportedto lag behind those of traditional systems and why the majority ofcation bases for assigning facility costs is part of ABC, manyConrming our second stated proposition, the ndings suggesta signicant association (signicant at 0.000 level Pearson Chi-Square) between the reported adoption rates for ABC and theadopters of ABC may have considered themselves as adopters oftraditional accounting systems by mistake.

6. Conclusion and limitations

The present study rst highlights the positive role of ABC inimproving organisational performance, and then identies differ-ent diffusion stages/scales (used in the literature to examine thediffusion process of ABC) and classies them into two maindiffusion approaches: the stages model (which looks at thediffusion of ABC as one whole practice), and the levels model(which breaks down the process of adoption of ABC into differentlevels). It also contributes to the literature by examining thelevels of association between the diffusion of ABC and theimplemented diffusion models and explains part of the reasonfor mixed adoption rates for ABC. The study further identies thelack of a common understanding of ABC systems as a key factorcontributing to the mixed reported adoption rates for ABC.

The particular feature of this investigation is that besides usinga similar questionnaire and targeting more or less similar respon-dents (qualied CIMA members who are working in a managerialaccounting position in organisations) in the same period (2007), itprovides information on the extent of the adoption of ABC both interms of the stages of adoption (usually used in studies whichhave reported low adoption rates for ABC) and the levels ofadoption (usually used in studies which have reported highadoption rates for ABC) at the same time.

The ndings suggest that examining the diffusion of ABC usingthe levels model (rather than the stages model) may lead toresults suggesting a higher adoption rate. Using the stagesmodel, the ndings suggest that the percentage of organisationswhich have implemented and accepted the ABC systems in theirorganisations is still lower than 24% in all three surveyedcountries: Australia, New Zealand and the UK by 2007. However,using the levels model, the ndings suggest a much higheradoption rate for all three countries. According to the ndings,42.6% of organisations in Australia are adopting ABC at some leveland the extent of adoption of ABC in New Zealand and the UK is38% and 36.4% respectively.

A comparison between the reported adoption rates for ABC(resulting from two diffusion approaches) for the three targetedcountries in this study can help us to explain some variationsbetween reported adoption rates for ABC in the literature as follows:according to the ndings, more than 19% of the variation in theadoption rates for ABC in Australia, more than 15% of the variationin the adoption rates for ABC in New Zealand and nally more than21% of the variation in the adoption rates for ABC in the UK are likelyto be due to the variation between using stages of adoption andusing levels of adoption to study the diffusion of ABC.

Conrming our rst stated proposition, both adopted diffusionapproaches (the stages model and the levels model) suggest asignicant association between the reported adoption rates forABC and the countries where the diffusion of ABC was investi-gated (signicant at 0.025 level-Pearson Chi-Square based on thestages model and signicant at 0.017 level-Pearson Chi-Squarebased on the level process model). Given the above, the currentpaper recommends further studies into the impact of contextualfactors (composing the characteristics of individual countries) onthe diffusion of ABC in organisations. Examining the impact ofsuch hindering and facilitating factors on the diffusion of ABC isimplemented diffusion models.

Anderson, S.W., 1995. A framework of assessing cost management system

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439438changes: the case of activity based costing implementation at General Motors,19861993. Journal of Management Accounting Research 7, 151.

Anderson, S.W., Young, S.M., 1999. The impact of contextual and process factors onthe evaluation of activity-based costing systems. Accounting Organizationsand Society 24, 525559.

APQC/CAM, 1995. Activity Based Management Consortium Study. AmericanProductivity and Quality Centre/CAM-1.

Armitage, H.M., Nicholson, R., 1993. Activity Based Costing: A Survey of CanadianPractice. Issue Paper No. 3. Society of Management Accountants of Canada.

Askarany, D., 2003. An overview of the diffusion of advanced techniques. In: Tan,B.F. (Ed.), Advanced Topics in Global InformationIDEA Group Publishing,London, pp. 225250.

Askarany, D., Smith, M., 2004. Contextual factors and administrative changes.Issues in Informing Science and Information Technology Journal 1, 179188.

Askarany, D., Smith, M., Yazdifar, H., 2007a. Attributes of innovation and theimplementation of managerial tools: an activity-based management techni-que. International Journal of Business and Systems Research 1, 98114.

Askarany, D., Smith, M., Yazdifar, H., 2007b. Technological innovations, activitybased costing and satisfaction. JABM: Journal of Accounting, Business andManagement 14, 5363.

Askarany, D., Yazdifar, H., 2009a. Relationship between business size, organiza-tional industry and the adoption of ABC in Australia, New Zealand and the UK.The 2009 AAA Conference and Annual Meeting, New York City, New York,August, 15, 2009.

Askarany, D., Yazdifar, H., 2009b. Supply Chain Management and Cost Accounting.The Business and Economics Society International (B&ESI) 2009. Prague, CzechAnother important nding of the current study is explainingan important part of the reason why the literature suggests thatthe majority of adopters of ABC have not replaced their traditionalaccounting techniques with ABC and use ABC alongside theirtraditional accounting techniques. We found that the majority(72%) of ABC users classify themselves (by mistake) as theadopters of traditional systems when they are dealing with theallocation of facility costs (which is one of the cost hierarchiesunder ABC and uses an arbitrary allocation base like traditionalaccounting systems rather than activity bases).

Although statistical tests were performed to look for evidenceof non-response bias, there was no way to directly test whetherthe non-respondents were systematically different than therespondents. The respondents were mostly controllers andaccounting managers who were members of the CIMA and maythus have exhibited a bias toward reporting ABC adoption orimplementation. Thus, generalising the results of this study to allorganisations in Australia, New Zealand and the UK should bedone with caution.

Acknowledgements

The authors are grateful to the University of Auckland,Research Foundation of the Chartered Institute of ManagementAccountants (CIMA) of the UK, the University of Shefeld andUniversity of Nizwa (specially Professor Abdallah Omezzine, Dr.Dennis Powers and Dr. Masri Hatem) for their supports andfacilitating the research. The authors are also grateful to ShahlaDamoory and Vicki Hargraves from Auckland University ofTechnology (AUT) for their constructive feedbacks.

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An investigation into the mixed reported adoption rates for ABC: Evidence from Australia, New Zealand and the UKIntroductionBackgroundThe diffusion of ABC from theoretical perspectivesResearch methodFindingsThe diffusion of ABC based on stages modelThe diffusion of ABC based on levels model

Conclusion and limitationsAcknowledgementsReferences