In this study, we emphasize that innovative strategy, management accounting information system and internal business process management can act as contingent factors that influence a company's financial performance. However, the implementation of all types of innovation strategies requires a reliable management accounting information system. The information provided by the management accounting information system plays a crucial role in management decision making.
Management accounting information system and company business processes are therefore used in this study as key resources that would help companies create superior financial performance. Managers depend on the management accounting information system to effectively implement the innovation strategy. Each company strategy, including the innovation strategy, affects the characteristics of the information system, including the management accounting information system.
In conclusion, the implementation of an innovation strategy determines the need for a reliable management accounting information system, which in turn affects the company's financial results. H9: Management accounting information system and internal business process performance mediate the relationship between innovation strategy and financial performance.
Research Methodology
Therefore, the effective operation of internal business process will affect the performance of customer relations, increase market share, retain existing customers, increase the number of new customers, improve customer satisfaction and increase customer value. In his study, Terziovski (2002) provided evidence suggesting that innovation strategy affects internal business process performance, customer relationship performance, and financial performance. A good management accounting information system tends to improve the performance of internal business processes, helps the company achieve better operations management processes (supply chain, production, distribution, risk management), better customer management processes (customer selection, acquisition, retention, growth), better processes innovation management and better social and regulatory management processes.
In this regard, it is clear that an excellent internal business process will improve a company's financial performance and therefore accelerate revenue growth and cost efficiency. Innovation strategy is a means used by an entity to compete in its industry in a sustainable manner (Terziovski, 2002). In this study, innovation strategy is defined as the perception of the respondents towards their unique ways to achieve a sustainable and competitive advantage and superior performance.
To measure the innovation strategy, we used two indicators developed by Terziovski (2002), namely: product innovation and process innovation. A management accounting information system is defined as respondents' perceptions of the design of an accounting system that generates management accounting information needed by management to make better decisions in an effort to support innovation strategy design and implementation. To measure a management accounting information system, we use an instrument developed by Chenhall and Morris (1986) that includes four aspects: breadth, aggregation, integration, and timeliness.
Internal business process performance is defined as respondents' perceptions of the performance of the value chain or strategic activities implemented in strategic business units (SBUs) to support customer satisfaction and/or productivity strategy that enhance financial performance. To measure the performance of internal business processes, we use four indicators developed by Kaplan and Norton (2001), namely: operations management processes, customer management processes, innovation management processes, and regulatory and social management processes. The sampling frame consisted of a list of manufacturing companies located in the province and registered with the Ministry of Industry of the Republic of Indonesia as of 2016.
Based on the Law Number 20 Year 2008 report describing Micro, Small, Medium and Large Enterprises, it was observed that many of these companies (79 percent) were manufacturing companies that were also mainly medium enterprises, as illustrated in Table 1.
Data Analysis and Findings 1 Measurement Model Analysis
In addition, this study also shows that the effect of management accounting information system on financial performance is significantly positive (β = 0.548, p<0.001), which supports H3. This study also reports that the effect of innovation strategy on internal business performance is significantly positive (β = 0.687, p<0.001) thus supporting H5. Finally, this study also reveals that the effect of management accounting information system on internal business process performance is significantly positive (β = 0.550, p<0.001), thus supporting H6.
Baron and Kenny's (1986) procedure is applied in this study to analyze the mediating effect of management accounting information system and internal business process performance on financial performance. As indicated in Appendix B, innovation strategy has a significant relationship with management accounting information system (H2) and financial performance (H1). The mediator variable of management accounting information system has a positive significant relationship with financial performance (H3).
It turns out that the inclusion of the accounting information system in the model reduces the effect. This study also examines the impact of internal business processes as a mediator between innovation strategy and financial performance. The innovation strategy has a positive and significant relationship with internal business process performance (H5) and thus fulfills the second condition.
Internal business process performance has a positive relationship with financial performance (H4) and therefore meets the third condition. It is found that by including internal business process performance in the model, the effect was reduced, as the β value dropped from 0.73 to 0.56, thereby indicating the existence of a mediator. This study also revealed the significant impact of management accounting information system on internal business process performance (H6).
In this regard, it supports H9, which shows the innovation strategy-management accounting information system-internal business process performance-financial performance relationship.
Discussion
Chenhall and Morris (1986) indicate that management accounting information systems are useful to managers when they include broad scope, timeliness, aggregation, and integration. The results of the current study also explain why managers of manufacturing companies in East Java province need a management accounting information system. The results of the current study also support the research of Kaplan and Norton (2001), who stated that excellent financial performance is the result of excellent performance of internal business processes, including operations management, customer management, innovation management and regulatory management processes.
The current study provides empirical evidence that shows that the managers of the manufacturing companies in East Java province believe that excellent internal business process performance will directly affect their financial performance (revenue growth and cost efficiency). The results of this study also support the results of previous studies (Lichtenthaler, Hoegl, & Muethel, 2011; Dorweiler & Yakhou, 2005), which show the important role that innovation has for internal business processes. The results of this study also support the observations of Chenhall and Morris (1986) and Kaplan (2009), who stated that management accounting information system has a strategic role in building a firm's competitive advantage in the era of knowledge-based economy.
The better information they get, the better the internal business process performance (operational management processes and customer management processes). This justifies why the managers of the manufacturing companies in East Java province perceive that the management accounting information system affects the internal business process performance. This study provides empirical support showing the mediating roles of management accounting information system and internal business processes on the relationship between innovation strategy and financial performance.
In addition, findings from this study also support Kaplan and Norton who stated that strategy must be translated into internal business processes in order to create superior customer relationship performance and financial performance. Based on the above discussions, this study therefore concludes that strategy influences the design of management accounting information system; management accounting information system affects internal business performance and internal business performance affects financial performance. The road tests also show that the managers are aware that they must align the design of their management accounting information system with innovation strategy.
The better the quality of their management accounting information system, the better the support.
Conclusion
The findings of this study also confirm the results of other studies conducted by Clemons and Row (1991), Mahmood and Mann (1993), Kettinger, Grover, Guha and Segars (1994), who all concluded that the system of Management accounting information provides a great opportunity for firms to improve their coordination and control. Alternatively, the findings of this study can be used by relevant companies to innovate and gain a competitive advantage in the world market. In addition, management should increase its concerns in the development of its management accounting information system, because the system plays a strategic role in helping managers to make good decisions and improve the internal performance of the business.
This study has several limitations, including: (1) it does not consider the product life cycle, and (2) it is limited to the manufacturing industry in East Java Province, Indonesia. Future research should consider using other contextual variables such as human capital, organizational capital, and customer relationship performance as new contingent factors in the model. The impact of using accounting information systems on the quality of financial statements submitted to the income and sales tax department in Jordan.
The case for strategic management accounting: The role of accounting information for strategy in competitive markets. The relationship between disclosure of corporate social performance and financial performance: Evidence from GRI reports in the manufacturing industry. Strategic choices, environmental uncertainty and SBU performance: A note on the intervening role of management accounting systems.
Performance implications of providing information value in e-service systems: Exploring the resource-based perspective and innovation strategy. Corporate social responsibility and its impact on the investment policy, organizational structure and performance of companies. The effects of the interactive use of management control systems on process and organizational innovation.
Comparing the resource-based and market-based views of the firm: Empirical evidence from Czech privatization. The effectiveness of Business Development Services Providers (BDS) in improving access to debt financing for start-up SMEs in South Africa. A study on technology management processes: the parts and components suppliers in the Turkish automotive industry.
