The effect of contingency factors and ABC implementation success on organizational performance in Iraqi manufacturing sector

The factors responsible for the successful implementation of activity-based costing (ABC) systems are still not much known especially among the developing countries. Additionally, there are still rooms for investigation into how external, internal and technological factors enhance the implementation of ABC and organizational performance. As such, this study employs the contingency theory to examine the relationships between contingency factors, ABC implementation success (ABCIS) and organizational performance, and the mediating effect of ABCIS on the relationships between contingency factors and organizational performance. This study is based on a questionnaire survey conducted on 114 respondents consisting of accounting managers of manufacturing industry in Iraq. The data collected was analyzed using both SPSS and PLS3-SEM. The results reveal that environmental uncertainty, market orientation, cost-leadership strategy, vertical decentralization and information technology (IT) have significant and
positive effects on ABCIS. Differentiation strategy and horizontal decentralization have significant but negative effect on ABCIS. The results also demonstrate that ABCIS, cost-leadership strategy, vertical decentralization and IT have significant and positive effects on organizational performance. Horizontal decentralization shows a negative and significant association with performance, but there is no significant effect of environmental uncertainty, market orientation and differentiation strategy on organizational performance. Also, this study shows that ABCIS significantly mediates the relationship between environmental uncertainty, market orientation, cost-leadership strategy, differentiation strategy, IT and organizational performance. Meanwhile, the mediating effect of ABCIS is not significant on the decentralized structure-performance relationship. The results also support the combined effects of contingency factors on ABCIS and organizational performance. Finally, the results show that different contingency factors are correlated with ABC at different levels of implementation. This study theoretically contributes to a growing body of knowledge on the fit between contingency factors, ABC systems and organizational performance. Practically, the findings explain how contingencies and ABC systems enhance the performance of manufacturing companies.