Management control systems package, organizational capabilities and organizational performance in Pakistan Textile Industry

This study determines the influence of management control systems (MCS) package (i.e. cultural, planning, cybernetic, rewards and compensation, and administrative) on organizational performance with the mediating role of organizational capabilities (i.e. the strategic management capability, operational capability, and external stakeholder capability) in Pakistan textile sector. The main motivation for this study is driven by the needs for better MCS in Pakistan‟s textile industry as they are facing challenges to sustain their business performance. Additionally, there are also limited studies in MCS literature that focus on MCS as a package and scant empirical evidence on the influence of MCS package on organizational performance with organizational capabilities and
resource-based view (RBV) theory. The data was collected using questionnaires that were distributed randomly to 300 chief financial officers and general managers of the Pakistan‟s textile companies. Partial Least Square Structural Equation Modeling (PLSSEM)
was used to analyze both the direct and indirect relationships among the variables of the study. The findings reveal that MCS package has significant influence on organizational performance and organizational capabilities. In terms of each MCS dimension, only cybernetic control, rewards and compensation control, and
administrative control have significant influence on organizational performance. In addition, each of the MCS dimension also shows significant influence on organizational capabilities. Finally, results also show that organizational capabilities have significant
influence on organizational performance. Hence, this study provides evidence that organizational capabilities significantly mediate the relationship between MCS package and organizational performance. Practically, this study proposes that the management of textile companies should use both MCS package and organizational capabilities in their decision making to enhance organizational performance. This study adds to the body of
knowledge in MCS and RBV by explaining the mediating effect of organizational capabilities on the relationship between MCS and performance.