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Accounting,Orgnnizatiom and Society,Vol. 23, No 5/6,pp. 467-483, 1998 c; 1998Fkvier science Ltd. AlIrights reserved

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0361.3682/98 $19.00+0.00

THE RELATIONSHIP BETWEEN BUDGET PARTICIPATION AND JOB PERFORMANCE: THE ROLES OF BUDGET ADEQUACY AND ORGANIZATIONAL COMMITMENT*

H. NOURI The College of New Jersey

and R. J. PARKER University of Manitoba

Abstract This study explores the linkages between budget participation and job performance. In the proposed theoretical model, budget participation affects job performance via two intervening variables: budget adequacy and organizational commitment. Accotdingly, budget participation leads to high budget adequacy which, in turn, increases job performance directly and indirectly via organizational commitment. To test the proposed relationships, a survey questionnaire was administered to managers of a large American corporation. The results of path analysis support the hypothesized relationships. 0 199EiElsevier Science Ltd. ARrights reserved.

Accounting researchers have long sought to understand the relationship between budget participation and job performance. Several studies have proposed that budget participation has a strong positive effect on job performance (e.g. Argyris, 1952; Becker & Green, 1962); however, the empirical evidence for this position is ambiguous. While some studies report that the relationship is positive (Merchant, 1981; Brownell, 1982~) others report a relationship that is negative (Stedry, 1960; Bryan & Locke, 1967) or unclear (Milani, 1975; Kenis, 1979). Such inconsistent findings have prompted several researchers to examine intervening variables which may link budget participation to job performance. Proposed intervening variables include motivation (Brownell & McInnes, 1986) role ambiguity (Chenhah & Brownell, 1988) and jobrelated information (Kren, 1992).

This study provides further examination of the linkages between budget participation and job performance. The paper proposes that budget participation affects job performance by means of two intervening variables: budget adequacy and organizational commitment. Budget adequacy is the degree to which an individual perceives that budgeted resources are adequate to fulfiI job requirements. In the proposed theoretical model, budget participation leads to budget adequacy. As argued in this paper, subordinates may have superior information about the level of budgetary support required to carry out their job duties. Further, since personal and organizational success depends partly upon the subordinate receiving adequate budgetary support, subordinates may attempt to incorpo rate this information into the budget. A participatory budget permits subordinates to do this.

The authors wish to thank Graham Drake, Nabil Elias, and Sue Greenberg for their helpful comments. We also wish to thank participants at the Research Forum of the American Accounting Association Annual Meeting. 467

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While budget participation leads to budget adequacy, budget adequacy, in turn, may lead to higher job performance. This paper proposes that employees with adequate budget resources outperform those without. In the management literature, several studies have raised the issue of how budgetary support may facilitate or hinder managerial performance, but relatively few studies have investigated the issue empirically (Peters 81 OConnor, 1980; Blumberg & Pringle, 1982). This paper proposes that budget adequacy increases job performance not only directly but also indirectly via organizational commitment. Strong organizational commitment is defined as the acceptance of organizational goals and a willingness to exert effort on behalf of the organization (Porter et al, 1974; Angle & Perry, 1981). If employees believe that the organization is responsible for ensuring that employees receive sufficient budgetary sup port, then budget adequacy is likely to increase employee bonding with the organization (i.e. employee organizational commitment). Higher organizational commitment, in turn, may lead to higher performance (Randall, 1990). To examine the proposed relationships, a survey questionnaire was distributed to managers of a large American corporation. The results of path analysis support the hypothesized relationships, suggesting that budget participation affects job

performance by means of the intervening variables of budget adequacy and organizational commitment. In addition, this paper investigates the issue of social desirability response bias and demonstrates techniques for assessing and correcting such a bias. While response bias seems to have occurred, it did not affect the results.

THEORETICAL DEVELOPMENT The full theoretical model appears in Fig. 1. Each link in the model is labelled by hypothesis and discussed subsequently. The first theoretical links to be discussed involve budget participation. As Brownell (1982b) argues, budget participation is the extent to which subordinates have inlhtence on and are involved in setting the budget. Budget participation and job pe@ormance Several studies have proposed that budget participation is positively linked to employee performance (e.g. Argyris, 1952; Becker & Green, 1962; Hofstede, 1968). According to this viewpoint, budget participation leads to high motivation and thus to high performance. However, Brownell and McIMes (1986) found that motivation does not mediate the relationship between budget participation and job

Fig. 1. Theoretical model.

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performance. Further, while some studies report a significant association positive between budget participation and job performance (e.g. Merchant, 1981; Brownell, 1982~) others report a signif&nt negative association (e.g. Stedry, 1960; Bryan & Locke, 1967). The conflicting results of prior studies have prompted researchers to investigate potential moderating and intervening variables in the relationship between budget participation and job performance (see Murray, 1990). This paper seeks to examine the roles of budget adequacy and organizational commitment as intervening variables in the relationship. Budget participation and budget adequacy Several accounting studies have argued that subordinates have more accurate information than their superiors regarding local conditions (Merchant, 1981; Christensen, 1982; Chow et al., 1988; Wailer, 1988). In the agency-principal framework, subordinates are said to have private information about local conditions. Several researchers have noted that allowing subordinates to participate in the budgeting process may result in the disclosure of private information which would result in more realistic plans and more accurate budgets (Merchant, 1981; Chow et al, 1988; Murray, 1990). This study proposes that subordinates often have better information about the level of budgetary support required to perform the subordinates tasks than do superiors. Further, subordinates wig attempt to incorporate this information into the budget to ensure that they have adequate resources to successfully perform their duties. A participatory budget allows subordinates to incorporate this information into the budget while a non-participatory

budget does not. The related hypothesis appears below:

Hl Budget participation and budget significant positive relationship. adequacy have a

Budget adequacy is the degree to which an individual perceives that budgeted resources are adequate to fulfil job requirements. This construct can be differentiated from the construct of budgetary slack as defined in the accounting literature. As Young (1985, pp. 829-830) notes, budgetary slack occurs when subordinates intentionally build excess requirements for budgets into the budget. In other words, budgetary slack entails two components: (1) excess budgetary resources, that (2) result from deliberate biases in budget forecasts (intended to make performance goals easier to achieve). Budget adequacy does not necessarily involve excess resources or biased budget forecasts. Budget participation and organizational commitment Organizational commitment is the bond that links the individual to the organization (Mathieu & Zajac, 1990). As noted in several literature reviews (Mathieu & Zajac, 1990; Randall, 1990) organizational commitment may be conceptualized in different ways. Meyer et al. (1990) distinguish between two types of organizationaf commitment, affective and continuance commitment. Affective commitment is characterized by: (1) a strong belief in and acceptance of the organizations goals and values; and (2) a willingness to exert considerable effort on behalf of the organization (Porter et af., 1974; Angle & Perry, 1981). Continuance commitment originates in the perceived costs associated with leaving the

As noted by an anonymous reviewer, budgetary slack and budget adequacy may correspond in some cases. Managers who intentionaIIy submit biased budget forecasts and consequently receive excess resources are likely to report high levels of budget adequacy. On the other hand, levels of budget adequacy and budgetary slack wiII differ in many situations. In some cases, managers wiIl report low budgetary slack and high budget adequacy. For example, some managers wiII not engage in budget biasing yet receive adequate budgetary resources. Budgetary slack and budget adequacy may have di@ercnt relationships with job perfo-ce. This study proposes that budget adequacy is positively Iinked to job performance (H4). Govindarajan (19B6), in a survey study, reports a correlation of -0.01 between budgetary slack and job performance while Wright (1993), in a multi-period laboratory experiment, reports a negative relationship.

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H. NOURI and R. J. PARKER H2 Budget participation and organizational have a significant positive relationship. commitment

organization (e.g. loss of benefits and seniority) (Becker, 1960). Affective (attitudinal) commitment may have a stronger relationship to work outcomes such as performance than does continuance (calculative) commitment (Mathieu & Zajac, 1990; Randall, 19%); consequently, this study uses the affective conceptualization of organizational commitment. Because of its potential for improving work outcomes, organizational commitment has been the focus of numerous studies, including those that have attempted to identify its antecedents. For example, several researchers have proposed that employee participation in decisionmaking increases employee commitment to the organization. March and Simon (1958) were among the first to argue that the more participation [of subordinates] in making policy decisions, the stronger the tendency of subordinates to identify with the organization (p.74). Lincoln and Kalleberg (1985) argue that participation serves to integrate workers in the organization and commit them to organizational decisions (p.754). Those studies which relationship report a significant positive between employee participation and organizational commitment include: Patchen (1965); Morris and Steers (1980); Rhodes and Steers (1981); Welsch and IaVan (1981); Zahm (1984); DeCotiis and Summers (1987); and Boshof and Mels (1995). This study proposes that budget participation is linked to organizational commitment. As Hanson (1966) argues, by becoming involved in the creation of the budget [through participative budgeting], members of the organization associate themselves more closely with and become better acquainted with budget goals (p.241). Further, participative budgeting increases employees identification not only with budget objectives but also with all organizational goals (p. 241). Since organizational commitment involves the belief in and acceptance of organizational goals and values, participative budgeting may increase organizational commitment. The related hypothesis may be stated as follows:

organizational Budget adequacy and commitment This paper proposes that budget adequacy leads to high organizational commitment. Budget adequacy is the employees belief that he/ she has adequate budget resources to perform his/her job duties. If employees believe that the organization is responsible for ensuring that the employee receives sufficient budgetary sup port, then budget adequacy is likely to increase the employees bonding with the organization (i.e. the employees organizational commitment). This suggests the following hypothesis:
H3 Budget adequacy and organizational significant positive relationship. commitment have a

and managerial Budget adequacy performance As Blumberg and Pringle (1982) note, the management literature has extensively investigated job performance. Based upon their review, they propose that individual performance is a function of three critical dimensions: willingness, capacity; and opportunity. Willingness refers to motivation, while capacity refers to individual abilities, skills, and energy levels. Opportunity refers to job-related environmental factors that facilitate or hinder performance such as equipment, supplies, coworker actions, and organizational policies. Blumberg and Pringle (1982) argue that researchers have generally ignored the relationship between performance and opportunity to perform. One exception, which Blumberg and Pringle (1982) cite, is Peters et al. (1980). Using open-ended questionnaires, Peters et al. (1980) asked business employees to describe situational factors that facilitate or hinder their work performance. One of the situational factors thus identified was budgetary support, which is described as the budgetary support needed to do the job assigned - the monetary resources needed to accomplish [sic] the job (p.82).

THE RELATIONSHIP BETWEEN BUDGET PARTICIPATlON AND JOB PERFORhIANCE

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Based upon their 6ndings, this study proposes rhat budgetary adequacy, a measure of budgetary support, is linked to job performance. Employees with adequate budgetary support will, on average, exhibit higher performance than employees without adequate budgetary support. The associated hypothesis appears as follows:
H4 Budget adequacy and job performance have a significant positive relationship.

METHOD Data collection Data was collected using a survey questionnaire sent to a large multi-national corporation engaged primarily in chemical production. The firm has its headquarters and most of its operating divisions in the United States. Questionnaires were distributed to a sample of 203 American managers and supervisors whom top management had identified as having budget responsibilities. Respondents were chosen from a variety of functional areas, including accounting, finance, marketing, engineering, research, and production operations. The questionnaire was distributed through the companys internal mailing system. Accompanying each questionnaire was a cover letter explaining the research, an endorsement letter from top management encouraging participation in the study, and written instructions for completing the survey. To minimize response bias, respondents were asked to complete the questionnaire independently and to return the questionnaire directly to the researchers in postage-paid return envelopes. Of the 203 questionnaires distributed, respondents returned 139, a response rate of 68.5%. Since four respondents failed to complete the entire questionnaire, 135 responses (66.5%) were used in the data analysis. The average respondent was 44 years old and had 38 employees beneath him/her in the organizational hierarchy. Several potential response biases were investigated to assure that meaningful responses were obtained from the respondents. These included fatigue, extremity, initiation, contentrelated, and routine biases (Alreck & Settle, 1985). Analyses indicates that none of these biases appears to be present in any of the measures used in the study.

Organizational commitment and job pe$ormance As Randall (1990) notes in her meta-analysis organizational of commitment, several researchers have theorized that organizational commitment is related to positive work outcomes such as high job performance. After reviewing the sometimes conflicting empirical studies of this subject, Randall (1990) concludes that organizational commitment has a positive (albeit low) relationship to job performance.2 This finding leads to the following hypothesis:
H5 Organizational commitmentand job performancehave a significantpositiverelationship.

Randall (1990) proposes that the inconsistencies between prior studies of this hypothesis may be attributed, in part, to the different conceptualizations of organizational commitment used by researchers. According to her analysis, work outcomes have a stronger relationship to attitudinal (affective) conceptualizations of organizational commitment than to calculative conceptualizations. With regard to work performance, the results of Meyer et al (1989) support Randall. In the sample of Meyer et al. (1989) affective organizational commitment correlates positively with work performance while continuance organizational commitment correlates negatively with work performance. As previously noted, this paper uses the affective conceptualization. ____ _

%I the accounting literature, relatively few studies have examin ed the relationship between organizational commitment and job performance, with the notable exceptions of Ferris (1981) and Ferris and Larcker (1983). Both studies surveyed auditors and found that organizational commitment was positively linked to job performance.

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Measures The variables measured in the questionnaire Include budget participation, budget adequacy, organizational commitment, and job performance. The questions used to measure each variable appear in Appendix 1. To measure budget participation, Milanis (1975) six-item scale was used. The instrument attempted to assess the respondents involvement in and Influence on the budget process. A sample item in the scale was: The amount of influence that I have on the Iinal budget. The response scale was a seven point Likert-type scale ranging from one (very little) to seven (very much). Satisfactory reliability and validity for the scale have been reported by prior researchers (e.g. Brownell, 1982~; Mia, 1988). In the current study, the Cronbach alpha coefficient was 0.84. Budget adequacy was measured using a threeitem scale developed for this study. The instrument attempted to determine whether individuals perceive their budgeted resources as adequate for the performance of job duties. A sample item (reverse wording) was: My budget does not allow me to perform what is expected of me. The other items in the scale include: What is expected of me is achievable under my budget and I am pretty much confident that I can achieve what is expected of me under my budget. The response scale was a seven-point Likert-type scale ranging from one (strongly disagree) to seven (strongly agree). For the three items, factor loading revealed one factor with an eigenvalue greater than one that explains 82% of the total variance. As for the reliability of the scale, the Cronbach alpha coefficient was 0.89. Organizational commitment was measured using the nine-item short-form scale from Mowday et al. (1979). Sample items in the scale include: I really care about the fate of this

organization and I am willing to put in a great deal of effort beyond that normally expected ln order to help this organization be successful. The response scale was a seven-point Llkerttype scale ranging from one (strongly disagree) to seven (strongly agree). Prior studies report acceptable levels of reliability and validity for the nine-item scale (Price & Muller, 1981; Blau, 1987). In this study, the Cronbach alpha coefhcient was 0.86.s Managerial performance was measured using a modified eight-item scale from Govindarajan and Gupta (1985).* Respondents were asked to evaluate their individual performance with regard to eight performance dimensions, such as personnel development, product quality, and cost reduction. The response scale was a seven point I&et-t-type scale ranging from one (well below average) to seven (well above average). As Govindarajan and Gupta (1985) note, different business units have different strategic missions; consequently, to evaluate business unit performance (and hence managerial performance), actual performance should be compared against a priori expectations which incorporate the subunits strategic objectives. Accordingly, this study, similar to Govindarajan and Gupta (1985) asked respondents to evaluate their actual performance in terms of superiors expectations (which should incorporate the subunits strategic mission). Also, similar to Govindarajan and Gupta (1985) this study computed managerial performance as a weighted average of the responses across the eight performance dimensions. The weight assigned to each performance dimension depended upon the relative importance attached to the dimension by the superior. To determine this, participants were asked to rate the importance of each performance dimension

3The organizational commitment questionnaire developed by Mowday et al. (1979), which is used in this study, is described by Meyer et al. (1989) as the most widely used measure of tiective commitment to date (p.152). Allen and Meyer (1990) attempted to develop a comprehensive scale that measures the different dimensions of organizational commitment, including affective, continuance, and normative commitment. Dunham et al. (1994) subsequently compared the scale developed by Mowday et al. (1979) with the affective commitment scale developed by Allen and Meyer (1990). They report that both scales provide basically the same information @. 377). 4See also Gupta and Govindarajan (1984).

THE RELATIONSHIP BElWEEN BUDGET PARTICIPATION AND JOB PERFORMANCE

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to the superiors assessment of the individual. The response scale was a seven- point Likerttype scale ranging from one (of little importance) to seven (extremely important). The formula for job performance appears as follows: JP = c(JPz * IMPi)/ c IMPI, (1)

Brownell, 1988; Kren, 1992). This study used self-reported measures to maintain the anonymity of the respondents which could not be guaranteed with the use of alternative measures such as superior ratings. Further, a self-reported measure minimizes the halo effect which may occur with superior ratings (Thornton, 1968; Nealy & Owen, 1970; Heneman, 1974).

where JP is job performance; JPf is job performance for dimension i; and IMPi is importance attached to dimension i by superiors. As Govindarajan and Gupta (1985) argue, their scale measures multiple dimensions of performance. Further, the weighting system adjusts for differences between business units since units differ as to which performance dimensions are most important to unit success. With regard to the two components of the job performance measure, performance ratings and importance ratings, these exhibited sign& cant positive correlations in this study, with correlations ranging from 0.16 to 0.50 and a mean of 0.37. In other words, individuals reported higher performance for those performance dimensions that their superiors considered important. Perhaps this reflects employee efforts to perform well in those areas which their superiors consider important. While the significant correlations between performance and importance ratings suggest that they overlap somewhat, the magnitude of the correlations suggests that they do not duplicate each other. Several studies have criticized self-reported measures of performance as unreliable due to a leniency bias (e.g. Parker et al., 1959). Other studies have noted that a leniency bias is inconsequential unless the bias is systematically related to an independent variable (Chenhall &

Path analysis
Path analysis was used to evaluate the pro posed hypotheses. The path model used in the analysis corresponds to the theoretical model in Fig. 1. In Fig. 1, each link between the variables has a path coefficient that measures the impact of the antecedent variable i in explaining variance in outcome variablej. More precisely, the path coefficient measures the number of standard deviations ofj associated with a one standard deviation change in i. For example, the path coefficient for the link between budget participation and budget adequacy indicates the increase in budget adequacy, measured in standard deviations, associated with a one standard deviation increase in budget participation. Values for the path coefficients were estimated using regression and correlation analysis (Asher, 1983). The path coefficient value is the standardized beta coefficient found by regressing the outcome variable on the appropriate antecedent variable(s).

RESULTS Descriptive statistics for the variables examined in this study appear in Table 1. Table 2 presents the correlation matrix for the variables. As noted previously, the hypotheses

TABLE 1. Descriptive statistics Variable Budget participation Budget adequacy Organizational commitment Job performance _____ n=135. Mean 28.18 15.81 46.05 5.36 ______ Standard deviation 6.69 3.22 8.61 0.74 Observed range 6-40 6-21 25-63 3.9-6.9

____.

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were evaluated using path analysis. Table 3 lists each hypothesis and its corresponding path coefficient, each of which was estimated using regression or correlation analysis. Since each related path coefficient has a pvalue of less than 0.025, the results in Table 3 support the

hypotheses. Figure 2 illustrates the path coefficients in the framework of the theoretical model. The results in Table 3 (illustrated in Fig. 2) suggest that budget participation affects job performance directly and indirectly via budget

TABLE 2. Matrix of intercorrelations Job performance (1) Budget participation (2) Budget adequacy (3) Organizational commitment (4)

(1)
(2) (3) (4)

1.000 0.340 0.382. 0.349

1.000 0.359 0.317

1.000 0.372.

1.000

n=135. One tailed significance. l p<o.O01 TABLE 3. Path analysis results Dependent variable BA OC Jp Independent variables BP BP BA BP BA OC Associated hypothesis Hl H2 H3 H4 H5 Path coefficient 0.359 0.211 0.296 0.191 0.240 0.199 t-value pvalue R2

4.44 2.49 3.50 2.27 2.78 2.35

0.001 0.014 0.001 0.025 0.006 0.021

0.129 0.177

0.226

n=135. For each regression equation, the F value has a pvalue of 0.001 or less. BP, Budget participation; BA, budget adequacy; OC, organizational commitment; JP, job performance.

Fig. 2. Path coefficients. Values for path coefficients are taken from Table 3. As Table 3 indicates, all coefficient values have apvalue of 0.025 or less.

THE RELATIONSHIP BETWEEN BUDGET PARTICIPATION AND JOB PERFORMANCE

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adequacy and organizational commitment. One advantage of path analysis in analyzing these effects is that their relative magnitude can be assessed by decomposing the total relationship between budget participation and job performance. With regard to the total relationship between participation and performance, the zero order correlation is 0.340 (pc.001, Table 2). The results in Table 4 indicate that the 0.340 correlation consists of a direct effect (0.191) and indirect effects (0.149). With regard to the direct link between budget participation and job performance, the 0.191 path coefficient is significant (Table 3, p=O.O25). It should be noted that this result could suggest either a direct relationship or an indirect relationship through omitted intervening variables. The indirect effects of budget participation on job performance consist of the following paths:
(1) (2) (3) BP+BA+l BP+BA-+OC-+JP BP+OC+JP total 0.359x0.240 0.359x0.2%x0.199 0.211x0.199 = 0.086 = 0.021 =0.042 0.149

Path (1) indicates the indirect effect exclusively via budget adequacy while Paths (2) and (3) reveal the indirect effect via organizational commitment. To assess the significance of the indirect effects, their standard deviations were estimated using the techniques of Sobel(l982). T-values associated with the indirect effects were statistically significant at the 5 level (Table 5). The results suggest that budget adequacy and organizational commitment partially mediate the relationship between budget participation and job performance. As Baron and Kenny (1986) argue, given a significant bivariate relationship between an independent variable and an outcome variable, a third variable functions as a mediator when: (1) the independent variable is significantly related to the mediating variable; (2) the mediating variable is significantly related to the outcome variable; (3) the relationship between independent variable and outcome variable decreases after controlling for the mediator variable. These conditions are fulfilled with regard to budget participation and job performance and the proposed mediating variables of budget adequacy and organizational

TABLE 4. Decomposition of observed correlations Combination of variables BP/BA* BP/OC BA/OC BP/JP BA/JP OQJP *Abbreviations as for Table 3. TABLE 5. Analysis of indirect effects Indirect effect BP on OCt BA on JP BP on JP viaBA via OC Indirect effect coefficient* 0.1372 0.0135 0.0095 0.0070 Standard deviation of coefficient 0.04985 0.00692 0.00400 0.00359 t-value 2.75 1.95 2.38 1.95 Observed correlation 0.359 0.317 0.372 0.340 0.382 0.349 = Direct effect 0.359 0.211 0.296 0.191 0.240 0.199 + Indirect effect 0.106 0.149 0.059 + Spurious effect 0.076 0.083 0.150

n=135. Au r-values are statistically significant at the 5% level (one-tail test). Formulae for standard deviation of coefficient appear in Appendix 2. thbbrcviations as for Table 3. *Indirect effect coefficients were calculated using unstandardized path coefficients.

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commitment. The results suggest partial mediation since the magnitude of the association between budget participation and job performance (zero order correlation of 0.340) decreases after controlling for the mediating variables but remains significant (path coefficient of 0.191). As Baron and Kenny (1986) note, full mediation occurs when the relationship between independent variable and outcome variable is no longer significant after controlling for the mediator variable(s). They note that in most social psychology research, given the complexity of the underlying phenomenon, researchers are more likely to lind partial mediation than full mediation. The relationship between budget participation and organizational commitment can be analyzed using a similar approach. The zero order correlation between participation and commitment is 0.317 (Table 2, p<O.OOl) which, as shown in Table 4, consists of a direct effect (0.211) and an indirect effect (0.106) via the path: BP+BA+OC (0.359x0.296=0.106). The path coefficient for the direct effect (0.211) is sign&ant (Table 3,p=O.O14) while the indirect effect also is significant (Table 5,p<O.O5). The results suggest that budget adequacy partially mediates the relationship between budget participation and organizational commitment. With regard to the relationship between budget adequacy and job performance, the zero order correlation performance is 0.382 (p<O.OOl , Table 2). As Table 4 reveals, the 0.382 correlation consists of a direct effect (0.240) and an indirect effect (0.059) consisting of the path: BA+OC+JP (0.296x0.199 =0.059). The path coefficient for the direct effect (0.240) is significant (Table 3, p=O.OoC) while the indirect effect also is signiticant (Table 5, ~~0.05). The remaining component of the correlation represents a spurious effect (0.083) whichreflects the intluence of budget participation, which is a common antecedent of budget adequacy, organizational commitment, and job performance. Effects of socially desirable responding Socially desirable responding (SDR) is the tendency of individuals to present themselves

favorably with respect to current social norms and standards (Zerbe 8z Paulhus, 1987, p. 250). Survey instruments may elicit SDR as respondents attempt to portray themselves favourably; consequently, SDR represents a potential response bias (Smith, 1967; Ganster et al., 1983; Arnold et aZ., 1985). As Ganster et al. (1983) note, in organizational behavior research using surveys, SDR can affect research findings by (1) producing spurious relationships; (2) hiding (suppressing) real relationships; or (3) moderating relationships. Nouri et al. (1995) report evidence that SDR moderates the relationship between budget participation and job performance. To examine the effect of SDR in this study, the individual propensity for SDR was measured using a scale adopted from Crowne and Marlowe (1964) (see Appendix 1). As recommended by Smith (1967) correlations between the SDR scale and study variables were examined to identify those variables that could be influenced by SDR. The SDR scale had insignilicant correlations with budget adequacy and job performance and significant positive correlations with budget participation and organizational commitment. This result suggests that individuals with a propensity for SDR overrated their budget participation and organizational commitment. The insignifkant correlation between job performance and the SDR scale suggests that social desirability did not produce spurious relationships between job performance and the other independent variables of the study. In other words, the insignificant correlation suggests that SDR was not responsible for the significant results reported in Table 3 involving job performance. Indeed, the insignificant correlation might result in a more conservative test of the relationship between job performance and those variables exhibiting a significant relationship with SDR (budget participation and organizational commitment). In contrast, the significant SDR correlations with budget participation and organizational commitment suggest that SDR might have produced a spurious relationship between these two variables. If so, the significant results reported in Table 3 for H2 could be misleading.

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To assess the impact of SDR on the findings of this study, the measurement of budget participation and organizational commitment was corrected for SDR and the path analysis rerun. Corrections were based upon the following regression formula adopted from Anderson et al. (1984): Xc = X - r(Sx/Sy)Y, (2)

where Xc is corrected score; X is original score (unadjusted for SDR); r is correlation between X and SDR scale; Sx is standard deviation of X; Sy is standard deviation of SDR scale; and Y is the score on SDR scale. Using corrected measures for budget participation and organizational commitment, the regression equations in Table 3 were rerun. The results appear in Table 6 and are similar to those appearing in Table 3, which suggests that SDR did not influence the relationships examined in this study.5

CONCLUSION The results of this study suggest that the relationship between budget participation and job performance is complex. The direct link between budget participation and job performance has a significant path coefficient which

may reflect a direct relationship as proposed by prior researchers (see theoretical development section) or an indirect relationship through omitted intervening variables. The results also suggest that budget participation affects job performance indirectly via budget adequacy and organizational commitment. Among the indirect effects, the link between budget participation, budget adequacy, and job performance may be the most important in terms of this papers contribution. Several analytic researchers have argued that budget participation could provide superiors with useful knowledge held by subordinates (Magee, 1980; Baiman, 1982; Baiman & Evans, 1983). The results of this study suggest that participation could allow subordinates to provide information about the level of budgeted resources needed to perform successfully. Apparently, prior studies have ignored this potential benefit of budget participation, choosing to focus on the related problem that subordinates may use participation to acquire excess resources-the problem of budgetary slack. Accounting researchers have extensively examined the relationship between budget participation and budgetary slack (e.g. Onsi, 1973; Merchant, 1985; Lukka, 1988; Waller, 1988). Several researchers have suggested that participation may lead to slack budgets which can be detrimental to organizational planning and resource allocation (Wailer, 1988; Kren,
_ p-value R2

TABLE 6. Path analysis results using data adjusted for SDR Dependent variable BA+ OC Independent variables BP BF BA BP BA oc Associated hypothesis Hl H2 Path coefficient 0.340 0.186 0.285 0.188 0.250 0.195
hdue

4.17 2.18 3.34 2.26 2.94 2.33

H3
H4 H5

JP

0.001 0.031 0.001 0.025 0.004 0.021

0.116 0.152 0.223

n=135. For each regression equation, the F value has apvalue of 0.001 or less. Abbreviations as for Table 3. *Adjusted for SDR. 5Nouri el al (1995) report a significant interaction between SDR and budget participation when job performance is the dependent variable in a regression model. In this study, this interaction is insignificant when budget participation is corrected for SDR.

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H. NOURI and R. J. PARKER

1992). The results of this study suggest that a tradeoff may exist with regard to budget participation. While participation may result in slack budgets, a lack of participation may result in budgets that provide subordinates with inadequate resources to perform well. Future research could examine the issue of whether, in a participatory budget, a tradeoff exists between budget adequacy and budgetary slack. Future research involving budget participation could also investigate the impact of socially desirable responding (SDR). SDR appears to have occurred in this study; although SDR did not influence the results, the possibility exists that SDR could affect the results in other studies of budget participation. If SDR occurs, this study demonstrates techniques for assessing its impact and correcting for the bias. The findings of this study are subject to several limitations. Since only one company was examined, the results may not be generalizable to organizations that differ significantly from that company. The survey approach as well has limitations, such as the use of self-reported measures and a lack of control over who responds to the questionnaires. Problems of omitted and uncontrolled intervening and moderating variables may also exist. For example, this study proposes that budget adequacy directly increases organizational commitment (H3). A possible intervening variable in this relationship is job satisfaction, which was not examined in the study.6 Finally, in interpreting the results of this paper, causality must be considered. Cross-sectional survey research typically does not prove the causal direction between variables. Consequently, the causal relationships between the

variables may be different and/or more complex than proposed by this study. For example, job performance may affect budget participation. Brownell and McInnes (1986) noted this possibility in trying to explain why their empirical results differed from their hypotheses. With regard to the relationship between organizational commitment and job performance, several possibilities exist including: (1) organizational commitment leads to performance (the causal direction usually assumed in the literature); (2) performance leads to organizational commitment; or (3) job performance and organizational commitment have a recipro cal relationship. The relationship between budget adequacy and job performance has similar possibilities. Alternative methodologies such as experiments may be able to provide more information about causality; however, their ability to model complex organizational behavior may be limited. For example, with regard to organizational commitment, a laboratory experiment might yield more information about causality than a survey approach; however, simulating organizational commitment in a laboratory setting would be difficult. A challenge for future research is to overcome these obstacles to investigate causality more fully. Despite its limitations, this study suggests that budget participation may have important positive consequences for organizations. Budget participation may lead to budgets that provide adequate budgetary support and thus facilitate employee performance. Budget participation may also increase organizational commitment, which could lead to positive work outcomes such as higher job performance.

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APPENDIX 1 SURVEY INSTRUMENTS Budget participation 1. The portion of the budget I am involved in setting. 2. The amount of reasoning provided to me by a superior when the budget is revised. 3. The frequency of budget-related discussion with superiors initiated by me. 4. The amount of influence I feel I have on the final budget. 5. The importance of my contribution to the budget. 6. The frequency of budget-related discus sions initiated by my superior when budgets are being set. Budget adequacy 1. 2. 3. My budget does not allow me to perform what is expected of me. What is expected of me is achievable under my budget. I am pretty much confident that I can achieve what is expected of me under my budget.
Oa-gadzational

commitment

1. I am willing to put in a great deal of effort beyond that normally expected in order to help this organization be successful. 2. I talk up this organization to my friends as a great organization to work for. 3. I would accept almost any type of job assignment in order to keep working for this organization. 4. I found that my values and the organizations values are very similar. 5. I am proud to tell others that I am part of this firm. 6. This organization really inspires the very best in me in the way of job performance. 7. I am extremely glad that I chose this organization to work for over others I was considering at the time I joined. 8. For me this is the best of all possible organizations for which to work. 9. I really care about the fate of this organization.

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H. NOURI and R. J. PARKER

Job performance How do you evaluate your performance as compared with your assessment of your superiors expectations on the following work dimensions? Please note that the word product could have different meanings for different departments. For example, the product of the marketing department could be sales and customers; the product of the accounting department could be reports; the product of the purchasing department could be supplies and suppliers; the product of the R&D department could be new innovations; and so on. 1. 2. 3. 4. 5. 6. 7. 8. Quality of the product Quantity of the product Timeliness of the product New product development Personnel development Budget achievement Cost reduction programs Political/public affairs

1. Quality of the product 2. Quantity of the product 3. Timeliness of the product 4. New product development 5. Personnel development 6. Budget achievement 7. Cost reduction programs 8. Political/public affairs social

desirabmty

Please circle the number you feel most accurately describes the degree of importance attached by your superior to your performance with respect to the following work dimensions. Please note that the word product could have different meanings for different departments as mentioned earlier.

1. I never hesitate to go out of my way to help someone in trouble. 2. I have never intensely disliked anyone. 3. No matter who I am talking to, I am always a good listener. 4. I am always willing to admit it when I make a mistake. 5. I always try to practice what I preach. 6. When I do not know something, I will readily admit it. 7. I never resent being asked to return a favour. 8. I have never been irritated when people expressed ideas very different from my own. 9. I have never felt that I was punished without cause. 10. I have never deliberately said something that hurt someones feelings.

APPENDIX 2 The procedures of Sobel (1982) were used to assess the statistical significance of the indirect effects in the path model. Using regression, unstandardized path coefficients and their standard deviations were estimated for all links in Fig. 1. Indirect effects were estimated by multiplying the relevant path coefficients. The standard deviation associated with each indirect effect was estimated using formulae derived from procedures suggested by Sobel (1982). The following figure and table demonstrate the procedures:

L=
Y, = Yz =

budget participation budget adequacy organizational commitment

THE RELATIONSHIP BETWEEN BUDGET PARTICIPATION AND JOB PERFORMANCE Y3 = b,, = s,! = Indirect effect XooY2 Y1 on Y,
LonY3

483

job performance path coefficient (unstandardized) standard deviation of path coefficient Indirect effect coefficient Standard deviation of coefficient (bz,Zs,,2+b, ~21~)~~

via Y2

bw hb21+bz3

[b3zb2,s,~2+b3z2sza2 +b32b&,* +@za+b,,b2,)s3zZl2

b&z, bz,b,z b&l

(b&,,Z+&3z-?12 (b3,2s,aZ+b,a2s3,312

viaY1

Note: The Sobel (1982) approach omits variance by variance multiplications in the formulae for the standard deviations of the indirect effects. As Baron and Kenny (1986) note, this product is ordinarily small.