Determinants of Budgetary Slack in Participative Budgeting of New Product Development Projects – A Field Study
The behavioral phenomenon of budgetary slack is a heavily researched topic in the field of budgeting and management accounting. It describes intentionally created budget slack in participative budgeting processes by the involved actors. The actors aim to pursue different, individual intentions, like facilitating performance evaluations, which for the most part are not in the interest of the company. The stream of literature yields a heterogeneous nature of prior research. Criticism of a blurred understanding of this important topic rises among scholars and practitioners. The recent focus on experimental research, that engages into isolated and restricted investigations of small numbers of variables only, results in practitioners blaming a lack of validity and generalizability in practice. To move theory closer to practice and to take a broader perspective, this paper aims to generate a comprehensive understanding of the phenomenon of budgetary slack and its environment in the setting of participative budgeting processes of new product development projects. During a period of eight months, we collect empirical evidence from different data sources by conducting a single case study at a German sportscar manufacturer. The qualitative analysis reveals that budgetary slack in budgeting new product development projects is primarily motivated by factors of uncertainty. We identify additional factors of information, control and social nature as well as organizational and personal factors. In-depth descriptions of their implications for the creation of slack and relations to other factors and the environment are provided, using quotes and examples derived from the field study. Furthermore, the qualitative results prove the applicability and validity of a general framework for budgetary biasing action by Lukka in the specific setting of budgetary slack creation in participative budgeting of development projects (Lukka. Budgetary biasing in organizations: Theoretical framework and empirical evidence. Accounting, Organizations and Society 13 (1998) 281–302). Determinants, identified in this field study, are linked back to his proposed groups of factors influencing budgetary biasing action. Derived from the empirical evidence and prior established theory, additional refinements of his framework are proposed to improve the fit to the special environment of development projects and the action of creating budgetary slack.