Management control systems design in new product development

Approximate reading time: 3-5 min. What are the affects of management control systems design in product development? How do companies customize their management control systems according to the specific characteristics of each product development project? A study attempted to clarify this issue.

The study investigated the relationship between uncertainty in the projects (market and technology), product strategy, and design of management control systems. The researcher also examined whether management control systems support or, as often claimed in the innovation literature, hinder product development.


management control systems design


To understand how project managers use management control systems, the researcher visited 12 business units in seven companies, both in Europe and the United States. During each of these visits, the researcher interviewed one or two project managers, the marketing manager, the R & D manager and the head of each business unit as well as responsible for the design and implementation of new guidelines for the product development process. Based on case studies, they were formulated and then tested hypotheses on a larger population of company. The response rate was 77% (56 of 73).


Management control systems design

The study reinforces a broader definition of management control systems that go beyond financial measures and includes non-financial measures. The study’s descriptive statistics show that project managers are dependent on non-financial measures much more than they are financial. This result indicates that one can not limit itself to traditional management control systems in product development. You must include a more comprehensive set of dimensions. This is probably because managers work with the implicit assumption that good results in non-financial measures, in the long-term, will lead to good financial results.

The study shows that uncertainty in the projects and product strategy can explain the design of management control systems. Furthermore, the study also shows that better cost control and design information have a positive relationship to performance (successful product development projects). On the other hand, time information in the resources prevents performance, which supports the argument that if excessive weight is attached to formal management control systems, innovations are limited. One likely explanation is that focus on reducing “time-to-market” is not appropriate for certain types of product development projects, especially those aimed at radical innovations.



Davila, T. 2000. An Empirical Study on the Drivers of Management Control Systems’ Design in New Product Development. Accounting, Organizations and Society 25 (4-5), 383–409.

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