The Impacts of Transformational Leadership on Competitive Advantage of Local Accounting Firms
top of page
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
crossref
doi
open access

Published: 23 November 2018

The Impacts of Transformational Leadership on Competitive Advantage of Local Accounting Firms

Devie, Ivan Wendrata, Christian A. Hartono

Petra Christian University, Indonesia

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

Download Full-Text Pdf

doi

10.31014/aior.1992.01.04.47

Abstract

The emergence of the ASEAN Economic Community (AEC) had increased the competitiveness of many industries in South-East Asia. Since the accounting services have been heavily regulated by the Mutual Recognition Arrangements (MRA), the impact of AEC has led to the entrance of many foreign accounting firms in Indonesia, which may harm the local accounting firms if they do not have the competitive advantage to prosper. This research aims to find the influence of transformational leadership, organizational culture, and management control system to a competitive advantage. A set of questionnaires was assembled to measure each of the variables using the statements adapted from previous researches of the respective variables. Each statement is rated using a 5-point Likert scale and analyzed using SmartPLS. This study was conducted on 27 public accounting firms and 18 accounting service firms in Surabaya, Indonesia. The findings confirm that both transformational leadership and organizational culture have significant influence to competitive advantage, while management control system has no significant influence to competitive advantage. Moreover, the transformational leadership also shows significant influence on organizational culture and management control system and the influence of organizational culture to management control system as mediating variables also show a significant impact. Finally, this paper concludes that local accounting firms can, in the long run, improve their competitive advantage by adopting an interactive management control system and showing idealized influence characteristic as transformational leaders. Moreover, to answer the rapid changes in market demand caused by AEC, local accounting firms can also adopt market culture.

References

  • Abernethy, M. A., Bouwens, J. & Lent, L. (2010). Leadership and control system design. Management Accounting Research, 21. 2-16. https://doi.org/10.1016/j.mar.2009.10.002

  • Al Serhan, Y. N., Julian, C. C. & Ahmed, Z. U. (2015). Using time to gain competitive advantage: a framework and analysis of propositions. International Journal of Commerce and Management, 25 (04). 456-465. https://doi.org/10.1108/ijcoma-05-2013-0043

  • Agbor, E. (2009). Creativity and innovation: the leadership dynamic. Journal of Strategic Leadership, 1 (1), 39-45

  • Ali, N. M., Jangga, R., Ismail, M., Kamal, S. N. M. & Ali, M. N. (2015). Influence of leadership styles in creating quality work culture. Procedia Economics and Finance, 31 (01). 161-169. https://doi.org/10.1016/S2212-5671(15)01143-0

  • Anjali, K. T. & Anand, D. (2015). Intellectual stimulation and job commitment: A study of IT Professional. IUP Journal of Organizational Behaviour, 14 (02), 28-41.

  • Anning-Dorson, T. (2018). Innovation and competitive advantage creation. International Marketing Review, 35 (04). 580-600. https://doi.org/10.1108/imr-11-2015-0262.

  • Argyris, C. (1991). Teaching smart people how to learn. Harvard Business Review, 69 (03). 99-109.

  • ASEAN. (2015a). ASEAN Economic Community. Retrieved from https://asean.org/asean-economic-community/

  • ASEAN. (2015b). ASEAN Economic Community. Retrieved from https://www.asean.org/storage/2015/12/ASEAN-Integration-in-Service -(Dec%202015).pdf

  • Avolio, B., Waldman, D. & Yammarino, J. (1991). Leading in the 1990s: the four i’s of transformational leadership. Journal of European Industrial Training, 15 (04). 9-16. https://doi.org/10.1108/03090599110143366

  • Avolio, B. J., Bass, B. M. & Jung, D. I. (1999). Re-examining the components of transformational and transactional leadership using the multifactor leadership questionnaire. Journal of Occupational and Organizational Psychology, 72. 441-462.

  • Barney, J. B. (1986). Organizational culture: can it be a source of sustained competitive advantage?. The Academy of Management Review, 11 (03). 656-665.

  • Bass, B. M. (1990). From transactional to transformational leadership: learning to share the vision. Organizational Dynamics, 18 (03). 19-31. https://doi.org/10.1016/0090-2616(90)90061-S

  • Bass, B. M. & Avolio, B. J. (1993). Transformational Leadership and Organizational Culture. Public Administration Quarterly, 17 (01), 112-121.

  • Bass, B. M. & Avolio, B. J. (1994). Improving organizational effectiveness through transformational leadership. Thousand Oaks, California: Sage Publications.

  • Bass, B. M. (1998). Transformational leadership: industrial, military, and educational impact. Mahwah, NJ: Lawrence Erlbaum Associates.

  • Bass, B. M. (1999). Two decades of research and development in transformational leadership. European Journal of Work and Organizational Psychology, 8 (01), 9-32.

  • Berson, Y. & Avolio, B. J. (2004). Transformational leadership and the dissemination of organizational goals: a case study of a telecommunication firm. The Leadership Quarterly, 15 (05), 625-646.

  • Birasnav, M. (2012). Relationship between transformational leadership behaviors and manufacturing strategy. International Journal of Organizational Analysis, 22 (02). 205-223.

  • Bisbe, J. & Otley, D. (2004). The effects of the interactive use of management control systems on product innovation. Accounting, Organizations and Society, 29. 709-737.

  • Block, L. (2003). The leadership-culture connection: an exploratory investigation. Leadership & Organization Development Journal, 24 (06). 318-334. https://doi.org/10.1108/01437730310494293

  • Brown, E. A. (2008). Dimensions of transformational leadership and relationship with employee performance in hotel front desk staff. Retrospective Theses and Dissertations. 14943. https://lib.dr.iastate.edu/rtd/14943

  • Bruch, H., & Walter, F. (2007). Leadership is context: investigating hierarchical impacts on transformational leadership. Leadership & Organization Development Journal, 28 (08), 710-726.                     

  • Burns, J. M. (1978). Leadership. New York: Harper & Row.

  • Cameron, K. S. & Quinn, R. E. (1999). Diagnosing and changing organizational culture: based on the competing values framework. California: Jossey-Bass.Chan, S. C. H. & Mak, W. M. (2014). Transformational leadership, pride in being a follower of the leader and organizational commitment. Leadership & Organizational Development Journal, 35 (08). 674-690. https://doi.org/10.1108/LODJ-12-09-0076

  • Chan, L. L. M., Shaffer, M. A. & Snape, E. (2004). In search of sustained competitive advantage: the impact of organizational culture, competitive strategy, and human resource management practices on firm performance. The International Journal of Human Resource Management, 15 (01). 17-35. https://doi.org/10.1080/0958519032000157320

  • Densten, I. L. (2002). Clarifying inspirational motivation and its relationship to extra effort. Leadership & Organizational Development Journal, 23 (01). 40-44. https://doi.org/10.1108/01437730210414553

  • Devie, Semuel, H, & Siagian, H. (2015). The different impact between transformational leadership and transactional leadership on competitive advantage. Journal of Progressive Research in Social Sciences, 3 (01). 146-153.

  • Duréndez, A., Madrid-Guijarro, A. & García-Pérez-de-Lema, D. (2011). Innovative culture, management control systems and performance in small and medium-sized Spanish family firms. Innovar: Revista de ciencias administrativas y sociales, 21 (40). 137-153.

  • Duréndez, A., Ruiz-Palomo, D., García-Pérez-de-Lema, D. & Dieguez-Soto, J. (2016). Management control systems and performance in small and medium family firms. European Journal of Family Business, 6. 10-20. https://doi.org/10.1016/j.ejfb.2016.05.001

  • Ehrhardt, M. G. & Klein, K. J. (2001). Predicting followers’ preferences for charismatic leadership: the influence of follower values and personality. The Leadership Quarterly, 12. 153-179.

  • Elkelish, W. W. & Hasan, M. K. (2014). Organizational culture and corporate risk disclosure. International Journal of Commerce and Management, 24 (04). 279-299. https://doi.org/10.1108/ijcoma-06-2012-0035

  • Flamholtz, E. G. (1983). Accounting, budgeting and control systems in their organizational context: theoretical and empirical perspectives. Accounting, Organizations and Society, 8 (02), 153-169. https://doi.org/10.1016/0361-3682(83)90023-5

  • Flamholtz, E. G.  & Randle, Y. (2012). Corporate culture, business models, competitive advantage, strategic assets, and the bottom line. Journal of Human Resource Costing & Accounting, 16 (02). 76-94. https://doi.org/10.1108/14013381211284227

  • Fleishman, E. A. & Peters, D. R. (1962). Interpersonal values, leadership attitudes and managerial "success." Personnel Psychology, 15 (02). 127-143.

  • Garcia-Morales, V. J., Llorens-Montes, F. J. & Verdu-Jover, A. J. (2008). The effects of transformational leadership on organizational performance through knowledge and innovation. British Journal of Management, 19. 299-319. https://doi.org/10.1111/j.1467-8551.2007.00547.x

  • Gibson, C. B., Conger, J. & Cooper, C. (2001). Perceptual distance: the impact of differences in team leader and member perceptions across cultures. Advances in Global Leadership, 2. 245-276.

  • Giunipero, L. C. & Brand, R. R. (1996). Purchasing’s role in supply chain management. International Journal of Logistics Management, 7 (01). 29-38.

  • Gunadi, A. (2016). ASEAN economic community impact for Indonesia. Jurnal Opinio Juris, 19. 8-30.

  • Herath, S. K., Herath, A. & Abdul Azeez, A. (2006). Family Firms and Corporate Culture: A Case Study from a Less Developed Country. International Journal of Management and Enterprise Development, 3 (03), 227-243.

  • Henri, J-F. (2006). Management control systems and strategy: A resource-based perspective. Accounting, Organizations and Society, 31 (06). 529-558.

  • Hoque, Z. & Chia, M. (2012). Competitive forces and the levers of control framework in a manufacturing setting: a tale of a multinational subsidiary. Qualitative Research in Accounting & Management, 9 (02). 123-145. https://doi.org/10.1108/11766091211240351

  • Howell, J. M. & Avolio, B. J. (1993). Transformational leadership, transactional leadership, locus of control and support for innovation. Journal of Applied Psychology, 78 (06). 891-902. https://doi.org/10.1037/0021-9010.78.6.891

  • Imran, M.K., Ilyas, M., Aslam, U. & Ubaid-Ur-Rahman (2016). Organizational learning through transformational leadership. The Learning Organization, 23 (04). 232-248. https://doi.org/10.1108/TLO-09-2015-0053

  • Jaeger, M. & Adair, D. (2013). Organisational culture of construction project managers in the GCC countries. Engineering, Construction, and Architectural Management, 20 (05). 461-473. https://doi.org/10.1108/ecam-01-2012-0004

  • Jain, P. & Duggal, T. (2018). Transformational leadership, organizational commitment, emotional intelligence, and job autonomy: empirical analysis on moderating and mediating variables. Management Research Review. https://doi.org/10.1108/MRR-01-2018-0029

  • Jati, M. K. K., Hassan, S., Harman, M. K., Jabar, S. A. & Majid, M. A. A. (2015). Transformational leadership and organizational culture: a case of MAHB. Procedia Economics and Finance, 31 (01). 425-435. https://doi.org/10.1016/S2212-5671(15)01217-4

  • Jordao, R. V. D., Souza, A. A. & Avelar, E. A. (2014). Organizational culture and post-acquisition changes in management control systems: an analysis of a successful Brazilian case. Journal of Business Research, 67. 542-549. https://doi.org/10.1016/j.busres.2013.11.011

  • Khan, S. & Anjum, M. A. (2013). Role of leadership style and its impact on getting competitive advantage. European Journal of Applied Sciences, 5 (02). 53-61. https://doi.org/10.5829/idosi.ejas.2013.5.2.1114

  • Klein, A. (2011). Corporate culture: its value as a resource for competitive advantage. Journal of Business Strategy, 32 (02). 21-28. https://doi.org/10.1108/02756661111109743

  • Koufteros, X. A., Vonderembse, M. A. & Doll, W. J. (1997). Competitive capabilities: measurement and relationship. Proceedings Decision Science Institute. 1067-1068.

  • Langfield-Smith, K. 1997. Management control system and strategy: a critical review. Accounting Organizations, and Society, 22 (02). 207-232.

  • Lee, J. (2011). Aligning organizations for positive change: the role of leadership in matching strategy, culture, and social networks to vital organizational challenges. Advances in Global Leadership. 71-94. https://doi.org/10.1108/s1535-1203(2011)0000006007

  • Li, S., Ragu-Nathan, B., Ragu-Nathan, T.S. & Rao, S.S. (2006). The impact of supply chain management practices on competitive advantage and organizational performance. Omega: The International Journal of Management Science, 34. 107-124. https://doi.org/10.1016/j.omega.2004.08.002

  • Liu, F. & Huang, T. (2018). The influence of collaborative competence and service innovation on manufacturers’ competitive advantage. Journal of Business & Industrial Marketing, 33 (04). 466-477. https://doi.org/10.1108/jbim-12-2016-0294

  • Marginson, D. (2009). Value systems as a mechanism for organizational change. Journal of Accounting & Organizational Change, 5 (01). 7-34. https://doi.org/10.1108/18325910910932197

  • Ma, H. (1999). Creation and preemption for competitive advantage. Management Decision, 37 (03). 259-267. https://doi.org/10.1108/00251749910264497

  • Matsuo, M. & Matsuo, T. (2017). The effect of diagnostic and interactive uses of management control systems and managerial coaching on reflection in teams. Journal of Accounting & Organizational Change. DOI:10.1108/JAOC-06-2016-0034

  • Metwally, A. H. & Zarka, S. E. (2017). An understanding of transformational leadership and its implication on organizational learning: a literature review. The Business and Management Review, 08 (05). 163-168.

  • Milgrom, P. & Roberts, J. (1995). Complementarities and fit strategy, structure, and organizational change in manufacturing. Journal of Accounting and Economics, 19 (02). 179-208

  • Moonen, P. (2017). The impact of culture on the innovative strength of nations. Journal of Organizational Change Management, 30 (07). 1149-1183. https://doi.org/10.1108/jocm-08-2017-0311

  • Morgan, N. A. & Vorhies, D. W. (2018). The business performance outcomes of market orientation culture and behaviors. Review of Marketing Research, 15. 255-282. https://doi.org/10.1108/s1548-643520180000015012

  • Motwani, J. G., Frahm, M. L. & Kathawala, Y. (1994). Achieving a competitive advantage through quality training. Training for Quality, 2 (01). 35-40. https://doi.org/10.1108/09684879410056229

  • Nguyen, T., Mia, L., Winata, L. & Chong, V. K. (2016). Effect of transformational-leadership style and management control system on managerial performance. Journal of Business Research, 18 (08). https://doi.org/10.1016/j.jbusres.2016.08.018

  • Oney-Yazici, E., Giritli, H., Oraz-Topcu, G. & Acar, E. (2007). Organizational culture: the case of Turkish construction industry. Engineering, Construction, and Architectural Management, 14(06). 519-531. https://doi.org/10.1108/09699980710828996

  • Otley, D. T. & Pierce, B. J. (1995). The control problem in public accounting firms: an empirical study of the impact of leadership style. Accounting, Organizations and Society, 20 (05). 405-420.

  • Pant, L. W. & Yuthas, K. (2001). Using the management control system to promote competitive advantage in organizations: behavioral and sociological perspectives. Advances in Accounting Behavioral Research, 4 (01). 155-183. https://doi.org/10.1016/S1474-7979(01)04072-8

  • Parolini, J. L. & Parolini, M. D. (2012). Moving from maturity to renewal: an investigation of culture and innovation. International Journal of Organization Theory & Behavior, 15 (02). 200-238. https://doi.org/10.1108/ijotb-15-02-2012-b003

  • Peteraf, M. A. & Barney, J. B. (2003). Unraveling the resource-based tangle. Managerial and Decision Economics, 24. 309-323. https://doi.org/10.1002/mde.1126

  • Reginato, L. & Guerreiro, R. (2013). Relationship between environment, culture, and management control systems. International Journal of Organizational Analysis, 21(02). 219-240. https://doi.org/10.1108/IJOA-02-2011-0477

  • Rochdianingrum, W. A. & Samuel, H. (2017). Pengaruh leadership style terhadap management control system dengan teknologi informasi dan organizational culture sebagai variabel mediasi pada UMKM sektor garmen studi kasus di kabupaten Gresik. Jurnal Manajemen Pemasaran, 11 (02). 61-68. https://doi.org/10.9744/pemasaran.11.2.61-68

  • Rost, J. C. (1991). Leadership for the twenty-first century. New York: Praeger.

  • Rowold, J. (2005). Multifactor Leadership Questionnaire. Psychometric properties of the German translation by Jens Rowold. Redwood City: Mind Garden.

  • Sadri, G. & Lees, B. (2001). Developing corporate culture as a competitive advantage. Journal of Management Development, 20 (10). 853-859.

  • Saepudin, A., Gunawan, I. D., Nuryanto, M. & Rusmanto, T. (2017). The development of foreign accounting firms in Indonesia, its determinants and consequences. Journal of Business and Management, 19 (12). 57-67. https://doi.org/10.9790/487X-1912045767

  • Samad, S. (2012). The influence of innovation and transformational leadership on organizational performance. Procedia Social and Behavioral Sciences, 57. 486-493. https://doi.org/10.1016/j.sbspro.2012.09.1215

  • Sarros, J. C., Gray, J. & Densten, I. L. (2002). Leadership and its impact on organizational culture. International Journal of Business Studies, 10 (02), 1-26.

  • Schein, E. (1985). Organizational Culture and Leadership. San Francisco: Jossey-Bass Publisher.

  • Sigalas, C., Economou, P. V. & Georgopoulos, N. B. (2013). Developing a measure of competitive advantage. Journal of Strategy and Management, 6 (04). 320-342. https://doi.org/10.1108/JSMA-03-2013-0015

  • Simons, R. (1990). The role of management control systems in creating competitive advantage: new perspectives. Accounting Organizations and Society, 15 (01/02). 127-143.

  • Simons, R. (1994). How new top managers use control systems as levers of strategic renewal. Strategic Management Journal, 15 (03). 169–189.

  • Simons, R. (1995). Levers of control: how managers use innovative control system to drive strategy renewal. Harvard Business School Press.

  • Simons, R. (2000). Performance measurement and control systems for implementing strategy: text and cases, Prentice Hall, Upper Saddle River, NJ.

  • Statista. (2018). ASEAN countries: gross domestic product (GDP) per capita in current prices from 2008 to 2018 (in U.S. dollars). Retrieved from https://www.statista.com/statistics/804307/gross-domestic-product-gdp-per-capita-in-the-asean-countries/

  • Taty, S., Possumah, B. T. & Razak, R. I. (2017). Human capital competitiveness in ASEAN economic community (AEC): the role of regulation, Indonesia experiences. American Journal of Applied Sciences, 14 (02). 267-273.

  • Tessier, S. & Otley, D. (2012). A conceptual development of simons’ lever of control framework. Management Accounting Research, 23. 171-185. https://doi.org/10.1016/j.mar.2012.04.003

  • Twati, J. M. & Gammack, J. G. (2006). The impact of organisational culture innovation on the adoption of IS/IT: the case of Libya. Journal of Enterprise Information Management, 19 (02). 175-191. https://doi.org/10.1108/17410390610645076

  • Tuomas, K. (2009). Interplay of control in a contemporary organization. Helsinki School of Economic Department of Accounting and Finance.

  • Tuomela, T. (2005). The interplay of different levers of control: a case study of introducing a new performance measurement system. Management Accounting Research, 16. 293-320. https://doi.org/10.1016/j.mar.2005.06.003

  • Turner, J. R., Muller, R. & Dulewicz, V. (2009). Comparing the leadership styles of functional and project managers. International Journal of Managing Projects in Business, 2 (02). 198-216. https://doi.org/10.1108/17538370910949266

  • Varadarajan, R. (2018). Innovation, innovation strategy, and strategic innovation. Innovation and Strategy. 143-166. https://doi.org/10.1108/s1548-643520180000015007

  • Widener, S. K. (2007). An empirical analysis of the levers of control framework. Accounting, Organizations and Society, 32. 757-788. https://doi.org/10.1016/j.aos.2007.01.001

  • Wijetunge, W. A. D. S. (2016). Service quality, competitive advantage, and business performance in service providing SMEs in Sri Lanka. International Journal of Scientific and Research Publications, 6 (07). 720-728.

bottom of page