Performance effects of value stream costing and accounting performance measures in lean production companies – accounting for time compression

Abstract

The first purpose of this research is to study how and whether the joint use of lean production, value stream costing and accounting performance measures contribute to performance. Comparing a first-order and second-order structural equation model with survey data from 368 American production facilities, we find that lean production and management accounting practices (value stream costing and accounting measures of variance) collectively – rather than additively – affect performance. This finding indicates that organisations obtain greater performance by integrating lean production and management accounting practices into a system. The second purpose of this research is to determine whether the length of time organisations have employed lean production (‘time with lean’) moderates the joint effect of lean production and management accounting practices on performance. We find that the joint performance effect is positively moderated by the time with lean (i.e. we find a positive progressive learning curve). This contradicts the traditional wisdom on learning, which suggests that the benefits from learning are degressive. We argue that this positive moderation derives from the difficulty of understanding relations between multiple variables and the need for organisations to promote system-wide coherence via holistic changes.

Keywords:

• Value stream costing
• lean
• time compression
• accounting practices
• performance

Acknowledgements

We would like to thank Associate editor Professor Paolo Gaiardelli for a constructive review process. Likewise, we would like to thank the three reviewers. They provided very helpful comments which vastly improved the paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Henrik Nielsen

Henrik Nielsen holds a PhD and M.Sc. from Aalborg University. He is currently an affiliated researcher of Aalborg University. Previously he has been a visiting scholar at Stanford University. His primary research interest are lean, management accounting, management control and roles of finance functions.

Thomas Borup Kristensen

Thomas Borup Kristensen holds a PhD and M.Sc. from Aalborg University. He is currently employed as an Associate Professor of Aalborg University. His research focus is lean, management accounting, statistical methods, complementarity and mental health.

Lawrence Grasso

Lawrence Grassso is a Professor Emeritus of accounting, Central Connecticut State University. He holds a DBA in Accounting from Boston University. His areas of research are: cost and managerial accounting, lean accounting, performance measurement and sustainability.