1 THE INFLUENCE FROM UNCERTAINTY AND COMPETITION ON THE ADOPTION OF TARGET COSTING

It is generally argued in the literature that target costing is not equally beneficial to all companies. Certain environmental factors have been mentioned as particularly important to the willingness of companies to adopt target costing. Perceived environmental uncertainty and intensity of competition are two factors that are suggested as having a positive impact on adoption rates. Empirical support for this view is sparse, however, and the theoretical arguments are not convincing. In this paper the alleged positive relationship between perceived environmental uncertainty and the adoption rate for target costing is called in question. It is argued that companies will generally adopt target costing only when the level of environmental uncertainty is perceived to be sufficiently low. It is suggested further that perceived environmental uncertainty interact with intensity of competition. Only companies that face intense competition and that perceive a low level of environmental uncertainty will consider the adoption of target costing. Hypotheses are generated regarding the direct and interaction effects of the contingency factors and are tested on data from a web survey of 91 randomly selected Swedish manufacturing companies (response rate 36.4%). The sample include adopters and non-adopters of target costing. Regarding the direct effects of the contingency factors, the findings indicate that the adoption of target costing is (1) negatively related to perceived environmental uncertainty, and (2) positively related to intensity of competition. As regards the effect on the adoption of target costing from interaction between the contingency factors, the findings indicate this to be negative