Japanese culture and budgeting: a review of the literature and a limited pilot study to illustrate the research agenda

Abstract

Purpose - This paper discusses the impact that Japanese culture has on the budgeting process using insights gained from the literature and from a single company small-sample pilot study. It provides a research agenda which links specific aspects of Japanese culture to predictions about Japanese groups’ budgetary, performance evaluation and variance investigation practices. Design/methodology/approach – A detailed literature review of the relevant literature in accounting, education and sociology, which considers how Japanese culture systematically differs from Western culture, and a small-sample pilot study. Findings - We find that the Singaporean subsidiary of the Japanese MNC we studied uses common Japanese budgeting practices, as previously documented by Ueno and Sekaran (1992). Line managers are rewarded based on overall actual companywide profit, consistent with the Japanese collectivist group-orientation which is itself a product of Confucianism. Although variances are used to rectify operational problems on a timely basis, line managers are not rewarded for outperforming the budget - the budget is a stick, but there is no offsetting carrot. An interviewed line manager (Chinese Singaporean, Purchasing) expressed mixed feelings about the current reward system and a preference for rewards based on outperforming his own budgetary target. This observation is consistent with some research in the educational literature suggesting that Chinese tend to be less collectivist than Japanese. Originality/value – Literature review provides a synthesis of a diverse variety of sources. The literature review and pilot study findings add to the accounting literature by studying in more detail than prior studies exactly how and why Japanese culture characteristics will and should affect budgetary practice. The paper should be of special value and interest to higher-degree and early-career researchers.