Int. J.

Production Economics 135 (2012) 430439

Contents lists available at SciVerse ScienceDirect

Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

An investigation into the mixed reported adoption rates for ABC: Evidence
from Australia, New Zealand and the UK
Davood Askarany a,n, Hassan Yazdifar b
a
b

Business School, School of Accounting and Finance, The University of Auckland, New Zealand
University of Glasgow, Glasgow, G12 8QQ, Scotland, UK

a r t i c l e i n f o

a b s t r a c t

Article history:
Received 25 February 2010
Accepted 21 August 2011
Available online 31 August 2011

An accumulated body of the literature conrms that the adoption of activity-based costing (ABC) can
lead to a substantial improvement in organisational performance, productivity and protability, and
therefore encourages further adoption of the technique. However, studies investigating the diffusion of
ABC have reported inconsistent and mixed results. This could cause uncertainty for many potential
adopters of ABC (especially for those who follow the fashion and fads approaches) and inuence their
tendencies towards the adoption of ABC in the future. Addressing the diffusion process as a contextual
factor, this study simultaneously investigates the adoption of ABC from the perspectives of different
diffusion processes. Using two commonly adopted diffusion processes (the stages of adoption and the
levels of adoption), this study examines the relationship between the reported adoption rates for ABC
and the diffusion process approaches chosen to measure its adoption rates in three western countries:
Australia, New Zealand and the UK. A similar questionnaire was used and more than 2000 qualied
CIMA members (via a survey study and follow-up interviews) were targeted. The ndings suggest a
signicant association between the reported adoption rates for ABC and the diffusion process
approaches chosen to measure the adoption rates. The ndings further suggest that the lack of a
common understanding of ABC systems may have also contributed to the mixed reported adoption
rates for ABC, as many ABC adopters have considered themselves adopters of traditional accounting
systems by mistake (especially when they are dealing with facility costs as one of the main cost
hierarchies under ABC systems).
& 2011 Elsevier B.V. All rights reserved.

Keywords:
Activity-based costing
Diffusion of innovation
Contextual factors
Adoption processes

1. Introduction
The positive role of activity-based costing (ABC) in improving
organisational performance, productivity and protability is well
demonstrated in the literature (Baykasoglu and Kaplanoglu, 2008;
Ben-Arieh and Qian, 2003; Gunasekaran and Sarhadi, 1998; Kee,
2008; Qian and Ben-Arieh, 2008; Singer and Donoso, 2008;
Tornberg et al., 2002; Tsai et al., 2008). However, research on
the diffusion of ABC has produced inconsistent results, ranging
from less than 10% up to 78% both within and between countries
(Al-Omiri and Drury, 2007a; Baird, 2007; Baird et al., 2007;
Cobb et al., 1993; Innes and Mitchell, 1991, 1995; Innes et al.,
2000; Langeld-Smith, 1997; Pierce, 2004). This inconsistency
could become more complex by the fact that some adopters of
ABC decided to stop the implementation after a short period
(Innes and Mitchell, 1991; Madison and Power, 1993). This
situation could cast doubt on ABCs capability as a suitable
technique for improving organisational performance, productivity

n
Corresponding author. Tel.: 64 9 9235785; fax: 64 9 3737406
or 64 93737444 or 64 9 3737019.
E-mail address: d.askarany@auckland.ac.nz (D. Askarany).

0925-5273/$ - see front matter & 2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2011.08.017

and protability especially in organisations that follow the fashion and fads approaches (Abrahamson, 1991, 1996; Rvik, 1996)
and might inuence their willingness towards the adoption of
ABC in the future.
A number of metaphors like translation, imitation and fashion
have been used to describe the processes by which new ideas
(innovations) travel between the members of a social system
(Rvik, 1996). As with the fashion perspective, the diffusion
innovation theory (Rogers, 2003) has been used to describe the
diffusion of innovations (including ABC) in organisations. This
theory suggests that a wide range of contextual factors (such as
organisational strategy, organisational culture, organisational
structure, characteristics of innovations, communication channels, environmental factors, etc.) may have an impact on the
diffusion of innovations (Adam and Fred, 2008; Al-Omiri and
Drury, 2007a; Askarany and Yazdifar, 2009b; Berling, 2008;
Englund and Gerdin, 2008; Qian and Ben-Arieh, 2008; Yazdifar
et al., 2005). However, the results are not consistent.
However, the majority of studies which have reported mixed
results have either failed to provide a clear denition for ABC or
used different adoption processes (e.g. considering ABC as a
practice, see Cobb et al., 1993; Innes and Mitchell, 1991, or as a
process, see Baird et al., 2004; Gosselin, 1997). So, it is not clear

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439

if these studies have examined and measured the same thing. This
is the main impetus for the current study to examine if there is a
relationship between the adopted diffusion processes and the
reported diffusion rates for ABC. No study has been reported to
examine the above relationship; therefore, current study is the
rst to address this gap in the literature.
Addressing the gap in the literature identied above, this study
simultaneously investigates the diffusion of ABC both as a
practice and as a process through two different diffusion
approaches in three western countries: Australia, New Zealand
and the UK. It targets (more or less similar respondents) 2041
qualied members of Chartered Institute of Management Accountants (CIMA) and then examines the level of association between
adopted diffusion processes and the reported diffusion rates for
ABC. It also examines the level of association between the
reported diffusion rates for ABC and the country in which ABC
is implemented.
The remainder of the paper is organised as follows: Section 2
provides a background to the research questions, followed by the
diffusion of ABC from theoretical perspectives (Section 3). Section
4 explains the adopted research method, Section 5 discusses our
empirical results and Section 6 concludes the study.

2. Background
While an accumulated body of the literature highlights the
important role of ABC in improving organisational performance,
productivity and protability, the adoption of ABC has been said
to be inconsistent and relatively behind that of the traditional
ones over the past two decades (Al-Omiri and Drury, 2007a;
Baird, 2007; Baird et al., 2007; Cobb et al., 1993; Innes and
Mitchell, 1991, 1995; Innes et al., 2000; Langeld-Smith, 1997;
Pierce, 2004). This is despite the fact that the ABC literature
provides convincing evidence for the signicant role of ABC in
improving organisational performance, productivity and protability including the following:

 To help managers make important strategic business decisions







(Lin et al., 2001) or to assist them with: cost reduction

(Baykasoglu and Kaplanoglu, 2008; Charles and Hansen,
2008b,a; Homburg, 2005; Qian and Ben-Arieh, 2008; Satoglu
et al., 2006; Thyssen et al., 2006).
To facilitate optimal joint product mix decisions (Tsai et al.,
2008); pricing, product mix and capacity expansion decisions
(Kee, 2008).
To offer cost-estimation models (Kingsman and de Souza,
zbayrak et al., 2004; Qian and Ben-Arieh, 2008), to
1997; O
provide more accurate product-cost information and to
improve decision quality (Charles and Hansen, 2008b).
To improve efciency by identifying and eliminating areas of
non-value added activities in supply chain processes (Whicker
et al., 2009).
To improve performance measurement systems (Kim et al.,
1997) and the quality of the products protability information
(Pirttila and Sandstrm, 1996) and to predict the economic
consequences of production and processes actions (Salafatinos,
1996).

However, despite the above contributions of ABC to organisational performance (which lead to relatively high expectation and
consistent adoption for ABC), research on the diffusion of ABC has
reported mixed and generally low adoption rates (commonly less
than 30% with a few exceptions of over 70% adoption rates) both
in manufacturing and service sectors (Al-Omiri and Drury, 2007a;
Askarany et al., 2010; Baird, 2007; Baird et al., 2007; Innes et al.,

431

2000; Langeld-Smith, 1997; Pierce, 2004). There is also some

evidence that a number of rms which had started to implement
ABC decided to stop the implementation after a short period
(Innes and Mitchell, 1991; Madison and Power, 1993). This
situation may cast doubt on ABCs capability as a suitable
technique and might have an impact on the attitudes of potential
adopters of ABC and reduce their willingness towards the adoption of the technique in the future.
Given the above, investigations into the adoption of ABC have
been popular during the past two decades. While many studies
have investigated the impact of different contextual factors on the
diffusion of ABC in different industries, the implemented adoption
processes and the ndings (especially in terms of adoption rates)
have not been consistent (Al-Omiri and Drury, 2007a; Anderson,
1995; Askarany and Smith, 2004; Baird et al., 2007; LangeldSmith, 1997; Yazdifar et al., 2008b).
Until now, the speed and scope of the diffusion of ABC have
been the major focus and concern in most of the published
studies in the eld of ABC (Al-Omiri and Drury, 2007b;
Anderson and Young, 1999; Askarany, 2003; Baird, 2007;
Gosselin, 1997; Langeld-Smith, 1997; Yazdifar et al., 2008a).
One of the common messages of these published studies is that
the adoption of ABC still lags behind those of traditional management accounting techniques. For example, Pierce (2004) reports
that in terms of the extent of adoption of management accounting
techniques in Ireland, the adoption of ABC ranks behind most
traditional accounting techniques such as budgeting, cost modelling and product/service pricing.
As another example, Chenhall and Langeld-Smith (1998)
have found that besides ABC, the level of adoption of most other
new management accounting techniques in Australia were relatively lower than those of the traditional techniques. For instance,
the ranking in terms of the extent of adoption of some of the new
techniques were as follows: activity-based costing ranked (24),
activity based management (21), product life cycle analysis (20)
and target costing (27). Given the above, they found the following rankings in terms of the extent of adoption of some of
traditional management accounting techniques: analysis for
budgeting and for planning nancial position (1), capital budgeting (2) and performance evaluation using return on investment
(3). Other studies have also reported relatively low adoption rates
for ABC in Australia such as 10% (Warwick and Reeve, 1997), 12%
(Booth and Giacobbe, 1997) and 28% (Askarany et al., 2007a).
Likewise, the published studies on the diffusion of management accounting innovation in the UK depict a similar picture. For
example, Abdel-Kader and Luther (2006) suggest that in terms of
ranking, the adoption of ABC ranks 32nd in the British food and
drinks industry. Similarly, another survey suggests that the
adoption rate for ABC by UK organisations is still fairly low, at
approximately 15% (Al-Omiri and Drury, 2007a).
As with Australia and the UK, the adoption of ABC in New
Zealand is reported to be low (Cotton et al., 2003a). Conducting a
comparative analysis, Cotton et al. (2003a) report an average of a
20.3% adoption rate for ABC users (both in manufacturing and
non-manufacturing sectors) in New Zealand and 17.5% for the UK
companies. Recent studies on the diffusion of ABC in New Zealand
indicate the adoption of ABC in New Zealand is still lower than
23% (Askarany et al., 2010).
Nevertheless, some studies suggest that the majority of ABC
users are still using traditional management accounting techniques. For example, Innes et al. (2000) report that while 17.5% of
the UKs largest companies have adopted ABC, only 6.2% have
replaced their traditional accounting techniques with ABC and the
rest of ABC users are using ABC alongside their traditional
accounting techniques. This could imply that the adopters of
ABC are not quite convinced that ABC is a perfect replacement for

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D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439

traditional management accounting techniques. This may discourage potential adopters of ABC who follow the fashion and fads
approaches to replace their traditional accounting systems with
ABC (Abrahamson, 1991, 1996; Rvik, 1996).
Given the above, some studies suggest that any further
signicant increase in the number of ABC adopters is unlikely
(Cotton et al., 2003a; Pierce, 2004). Other studies have gone even
further and suggested that there has been a reduction in the
adoption of ABC after the rst decade of its introduction. For
example, Innes et al. (2000) argued that from 1987 to 1994 there
was a considerable growth (from nil to over 20%) in ABC adoption
in the U.K.s largest companies but this rate of growth had not
been maintained. According to their ndings, the adoption rate
for ABC in the U.K.s largest companies has dropped to 17.5%
(from 20% in 1994) by 1999.
However, while many published studies on the adoption of
ABC have reported a relatively lower adoption rate for ABC
(compared with those using traditional costing systems), the
ndings are inconsistent. The majority of reported adoption rates
range from 10% to 30% with a few exceptions of over 70% (Al-Omiri
and Drury, 2007a; Baird, 2007; Baird et al., 2007; Innes et al., 2000;
Langeld-Smith, 1997; Pierce, 2004). For instance, the reported
adoption rates for ABC in Australia vary from 10% (Warwick and
Reeve, 1997) to 56% (Chenhall and Langeld-Smith, 1998) in almost
the same period and up to 78% after 6 years (Baird et al., 2004).
However, others reported an adoption rate of less than 30% for ABC
in Australia at the same time that a 78% adoption rate was reported
(Askarany et al., 2007a; Booth and Giacobbe, 1997; Clarke and Mia,
1995; Corrigan, 1996).
It might be argued that such variations could be normal as
some of the studies with the low adoption rates of 10% and 12%
(such as those of Warwick and Reeve and Booth and Giacobbe)
occurred in 1997, whereas Bairds studies that reported higher
adoption rates were published in 2004 and 2007. While this could
be a legitimate argument for comparing studies that occurred in
very different time periods, reporting very different adoption
rates for the same countries in the same time-period somehow
needs justication. For instance, different reported adoption rates
of 10% (Warwick and Reeve, 1997) and 56% (Chenhall and
Langeld-Smith, 1998) in almost the same time period (19978)
in Australia followed by other quite different adoption rates of
less than 20% (Askarany and Smith, 2004; Booth and Giacobbe,
1997; Clarke and Mia, 1995; Corrigan, 1996) to 78% (Baird et al.,
2004) in the same country (Australia) in the same time period
(2004) raise an important question: Are these studies examining
the same thing and is there any relationship between adopted
diffusion processes and the reported diffusion rates for ABC?
A careful examination of the published results in the literature
suggests that part of the above variation (mixed results) could be
related to the following factors: using different diffusion process
approaches for studying the adoption of ABC such as referring to
ABC as a whole practice in some studies (Al-Omiri and Drury,
2007a; Anderson, 1995; Pierce, 2004) but breaking down ABC into
a set of different processes and activities in other studies (Baird
et al., 2004; Brown et al., 2004; Gosselin, 1997; Krumwiede,
1998); using different questionnaires, or targeting different
populations with different understanding of ABC; or comparing
the ndings of different studies carried out in different periods.
However, the majority of these studies fail to provide a clear
explanation to show how they have measured the process of the
diffusion of ABC. In other words, they have either failed to provide
a clear denition or diffusion process for ABC or they have used
different adoption processes (e.g. considering ABC as a practice,
see Cobb et al., 1993; Innes and Mitchell, 1991, or as a process,
see Baird et al., 2004; Gosselin, 1997). So, it is unclear if the
targeted respondents had a common understanding regarding the

diffusion of ABC and whether these studies have examined and

measured the same thing. What is clear is that they have
produced inconsistent and mixed results for the adoption of
ABC in different countries over the past two decades. Table 1
provides a summary of the variations for the diffusion of ABC in
the three targeted countries (Australia, New Zealand and the UK) and
some other countries for almost the past two decades (19912009).
The main impetus for the current study is to examine if there
is a relationship between adopted diffusion processes and the
reported diffusion rates for ABC. No study has been reported to
examine the above relationship; therefore, the current study is
the rst to address this gap in the literature. In this study we
examine the diffusion of ABC both as a practice and as a process at
the same time by targeting the same respondents. Furthermore,
this study compares the adoption rates of ABC among the three
surveyed countries; Australia, New Zealand and the UK to see
whether (or not) there is any association between the diffusion of
ABC and the countries where the diffusion of ABC is investigated.
The following section discusses the diffusion of ABC from theoretical perspectives.

Table 1
A summary of the diffusion of ABC during the past two decades.
Author, date

Adoption
rate (%)

Country

Drury and Tayles (2000)

Cobb et al. (1993)
Innes and Mitchell (1991) and Innes and
Mitchell (1995)
Warwick and Reeve (1997)
Nicholls (1992)
Cinquini et al. (1999)
Armitage and Nicholson (1993)
Chen et al. (2001)
Sartorius et al. (2007)
Clarke et al. (1999)
Chongruksut (2002)
Booth and Giacobbe (1997)
Corrigan (1996)
Groot (1999)
Nguyen and Brooks (1997)
Clarke and Mia (1995)
Armitage and Nicholson (1993)
Al-Omiri and Drury (2007a,b)
Askarany and Yazdifar (2009a,b)
Cotton et al. (2003a,b)
Innes et al. (2000)
Groot (1999)
APQC/CAM (1995)
Askarany and Smith (2004)
Kip and Augustin (2007)
Hosseini et al. (1997)
Joshi (2001)
Cotton et al. (2003a,b)
Innes and Mitchell (1995)
Kip and Augustin (2007)
Askarany and Yazdifar (2009a,b)
Askarany and Yazdifar (2009a,b)
Pavlatos and Paggios (2009)
Ittner et al. (2002)
Fawzi (2008)
Pierce and Brown (2004)
Askarany et al. (2007a,b)
Hosseini et al. (1997)
Maelah and Ibrahim (2007)

Bjornenak
(1997)
Cohen et al. (2005)
Gosselin (1997)
Yakhou and Dorweiler (1995)
Duffy and McCahey (2002)
Chenhall and Langeld-Smith (1998)
Baird et al. (2004)

4
6
6

UK
UK
UK

10
10
10
11
11
11.60
11.80
11.90
12
12
12
12.50
13
14
15
15.20
17.50
17.50
17.70
18
19
19
20
20
20.30
21
21
22.50
23.40
23.50
26
26.30
27.90
28
28
36
40
40.90
47.8
48
55
56
78

Australia
UK
Italy
US
Hong Kong
South Africa
Ireland
Thailand
Australia
Australia
Netherlands
Australia
Australia
Canada
UK
UK
UK
UK
US
US
Australia
Germany
Canada
India
New Zealand
UK
US
New Zealand
Australia
Greek
US
Ireland
Ireland
Australia
US
Malaysia
Norway
Greek
Canada
UK
Ireland
Australia
Australia

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439

3. The diffusion of ABC from theoretical perspectives

According to diffusion theory (Rogers, 2003), an innovation
can be an idea, practice, or object that is perceived as new by an
individual or other unit of adoption. Likewise, Damanpour and
Gopalakrishnan (1998) dene innovation as the adoption of an
idea or behaviour new to the organisation. Wolfe (1994) explains
the diffusion of an innovation as a way the new ideas are accepted
(or not) by those to whom they are relevant. Rogers (2003)
extends this denition to consider diffusion as a process by which
an innovation is communicated through certain channels over
time among the members of a social system. The members of a
social system could be organisations, societal sectors or nations.
According to Rogers (2003), the diffusion of an innovation in a
particular population is usually measured by its rate of implementation. Diffusion rates are often measured in terms of the
proportion of rms using a new technique (an innovation) as
compared with those using the old ones.
As with the diffusion of innovation theory (Rogers, 2003),
imitation, fashion and fads have also been introduced to explain
the diffusion process of innovations (Abrahamson, 1991, 1996;
Rvik, 1996). Rvik (1996) introduces fashion as an inuencing
factor, which can play an important role in the diffusion process
of an innovation. He argues that the process of the diffusion of an
innovation follows a selective perception, which adjusts to the
social environment and copes with what is in fashion and what is
out of fashion. This implies that usually the innovations chosen
are those which seem to be more fashionable. According to Rvik
(1996), fashion is a human made and dynamic phenomenon that
spreads by drawing attention to it. Fashion can present itself in
many ways: as ideas, social organisations, specic structures and
processes in organisations, etc. Rvik refers to fashion as an
institutionalised standard for implementing a new idea, and
change/innovation, in order to organise successfully, be up-todate and be efcient. According to Rvik (1996, p.159), fashion
also refers to the notion that organisations are torn between
signalling a common identity and belonging to a group of
organizations and the motive of distinguishing themselves from
the other organisations and attracting attention. From this
perspective, fashionable ideas and innovations/changes spread
by imitation, but, after a while, they will be so common, that
some organisations may wish to demonstrate their uniqueness by
developing new ideas or implementing new innovations, which in
turn become fashionable, and so the process starts all over again.
The fashion perspective leads to imitating certain technologies
promoted by fashion-setting organisations or fashion setters,
such as consultants, irrespective of whether or not such technologies are efcient (Malmi, 1999). Finally, the fad perspective
explains that innovations are adopted for legitimacy rather than
rational purposes.
In line with the above argument, we can assume that some
organisations may follow fashion and fads approaches in pursuing
ABC adoption. In this case, the low level of acceptance and the low
diffusion rate of ABC may have an impact on its further diffusion
in organisations, especially for organisations that follow fashion
and fads approaches (Abrahamson, 1991, 1996; Rvik, 1996). So,
from this perspective, an investigation into the mixed and
relatively low adoption rates of ABC in organisations may contribute to the further diffusion of ABC in practice.
Proposing the diffusion of innovation theory, Rogers (2003)
identies a wide range of contextual factors inuencing the diffusion
of innovations in organisations. Addressing the major contextual
factors identied by Rogers, Askarany (2003) classies all inuencing factors into three main categories: characteristics of innovations, characteristics of adopters, and factors external to both
innovations and adopters (such as social and environmental factors).

433

Adopting the diffusion of innovation theory, an accumulated

body of literature has examined and conrmed the impact of
different contextual factors on the diffusion of management
accounting innovations including ABC (Adam and Fred, 2008;
Al-Omiri and Drury, 2007a; Askarany and Yazdifar, 2009b;
Berling, 2008; Englund and Gerdin, 2008; Qian and Ben-Arieh,
2008; Yazdifar and Askarany, in press). According to the diffusion
of innovation theory (Rogers, 2003), there are a number of
contextual factors which could inuence the diffusion of innovations: characteristics of innovations (e.g. relative advantage,
complexity, compatibility, observability and trialibility of innovation/s), characteristics of adopters (e.g. organisational structure,
organisational culture, organisational strategy, etc.) and other
inuential factors related to a particular country or environment
such as the level of development of the country, local regulations
and policies, communication channels, roads, networks, etc. Given
the above, it can be argued that the variation of the above factors
in different countries or societies may inuence the diffusion of
ABC and lead to different adoption rates for ABC in different
countries. So, in line with the diffusion of innovation theory, we
may suggest the following proposition:
There is a signicant association between the reported adoption rates for ABC and the country where the diffusion of ABC
is investigated.
Studies investigating the diffusion of ABC have used different
approaches to examine the status and the extent of the diffusion
of ABC in organisations (Askarany and Yazdifar, 2009b; Baird,
2007; Chenhall and Langeld-Smith, 1998; Gosselin, 1997; Innes
and Mitchell, 1991; Yazdifar and Askarany, 2009). Some studies
have examined the level of the diffusion of ABC based on the
purpose for which it has been used: activity analysis, activity
cost analysis and the allocation of costs to costs objects (Baird
et al., 2007, 2004; Gosselin, 1997). Some studies have examined
the extent of the adoption of ABC based on the following scales:
relatively high adoption, relatively moderate adoption and
relatively low adoption (Chenhall and Langeld-Smith, 1998),
or small extent, moderate extent and great extent (Baird, 2007;
Baird et al., 2007), Other studies have used further scales to
examine the status and the extent of the diffusion of ABC in
organisations including: adoption and implementation processes
(Gosselin, 1997; Rogers, 2003); initiation, adaption, adoption,
acceptance processes (Anderson, 1995; Cooper and Zmud, 1990);
not considered, considering, considered then rejected, approved
for implementation, analysis, getting acceptance, implemented
then abandoned, acceptance, routine systems and integrated
system (Krumwiede, 1998); no consideration/decision or introduction, decided not to adopt or decided to reject, considering
adoption in the future or given some consideration into the
introduction of ABC, implemented on a trial basis and implemented and accepted (Al-Omiri and Drury, 2007a; Askarany et al.,
2007a; Pierce, 2004).
Given the above, we can classify all implemented diffusion
processes in the literature (for examining the diffusion of ABC)
into two main groups: studies that look at ABC as one whole
practice (Al-Omiri and Drury, 2007a; Anderson, 1995; Pierce,
2004) and studies that look at ABC as a process or as a set of
events or activities (Baird et al., 2007, 2004; Gosselin, 1997) and
therefore identify two diffusion approaches. Depending on the
selected approach, the diffusion of ABC follows different steps.
Considering the diffusion of ABC as a practice may include
studies which use any of the following stages or scales addressed
in the literature: implementation, initiation, adaption, adoption,
acceptance, (Anderson, 1995; Cooper and Zmud, 1990)not considered, considering, considered then rejected, approved for

434

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439

implementation, analysis, getting acceptance, implemented then

abandoned, used as routine systems, used as integrated system,
decided not to adopt, or decided to reject, considering adoption in
the future, or given some consideration into the introduction of
ABC, implemented on a trial basis and implemented and accepted.
Considering the diffusion of ABC as a process (as a sequence of
events) does not look at the adoption of ABC as a yes or no
option but makes a distinction between full adoption and partial
adoption of ABC by dividing the adoption process of ABC into a
few levels. The main commonly adopted diffusion levels reported
in the literature for this approach can be summarised as follows:
activity analysis (AA), which is the rst level used for identifying
the activities and procedures performed to make the nal products/services; activity cost analysis (ACA), which is the second
level used for identifying the costs of each activity and cost
drivers and nally activity-based costing (ABC), which is the
allocation of the costs of different activities and cost hierarchies
to cost objects (Baird et al., 2007, 2004; Gosselin, 1997).
Considering the diffusion of ABC as a process, Baird et al.
(2004) report relatively higher adoption rates for all three levels
of ABC in private sectors in Australia as follows: 86.2% for AA
(activity analysis) users, 82.1% for ACA (activity cost analysis)
users and 78.1% for ABC users. In a comparative study, Baird
(2007) reports similarly higher adoption rates for all three activity
levels of ABC in public sectors in Australia.
However, considering the diffusion of ABC as a practice
(looking at ABC as one whole practice), some studies have
(generally) recorded relatively much lower adoption rates for
ABC, such as 10% (Warwick and Reeve, 1997), 12% (Booth and
Giacobbe, 1997) and 28% (Askarany et al., 2007a). Furthermore, as
discussed earlier, while some studies report a positive trend (an
increase) in the adoption rates for ABC over the years, other
studies suggest the opposite (Innes and Mitchell, 1991, 1995;
Innes et al., 2000). The literature review presented in this study
highlights the possible impact of using different diffusion process
models on the reported adoption rates of ABC and suggests
further investigation to examine the level of association between
the reported adoption rates for ABC and the implemented diffusion models. However, no study has been reported to examine the
above relationship; therefore, the current study is the rst to
address this gap in the literature. Given the above, we may
suggest the following proposition:
There is a signicant association between the reported adoption rates for ABC and the adopted diffusion approaches to
investigate the diffusion of ABC.

4. Research method
A survey questionnaire was mailed to 2041 registered CIMA
members in Australia, New Zealand and the UK in 2007 (1175 in
Australia, 366 in New Zealand and 500 in the UK) followed by 56
interviews. The selection of the total number of CIMA members
for each country and also the selection of each individual member
in each country was based on the total numbers of registered and
qualied CIMA members in each country who were working in
managerial accounting sections of organisations in 2007. The
head ofce of CIMA in the UK provided the authors with a list
of names and addresses of qualied and registered CIMA members who were working in a managerial accounting position in
Australia, New Zealand and the UK in 2007. Hard copies of similar
questionnaires were sent out to all targeted members in these
three countries followed by a general announcement on CIMA
website (after three weeks) encouraging those CIMA members
who had received the hard copies of the questionnaires but did

not complete them to complete an online version of the

questionnaire.
Although the limitations of surveys are well documented in
the literature (Birnberg et al., 1990; Runkel and McGrath, 1972;
Young, 1996), a survey instrument was considered appropriate at
this rst stage as it could provide the large amount of crosssectional data needed for this study. It was followed by interviewing those who expressed their willingness for this in the
survey. The interviews aimed at eliminating uncertainty, validating responses and examining answers to open ended questions in
detail, as well as gathering additional qualitative interpretations.
The respondents were the CIMA qualied management accountants who had expressed their interest in participating in an
interview by checking a box in the questionnaire and provided
the researchers with their contact details. Consequently, 56
interviews were conducted with CIMA members: 34 in Australia,
13 in New Zealand and 9 in the UK (face-to-face and over the
phone interviews). These interviews took place in 2008 and 2009.
The comments received from respondents to the initial, openended questions drew our attentions to an important, but
unexplored issue in the ABC literature (e.g. the misunderstanding
regarding the concept of ABC). Although semi-structured questions were set, the interviews took a exible form along with
follow-up questions aimed at clarifying some of the practices. All
but six of the interviews lasted between 1 and 2 h. For validity
purposes, these were also followed-up by some telephone calls
and emails to clarify some issues that had emerged subsequently.
Apart from three, all the interviews were tape recorded with the
permission of the interviewees, and then transcribed (condentiality was assured both externally and internally).
Examining the diffusion process approaches, the two most
commonly used diffusion processes in the ABC literature that
were identied and implemented follows: the stages of diffusion
and the levels of diffusion.

 The stages of diffusion approach looks at ABC as one whole

practice and examines the diffusion of ABC through different

stages such as decided not to use ABC, decided to use ABC,
etc. (Al-Omiri and Drury, 2007a; Anderson, 1995; Pierce,
2004).
The levels of diffusion approach looks at ABC as a process or a
set of different activity levels such as AA, ACA and ABC (Baird
et al., 2004; Gosselin, 1997; Krumwiede, 1998).

Under the rst diffusion approach, respondents were asked to

indicate the extent to which ABC was used in their organisations,
using a 5-point Likert-type scale (Abdel-Kader and Luther, 2006;
Innes et al., 2000) as follows: with anchors of 1. discussions have
not taken place regarding the introduction of ABC; 2. a decision
has been taken not to introduce ABC; 3. some consideration is
being given to the introduction of ABC in the future; 4. ABC has
been introduced on a trial basis and 5. ABC has been implemented and accepted. Under the second diffusion approach, the
respondents were asked to identify the level of the adoption of
ABC in their organisations as follows: activity analysisAA
(identication of activities and procedures performed in their
organisations to make the nal products/services); activity cost
analysisACA (identication of cost drivers and allocation of
costs to cost pools) and activity-based costingABC (allocation
of costs of activities to products/services). However, we have also
provided respondents with a denition for ABC as follows: an
approach to costing that focuses on activities as the fundamental
cost objects and uses the cost of these activities as the basis for
assigning costs to other cost objects such as products, services, or
customers.

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439

5. Findings
The nal number of useable survey responses (both hard
copies and online replies) was 584 for all three countries (310
completed questionnaires plus 88 not-completed or not delivered
for Australia; 142 completed questionnaires plus 10 not-completed or not delivered for New Zealand and 132 completed
questionnaires plus 45 not-completed or not delivered for the
UK). The nal completed questionnaires provided the authors
with the satisfactory response rates of 28.5%, 39.5% and 29% for
Australia, New Zealand and the UK, respectively. According to
Krumwiede (1998), the normal response rate for these surveys is
approximately 20% though there are many published surveys
with lower response rates such as 12.5% (Brown et al., 2004) or
19.6% (Al-Omiri and Drury, 2007a).
Non-response bias was examined both using the aggregated
data provided by CIMA (such as the total number of CIMA
members working in manufacturing and non-manufacturing
organisations, the average length of experiences of CIMA members and their average ages as qualied CIMA members) and
comparing them with the same information gathered by the
surveys, and through a comparison between early and late
responses. The former showed responses to be representative,
the latter that there was no perceived difference between these
responses, suggesting that non-response bias would not inuence
the outcomes.
Besides using two different diffusion processes at the same
time, the study used a similar questionnaire (for all 3 surveyed
countries) and targeted similar respondents.
5.1. The diffusion of ABC based on stages model
Using the rst diffusion approach, the diffusion of ABC in all
three targeted countries: Australia, New Zealand and the UK, is
shown in Table 2 under the following stages: discussions have
not taken place regarding the introduction of ABC; a decision has
been taken not to introduce ABC; some consideration is given to
the introduction of ABC; ABC has been introduced on a trial
basis and nally ABC has been implemented and accepted.
According to Table 2, a signicant number of organisations in
all three surveyed countries have not even discussed the introduction of ABC in their organisations (39.6% in Australia, 45.1%
New Zealand and 34.8% in the UK). Furthermore, the ndings
show a considerable number of organisations have decided not to
introduce ABC in their organisations (13.0% in Australia, 15.5% in
New Zealand and 18.2% in the UK). The sum of the two gures shows
that the adoption of ABC has not been an option for the majority of
organisations (more than 50%) in all three surveyed countries.
However, some organisations have given some consideration to the
introduction of ABC in their organisations (18.8% in Australia, 12.7%

435

in New Zealand and 19.7% in the UK), and some introduced it on a

trial basis (5.2% in Australia, 4.2% in New Zealand and 12.1% in the
UK). Nevertheless, the percentage of organisations which have
implemented and accepted the adoption of ABC in their organisations is still low (23.4% in Australia, 22.5% in New Zealand and 15.2%
in the UK). If we add to these (implemented and accepted category)
the percentages of organisations which have introduced ABC on a
trial basis, the total adoption rates are still lower than 29% for all
three countries (28.6% in Australia, 26.7% in New Zealand and 27.3%
in the UK).
Given the above, the ndings of the current study are conrmatory of the results of the majority of previous studies which
have reported relatively low adoption rates (of less than 30%) in
the above countries (Al-Omiri and Drury, 2007b; Askarany et al.,
2007b; Booth and Giacobbe, 1997; Cotton et al., 2003a; Warwick
and Reeve, 1997).
5.2. The diffusion of ABC based on levels model
Using the second diffusion process approach, the latest levels
of adoptions of ABC in all three targeted countries: Australia, New
Zealand and the UK are shown in Table 3.
Examining the extent of the adoption of ABC (using the levels
of adoption rather than the stages of adoption), Table 3 indicates
a much higher adoption rate for ABC in all three countries.
According to Table 3, 42.6% (6.524.5 11.6%) of organisations
in Australia are adopting some of the levels of ABC. This gure is
nearly twice as much as the percentage (23.4%) of the rms which
have implemented and accepted the ABC (as a practice). This is
the case for New Zealand and the UK as well. Using the second
approach, the extents of the adoption of ABC in New Zealand and
the UK are as follows: 38% (4.216.9 16.9%) and 36.4%
(1.515.2 19.7%), respectively.
A comparison between the above reported adoption rates for
ABC (resulted from two diffusion approaches) for the three
targeted countries in this study can help us to explain some
variations between reported adoption rates for ABC in the
literature as follows: according to the ndings, more than 19%
(42.623.4%) of the variation in adoption rates for ABC in
Australia, more than 15% (3822.5%) of the variation in the
adoption rates for ABC in New Zealand, and nally more than
21% (36.415.2%) variation in adoption rates for ABC in the UK are
due to the implementation of different diffusion approaches
(using the stages of adoption and the levels of adoption). These
ndings may provide us with some insights to explain how and
why some studies (Baird, 2007; Baird et al., 2004; Chenhall and
Langeld-Smith, 1998) have reported relatively high adoption
rates for ABC in the past.
According to Vincent (2005), Chi-Square is one the best
statistics for the analysis of categorical (ordinal) and nominal

Table 2
The diffusion process of ABC in Australia, New Zealand and the UK (using the stages approach).
Countries

Discussions have not taken A decision has been taken Some consideration is being
given to the introduction of
not to introduce this
place regarding the
this
practice
introduction

This practice has been

introduced on a trial
basis

This practice has been

implemented and
accepted

Total

Count
Australia
122
New Zealand 64
UK
46

Pearson Chi-Square
Likelihood ratio

Count

Count

Count

Count

Count %

39.6
45.1
34.8

40
22
24

13.0
15.5
18.2

58
18
26

18.8
12.7
19.7

16
6
16

5.2
4.2
12.1

72
32
20

23.4
22.5
15.2

308
142
132

100
100
100

Value

df

Asymp. sig. (2-sided)

17.500
16.826

8
8

0.025
0.032

436

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439

Table 3
The diffusion process of ABC in Australia, New Zealand and the UK (using the levels approach).
Countries

Australia
New Zealand
UK

Activity analysis (AA)

Allocation of costs
to activities (ACA)

Allocation of costs of
activities to products/service (ABC)

Total ABC adopters

Total

Count

Count

Count

Count

Count

20
6
2

6.5
4.2
1.5

76
24
20

24.5
16.9
15.2

36
24
26

11.6
16.9
19.7

132
54
48

42.6
38
36.4

308
142
132

100
100
100

Pearson Chi-Square
Likelihood ratio

Value

df

Asymp. sig. (2-sided)

15.436(a)
16.387

6
6

0.017
0.012

Table 4
The extent of association between two diffusion approaches for ABC in Australia, New Zealand and the UK.
The levels of the diffusion of ABC
The stages of the diffusion of ABC

Activity analysis (AA)

Total

Allocation of costs
to cost pools (ACA2)

Allocation of cost pools

to products/services (ABC)

Not used

Discussions have not taken place regarding the introduction

Count
0
%
0.0

0
0.0

0
0.0

232
39.9

232
39.9

A decision has been taken not to introduce this practice

Count
0
%
0.0

0
0.0

0
0.0

86
14.8

86
14.8

Some consideration is being given to the introduction of this

Count
14
%
2.4

48
8.2

10
1.7

30
5.2

102
17.5

This practice has been introduced on a trial basis

Count
6
%
1.0

24
4.1

8
1.4

0
0.0

38
6.5

This practice has been implemented and accepted

Count
8
%
1.4

48
8.2

68
11.7

0
0.0

124
21.3

120
20.6

86
14.8

348
59.8

582
100.0

Count
%

Pearson Chi-Square
Likelihood ratio

28
4.8

Value

df

Asymp. sig. (2-sided)

578.523
702.039

12
12

0.000
0.000

data. Given the nature of data in this study, we would consider

our data as categorical (in terms of the levels and the stages of
adoption of ABC) and nominal (in terms of the names of
countries) rather than interval and ratio data.
Conrming our rst stated proposition, descriptive information as well as the data analysis presented in Tables 2 and 3
suggest a signicant association between the reported adoption
rates for ABC (both the stages model and the levels model) and
the countries where the diffusion of ABC was investigated (signicant at 0.025 level-Pearson Chi-Square for the stages model
and signicant at 0.017 level-Pearson Chi-Square for the levels
model). These ndings suggest a need for further studies to
investigate the impact of contextual factors (constituting the
individual characteristics of the country where the study is done,
such as the extent of the development in the country, governments support for the diffusion of innovations, the levels of

education, communication channels and networks, etc.) on the

diffusion of ABC. Examining the impact of such hindering and
facilitating factors on the diffusion of ABC is expected to contribute to the adoption of ABC in the future.
Supporting our second stated proposition, descriptive information
as well as the data analysis presented in Table 4 show a signicant
association (signicant at 0.000 level-Pearson Chi-Square) between
the adopted diffusion models (for measuring the diffusion of ABC)
and the reported adoption rates.
In interpreting the above ndings, (especially in terms of the
variation between the adoption rates for ABC when using two
different diffusion models), we may suggest a few possible
scenarios as follows:

 Some organisations (e.g. those who have given some consideration to the introduction of ABC at primary levels) may have

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439




considered themselves as ABC adopters under the second

diffusion model (the levels of adoption model) but not under
the rst diffusion model (the stages of adoption model). This
could be the case if some organisations have actually started
practising some kinds of activity analysis or allocation of
costs to cost pools, which are considered the rst and the
second levels of ABC adoption under the levels diffusion
model but would not make them ABC adopters under the
stages diffusion model.
Some organisations might have been using Time-Driven ABC
but not considered themselves as ABC adopters. As with
traditional accounting systems, time-driven ABC uses a predetermined rate for allocations of costs during a specied
period. This rate is xed for the whole period and depends
only on two parameters: (1) the unit cost of supplying capacity
and (2) the time required performing a transaction or an
activity (Askarany, 2012). Having a predetermined rate (similar to those of traditional allocation systems) may mislead
some adopters of time-driven ABC to think that they are using
traditional accounting systems rather than ABC.
There is also a possibility that some respondents might have
answered yes for ABC adoption while thinking of the ABC
classication of goods stocked in warehouses.
In the case of reporting higher adoption rates (when using the
levels diffusion model), it is also possible that the higher
adoption rates are representing the organisations that are
using ABC on a trial basis as well as those that are using ABC
as an accepted practice and even some of the organisations
which have indicated giving consideration to the introduction
of ABC in the future.

In order to verify our ndings, we further performed some

interviews (face-to-face and telephone interviews with CIMA
qualied management accountants) following our surveys and
after some data analyses. While questionnaires proved to be very
economic in collecting a large volume of primary data, we realised
that we would gather some signicant insights through a number
of follow-up interviews. Our interviews with 56 accountants in
organisations revealed a very important key factor explaining part
of the reason why the adoption of ABC has always been reported
to lag behind those of traditional systems and why the majority of
ABC adopters have not replaced traditional systems with ABC. For
example, Innes et al. (2000) report that while 17.5% of the UK
largest companies have adopted ABC, only 6.2% have replaced
their traditional accounting techniques with ABC and the rest of
ABC users are using this technique along with their traditional
accounting techniques. We selected our interviewees form those
who had adopted management accounting innovations including
ABC. We asked our interviewees who had adopted ABC if they
were using traditional cost accounting alongside ABC or whether
their old costing systems were replaced by ABC.
Surprisingly, the majority of interviewees (72%) stated they
were using traditional cost accounting alongside ABC. When we
asked our interviewees to provide us with more details about
their use of ABC alongside traditional costing systems, it became
clear that they were considering the allocation of facility costs
(which is one of the cost hierarchies under ABC and uses an
arbitrary allocation base the same as traditional accounting
systemsrather than activity bases) as the adoption of traditional
accounting systems. This may be regarded as a signicant addition to the current literature that can explain an important part of
the reason why the literature suggests that the majority of
adopters of ABC have not replaced ABC with their traditional
accounting techniques and use ABC alongside their traditional
accounting techniques. In other words, given that using arbitrary
allocation bases for assigning facility costs is part of ABC, many

437

adopters of ABC may have considered themselves as adopters of

traditional accounting systems by mistake.

6. Conclusion and limitations

The present study rst highlights the positive role of ABC in
improving organisational performance, and then identies different diffusion stages/scales (used in the literature to examine the
diffusion process of ABC) and classies them into two main
diffusion approaches: the stages model (which looks at the
diffusion of ABC as one whole practice), and the levels model
(which breaks down the process of adoption of ABC into different
levels). It also contributes to the literature by examining the
levels of association between the diffusion of ABC and the
implemented diffusion models and explains part of the reason
for mixed adoption rates for ABC. The study further identies the
lack of a common understanding of ABC systems as a key factor
contributing to the mixed reported adoption rates for ABC.
The particular feature of this investigation is that besides using
a similar questionnaire and targeting more or less similar respondents (qualied CIMA members who are working in a managerial
accounting position in organisations) in the same period (2007), it
provides information on the extent of the adoption of ABC both in
terms of the stages of adoption (usually used in studies which
have reported low adoption rates for ABC) and the levels of
adoption (usually used in studies which have reported high
adoption rates for ABC) at the same time.
The ndings suggest that examining the diffusion of ABC using
the levels model (rather than the stages model) may lead to
results suggesting a higher adoption rate. Using the stages
model, the ndings suggest that the percentage of organisations
which have implemented and accepted the ABC systems in their
organisations is still lower than 24% in all three surveyed
countries: Australia, New Zealand and the UK by 2007. However,
using the levels model, the ndings suggest a much higher
adoption rate for all three countries. According to the ndings,
42.6% of organisations in Australia are adopting ABC at some level
and the extent of adoption of ABC in New Zealand and the UK is
38% and 36.4% respectively.
A comparison between the reported adoption rates for ABC
(resulting from two diffusion approaches) for the three targeted
countries in this study can help us to explain some variations
between reported adoption rates for ABC in the literature as follows:
according to the ndings, more than 19% of the variation in the
adoption rates for ABC in Australia, more than 15% of the variation
in the adoption rates for ABC in New Zealand and nally more than
21% of the variation in the adoption rates for ABC in the UK are likely
to be due to the variation between using stages of adoption and
using levels of adoption to study the diffusion of ABC.
Conrming our rst stated proposition, both adopted diffusion
approaches (the stages model and the levels model) suggest a
signicant association between the reported adoption rates for
ABC and the countries where the diffusion of ABC was investigated (signicant at 0.025 level-Pearson Chi-Square based on the
stages model and signicant at 0.017 level-Pearson Chi-Square
based on the level process model). Given the above, the current
paper recommends further studies into the impact of contextual
factors (composing the characteristics of individual countries) on
the diffusion of ABC in organisations. Examining the impact of
such hindering and facilitating factors on the diffusion of ABC is
expected to contribute to the adoption of ABC in the future.
Conrming our second stated proposition, the ndings suggest
a signicant association (signicant at 0.000 level Pearson ChiSquare) between the reported adoption rates for ABC and the
implemented diffusion models.

438

D. Askarany, H. Yazdifar / Int. J. Production Economics 135 (2012) 430439

Another important nding of the current study is explaining

an important part of the reason why the literature suggests that
the majority of adopters of ABC have not replaced their traditional
accounting techniques with ABC and use ABC alongside their
traditional accounting techniques. We found that the majority
(72%) of ABC users classify themselves (by mistake) as the
adopters of traditional systems when they are dealing with the
allocation of facility costs (which is one of the cost hierarchies
under ABC and uses an arbitrary allocation base like traditional
accounting systems rather than activity bases).
Although statistical tests were performed to look for evidence
of non-response bias, there was no way to directly test whether
the non-respondents were systematically different than the
respondents. The respondents were mostly controllers and
accounting managers who were members of the CIMA and may
thus have exhibited a bias toward reporting ABC adoption or
implementation. Thus, generalising the results of this study to all
organisations in Australia, New Zealand and the UK should be
done with caution.

Acknowledgements
The authors are grateful to the University of Auckland,
Research Foundation of the Chartered Institute of Management
Accountants (CIMA) of the UK, the University of Shefeld and
University of Nizwa (specially Professor Abdallah Omezzine, Dr.
Dennis Powers and Dr. Masri Hatem) for their supports and
facilitating the research. The authors are also grateful to Shahla
Damoory and Vicki Hargraves from Auckland University of
Technology (AUT) for their constructive feedbacks.
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