Strategic cost management and performance: The case of environmental costs

Despite recent developments in the stream of research devoted to strategic cost management (SCM), there are limitations found with this research, notably the overemphasis on one component of SCM (executional cost management), the underemphasis on the other component (structural cost management), the insufficiency of links between those two components, and the absence of evidence supporting their link with performance. The aim of this study is to examine the relationship between both components of SCM, and financial performance. Two main research questions are investigated: (i) To what extent do executional and structural cost management influence financial performance? (ii) To what extent does structural cost management mediate the link between executional cost management and financial performance? In order to examine the link between SCM and performance, one specific context is investigated, namely environmental costs. The environmental costs reflect an ‘executional’ aspect aimed at managing, controlling and optimizing costs for a given environmental strategy, but also a ‘structural’ aspect based on their influence on the firm's cost structure notably in terms of product design, raw materials used and operational process design. Survey data have been collected on a sample of 319 Canadian manufacturing firms to examine the link between SCM and financial performance.