cb1d10150528ba41c692f605703e0264c94e.pdf - Griffith Business School SPONSORSHIP DECISION-MAKING AND MANAGEMENT AN ACCOUNTING PERSPECTIVE Submitted in

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Unformatted text preview: Griffith Business School SPONSORSHIP DECISION-MAKING AND MANAGEMENT: AN ACCOUNTING PERSPECTIVE Submitted in fulfilment of the requirements of the degree of Doctor of Philosophy By Deborah Delaney BBus (Acc), MCom, CA April 2009 Sponsorship Decision-Making and Management: An Accounting Perspective Abstract This thesis reports on a study that has examined the sponsorship decision-making process in Australian organisations. The broad objectives of the thesis are to develop an understanding of the process of sponsorship decision-making, the factors affecting this process and the role management accounting plays in the investment decision-making process. Three empirical phases have been undertaken in the study. The first phase comprised a case study in a large public sector institution (an Australian university). The second phase involved the conduct of exploratory interviews with managers responsible for sponsorship in a number of Australian organisations. The third empirical phase involved the administration of a survey questionnaire to managers responsible for sponsorship decision making in Australian organisations. The study’s more significant findings include: (1) There appears to be scope for the application of more sophisticated sponsorship decision-making processes in Australian companies. (2) In the case study organisation studied, it appeared that the only real significant sponsorship management role for accounting concerned the budgetary identification of funds allocated to sponsorship and monitoring of funds expended. The sponsorship decision-making approach in the case study organisation can be best described as intuitively-based. (3) The exploratory interview findings suggest that the role of accounting and involvement of accountants in the sponsorship decision-making process tends to be negligible. Consistent with the case study findings, budgets were found to be mainly used in a planning and control capacity. This finding was supported by the survey phase of the study, where it was observed that the most prominent budgetary role in the context of sponsorship management is “expenditure authorisation”. i (4) Some support has been found for a proposed relationship between formalisation of the sponsorship decision-making process and the contingent factor environmental uncertainty. (5) No support was found for a proposed relationship between sophistication of the sponsorship decision-making process and the contingent factors of strategy, size, environmental uncertainty, risk and trust. (6) Support was found for a proposed relationship between intuition in the sponsorship decision-making process and the contingent factors of strategy, risk and trust. ii Originality Statement I declare that this thesis has not previously been submitted for any other degree or diploma in any university. To the best of my knowledge and belief, the thesis contains no material previously published or written by another person except where due reference is made in the thesis itself. Deborah Delaney iii Abstract........................................................................................................................... i Originality Statement .................................................................................................... iii Table of Contents .......................................................................................................... iv List of Figures ............................................................................................................... ix List of Tables.................................................................................................................. x List of Appendices ........................................................................................................ xi References ..................................................................................................................... xi Acknowledgements ...................................................................................................... xii Table of Contents CHAPTER 1 Introduction .......................................................................................... 1 1.1 1.2 1.3 1.4 1.5 Introduction ...................................................................................................... 1 Motivation ........................................................................................................ 1 Research Objectives ......................................................................................... 3 Thesis Structure ................................................................................................ 3 Conclusion ........................................................................................................ 6 CHAPTER 2 The Advertising Literature ................................................................. 7 2.1 Introduction ...................................................................................................... 7 2.2 The Advertising Literature ............................................................................... 9 2.2.1 Justifying advertising expenditure (or setting the advertising budget)......... 9 2.2.1.1 Definitions and the nature of advertising ............................................. 9 2.2.1.2 The advertising budget ....................................................................... 11 2.2.1.3 Advertising evaluation........................................................................ 14 2.3 The Sponsorship Literature ............................................................................ 15 2.3.1 Justifying sponsorship ................................................................................ 15 2.3.1.1 Definitions and motivations ............................................................... 15 2.3.1.2 Management of sponsorships ............................................................. 17 2.3.1.3 Objective setting ................................................................................. 19 2.3.1.4 Coordination and integration .............................................................. 22 2.3.1.5 Sponsorship selection ......................................................................... 26 2.3.1.6 Measuring sponsorship effectiveness ................................................. 27 2.3.2 Main sponsorship empirical studies conducted .......................................... 30 2.3.2.1 Objective related studies ..................................................................... 30 2.3.2.2 Co-ordination and integration studies ................................................ 33 2.3.2.3 Performance related studies ................................................................ 34 2.3.3 Other studies ............................................................................................... 37 2.3.3.1 Sponsorship mechanisms.................................................................... 37 iv 2.3.3.2 2.3.3.3 2.4 Longevity ............................................................................................ 37 Budgeting ........................................................................................... 38 Conclusion ...................................................................................................... 38 CHAPTER 3 The Investment Decision-making Literature .................................. 40 3.1 Introduction .................................................................................................... 40 3.2 The Decision-making Literature..................................................................... 41 3.2.1 Behavioural decision-making theory (BDT) .............................................. 41 3.2.2 Organisational decision-making theory (ODM) ......................................... 42 3.2.2.1 The rational model .............................................................................. 43 3.2.2.2 The information model ....................................................................... 44 3.2.2.3 The organisational model ................................................................... 44 3.2.2.4 The garbage can model ....................................................................... 45 3.2.2.5 The political model ............................................................................. 45 3.2.2.6 The participation model ...................................................................... 46 3.2.2.7 The dynamic phases model................................................................. 47 3.2.2.8 The model of meaning ........................................................................ 48 3.2.2.9 The intuitive model............................................................................. 49 3.2.2.10 Other issues relating to ODM research............................................... 50 3.3 The Accounting Literature.............................................................................. 52 3.3.1 The finance perspective .............................................................................. 52 3.3.1.1 Capital asset pricing model................................................................. 52 3.3.1.2 Real options theory ............................................................................. 54 3.3.2 The management accounting perspective ................................................... 55 3.3.3 The strategic management perspective ....................................................... 58 3.4 Investment in Marketing Assets ..................................................................... 60 3.5 Conclusion ...................................................................................................... 62 CHAPTER 4 The Contingency, Agency and Trust Literatures ........................... 64 4.1 Introduction .................................................................................................... 64 4.2 Contingency Theory ....................................................................................... 64 4.2.1 Size ............................................................................................................. 66 4.2.2 Uncertainty ................................................................................................. 67 4.2.3 Strategy ....................................................................................................... 70 4.3 Agency Theory ............................................................................................... 74 4.4 Trust Theory ................................................................................................... 76 4.5 Conclusion ...................................................................................................... 78 CHAPTER 5 The Roles of the Budget .................................................................... 80 5.1 Introduction .................................................................................................... 80 5.2 The Planning and Control Functions .............................................................. 81 5.2.1 Planning ...................................................................................................... 81 v 5.2.2 Control ........................................................................................................ 83 5.3 Roles of the Budget ........................................................................................ 84 5.3.1 Performance evaluation .............................................................................. 85 5.3.2 Communication .......................................................................................... 88 5.3.3 Co-ordination .............................................................................................. 90 5.3.4 Planning and forecasting ............................................................................ 90 5.3.5 Motivation .................................................................................................. 91 5.3.6 Modifier of perceived organisational reality .............................................. 92 5.3.7 Political ....................................................................................................... 93 5.3.8 Authorisation .............................................................................................. 94 5.3.9 Budgetary roles summarised ...................................................................... 95 5.4 Conclusion ...................................................................................................... 95 CHAPTER 6 Research Methods.............................................................................. 98 6.1 Introduction .................................................................................................... 98 6.2 Research Methods .......................................................................................... 98 6.2.1 Quantitative versus qualitative analysis ..................................................... 98 6.3 Quantitative Analysis ................................................................................... 100 6.3.1 Design and planning issues....................................................................... 100 6.3.2 Pilot testing ............................................................................................... 102 6.3.3 Data collection .......................................................................................... 102 6.3.4 Measurement error.................................................................................... 103 6.3.5 Advantages and limitations of the survey method.................................... 104 6.4 Qualitative Analysis ..................................................................................... 105 6.4.1 Interview Methods .................................................................................... 106 6.4.1.1 Structure of the interview ................................................................. 108 6.4.1.2 Interviewing skills ............................................................................ 108 6.4.1.3 Social interaction .............................................................................. 109 6.4.1.4 Interviewer bias ................................................................................ 109 6.4.1.5 Relevance.......................................................................................... 110 6.4.1.6 Issues of validity and reliability ....................................................... 111 6.4.1.7 Write-up of interview findings ......................................................... 112 6.4.2 Exploratory Interview Research Approach .............................................. 112 6.5 The Research Methods Adopted in this Study ............................................. 114 6.6 Conclusion .................................................................................................... 116 CHAPTER 7 The Case Study ................................................................................ 117 7.1 Introduction .................................................................................................. 117 7.2 Case Study Method ....................................................................................... 118 7.2.1 The interview schedule ............................................................................. 119 7.2.2 The interviews .......................................................................................... 120 7.2.3 The sample................................................................................................ 120 7.3 Case Study Findings ..................................................................................... 121 7.3.1 Sponsorship decision-making procedures ................................................ 121 7.3.2 Roles of the budget in sponsorship management ..................................... 124 vi 7.3.3 7.4 Degree of accounting personnel involvement in sponsorship management ...................................................................................................................126 Conclusion .................................................................................................... 127 CHAPTER 8 Interview Findings ........................................................................... 129 8.1 Introduction .................................................................................................. 129 8.2 The Interviews .............................................................................................. 129 8.3 The Interview schedule................................................................................. 130 8.4 The Sample ................................................................................................... 131 8.5 Interview Findings ........................................................................................ 134 8.5.1 The sponsorship decision-making process ............................................... 134 8.5.1.1 Definition .......................................................................................... 134 8.5.1.2 Formalisation of sponsorship analysis .............................................. 134 8.5.1.3 Sophistication of analytical techniques ............................................ 138 8.5.1.4 The leveraging decision .................................................................... 141 8.5.2 Factors affecting the sponsorship decision-making process..................... 143 8.5.2.1 Economic climate ............................................................................. 143 8.5.2.2 Role of internal environment within the sponsor organisation......... 143 8.5.2.3 Size ................................................................................................... 144 8.5.3 The role of accounting in the sponsorship decision-making process ....... 145 8.5.3.1 Accounting personnel involvement in the sponsorship investment decision ............................................................................................. 145 8.5.3.2 Budgets ............................................................................................. 146 8.5.3.3 Performance measurement ............................................................... 150 8.5.4 Other ......................................................................................................... 150 8.5.4.1 Trust .................................................................................................. 150 8.5.4.2 Marketing assets ............................................................................... 152 8.6 Conclusion .................................................................................................... 153 CHAPTER 9 Proposition Development and Design ............................................ 159 9.1 Introduction .................................................................................................. 159 9.2 Proposition Development ............................................................................. 159 9.2.1 Model 1: Independent variables and the degree of formalisation of the sponsorship decision-making process ...................................................... 164 9.2.1.1 Strategy ............................................................................................. 164 9.2.1.2 Organisation size .............................................................................. 166 9.2.1.3 Level of sponsorship expenditure ..................................................... 166 9.2.1.4 Environmental uncertainty ............................................................... 167 9.2.1.5 Risk ................................................................................................... 167 9.2.1.6 Trust ...............
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