Mediating role of balanced scorecard on the relationship between uncertainty and performance in the manufacturing companies in Jordan

Full text

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Mediating Role of Balanced Scorecard on the Relationship between Uncertainty
and Performance in the Manufacturing Companies in Jordan
Almothanna Jamil Abu Allan
Khawarizmi Technical University College
36 Mirza Wasfi St. Amman, Jordan
E-mail: a.abuallan@khawarizmi.edu.jo
Nor Aziah Abu Kasim
University Putra Malaysia
43400 UPM Serdang
Selangor Darul Ehsan
Malaysia
E-mail: noraziah@upm.edu.my
Mazlina Mustapha
University Putra Malaysia
43400 UPM Serdang
Selangor Darul Ehsan
Malaysia
E-mail: mazlina@upm.edu.my
Sabarina Mohammed Shah
University Putra Malaysia
43400 UPM Serdang
Selangor Darul Ehsan
Malaysia
E-mail: sabarina@upm.edu.my
Suzan Abed*
School of Business and Public Administration
University of the District of Columbia
4200 Connecticut Avenue, NW
Washington, DC 20008
Email: suzan.abed@udc.edu
* Corresponding author
Biographical notes: Almothanna Jamil Abu Allan is an assistant professor of Accounting at
Khawarizmi Technical University College - Jordan. He finished his PhD in Accounting from the
University Putra Malaysia.

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Nor Aziah Abu Kasim is an associate Professor of Management Accounting at University
Putra Malaysia. She finished her PhD in Management Accounting from Manchester
University in Britin.
Mazlina Mustapha is a professor of Accounting at University Putra Malaysia. She finished her
PhD in audit and governance from the University Utara Malaysia.
Sabarina Mohammed Shah is an assistant professor of Accounting at University Putra
Malaysia. She finished her PhD in Accounting from the University Kebangsaan Malaysia
Suzan Abed is an Associate professor in accounting at University of the District of Columbia-
Washington-DC- USA. She has earned her Ph.D. in Accounting from the University of
Aberdeen – UK in 2010. Meanwhile, BSc and MSc in Accounting were received in Jordan at
Yarmouk University. She promoted to the professorship in Accounting from Applied Science
Private University (ASU) 2019 in Jordan. She has major roll in school administration work as a
team leader and Dean of Scientific Research and Graduate studies from 2015-2019 in ASU.
Her main research interest area is mostly focus on content analysis with measuring the level
of forward-looking information using computerized content analysis method. In her
research, highly innovative research methodologies were used; for example, using textual
analysis computer software NVivo to measure the level and quality of narrative reporting
and identify its information content, and several research articles that explored issues
related to, corporate governance; earnings management, accounting education; accounting
ethics and gender in auditing were published.
Abstract
The main purpose of this study is to investigate the mediating role of balanced
scorecard (BSC) implementation between perceived environmental uncertainty and
organizational performance. To achieve the above objective, this study employed a
quantitative research methodology of 312 samples questionnaire. This questionnaire
was targeting medium and large manufacturing companies operating in Jordan and
implementing a balanced scorecard. The study has revealed a significant positive
relationship between perceived environmental uncertainty and both BSC and
organizational performance. Also, this study documented the mediating effect of BSC
on the relationship between perceived environmental uncertainty and organizational
performance. As a result, it was clear that BSC offers information that leads managers
to rapidly respond to environmental uncertainty in order to formulate strategies,
confront challenges, and enhance their organizational performance.
Keywords: balanced scorecard, environmental uncertainty, manufacturing industry,
emerging economy, performance, Jordan

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1. Introduction
Perceived Environmental uncertainty has always been one of the challenging issues
faced by top management in organizations (Milliken, 1987; Jahanshahi, 2016), as it
has a vital effect on organizational performance (Mingo, 2013). Perceived
environmental uncertainty occurs when decision-makers perceive that the
organization’s environment is unpredictable (Duncan, 1972). Perceived
environmental uncertainty primarily focuses on several factors external to an
organization such as economic, political, and social (Otley, 1980). Predicting external
changes might seem difficult particularly in an environment that is unreliable and
similarly information regarding the environmental factors is scarce. According to
Duncan (1972), the uncertain environment is difficult to predict due to the lack of
sufficient information among decision-makers about the environmental factors.
Management Accounting Control System (MACS) plays an important role in
providing the necessary information to top management in making timely decisions
during environmental uncertainty (Al-Mawali, 2015). Performance Management
System (PMS), as part of MACS, addresses the developmental changes in the
business environment and facilitates problem-solving in organizations. The
implementation of PMS is necessary for economic competitions under environmental
uncertainty (Kloviene, 2013).
Balanced Scorecard (BSC) is one of the widely used PMS in business and industry
(Balanced Scorecard Institute, 2017). BSC is considered as one of the most influential
ideas in the last century (Balanced Scorecard Institute, 2017). As an innovative PMS,
BSC balances four different financial perspectives, learning and growth, internal
business process, and customer satisfaction (Kaplan & Norton, 1992; Kaplan &
Norton, 1996; Kaplan & Norton, 2001; Kaplan & Norton, 2007; Gosselin, 2011). The

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integration of both non-financial and financial perspective is one of the benefits of
BSC over other models (Michaela & Marketa, 2012).
In the context of Jordan, its economic growth has been hindered during the years from
2010 till 2016 due to several reasons. This decline was largely attributed to the
turmoil caused by the Arab Spring which started in 2010 (The Economic Policy
Council, 2017). Furthermore, the unprecedented influx of several thousands of
refugees as well as the instability in import and export were the main reasons that
burdened the Jordanian economy (The Economic Policy Council, 2017).
Manufacturing sector is the second biggest sector in Jordan after services sector. The
manufacturing sector contributes 18% to the GDP in 2018.
The Arab Spring has caused many changes to the region, specifically, there are high
levels of uncertainty that threaten the future of these countries. Similarly, business
organizations that import and export products from and to these countries are affected
by the conflict (Fanek, 2016). The Jordan Free Zone Investor Association (2015) has
reported that the manufacturing sector in Jordan is adversely affected by the unrest
stemmed from countries in the Middle East region. For example, due to the unstable
condition in Iraq and Syria, exports were on a declining trend (Obeidat, 2014). Iraq
and Syria were considered Jordan’s largest export partners within the greater Arab
trade zone (Al-Sharif, 2017). The loss of land routes to the Mediterranean has forced
the companies to ship freight via the Suez Canal, rather than transport overland to
Syrian or Lebanon ports for transhipment. As a result, this led to a severe impact on
Jordan’s manufacturing sector (The Economic Policy Council, 2017).
Manufacturing companies in Jordan have been facing many challenges due to the civil
wars surrounding the country. These companies have lost a significant market shared
with neighbouring countries, and suffer operational costs as transportation has

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become a bottleneck to their trade work (Abu Allan et al., 2018). This issue was a
result of the basic use of BSC measurement system leading to a lack of accurate
information and uncertainty which affected decision making. Given the high
uncertainty, implementing BSC effectively could improve the organizational
performance of manufacturing companies in Jordan (Rababah, 2014). The main issues
faced by the manufacturing sector in Jordan are related to competition, market, and
volatility. Therefore, this study aims to investigate the interrelationship between the
variables perceived environmental uncertainty and BSC implementation as it has been
argued to enhance competitive advantage and organizational performance.
Studies in the past have applied the contingency theory to understand the role of the
contingent variables and to explain variation in organizational performance (Jusoh,
2008; Jusoh, 2010; Bastian & Muchlish, 2012; Hendricks et al., 2012; Taylor &
Taylor, 2013; Asiaei & Jusoh, 2014). The contingency theory claims that the design
and use of the management control system is dependent upon several contextual
factors but determining the appropriate set of factors is always controversial (Otley,
1980). In the same manner, Otley (2016) argued that contingency studies should be
conducted based on identifying an appropriate set of contingent factors in the context
of the current business environment. He suggested the need to undertake further
research to describe the management control systems’ effectiveness by investigating
the best designs suited for contingent factors. This suggestion has provided additional
insights for studying PMS. Therefore, the current study investigates the
implementation of BSC as a PMS in manufacturing companies in Jordan. This study
utilizes the contingency theory, as a theoretical framework, to studying the impact of
an appropriate set of contingent variables such as perceived environmental uncertainty
on BSC implementation. It also examines whether there is an interrelationship match

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between the contingent factors and whether the BSC implementation is associated
with organizational performance. However, there is a paucity of research on
examining the effective use of BSC as PMS in manufacturing companies in Jordan to
enhance the companies’ performance (Al-Sawalqa et al., 2011; Rababah, 2014).
The rest of the paper includes a literature review and hypothesis development in the
second section, the third section discusses the methodology used. Furthermore, the
next section explains the results and discussion. Finally, the last section summarises
and concludes.
2. Literature Review and Hypotheses Development
The literature review and research hypotheses section is divided into four sections.
Each section discusses the hypotheses development of each construct together with its
dimension.
2.1 Perceived Environmental Uncertainty and Organizational Performance
The contingency theory discusses that organizational structure hinges upon contingent
factors that aid in organizational performance. The contingent factors aid in enhancing
the performance of the organization (Otley, 1980). The literature that utilized the
contingency framework argued that organizational performance is as a result of the
influence of the manager’s perceived environmental uncertainty (Hoque, 2004;
O’Shannassy, 2007; Ajibolade, 2013; Al-Mawali, 2015; Al-Naser & Mohamed,
2017). Perceived environmental uncertainty in this context is defined as a contingent
factor that aids in enhancing organizational performance. Duncan (1972) viewed
perceived environmental uncertainty as a paucity of information that is utilized by
managers for decision-making. Lebas & Euske (2007) defined organizational

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performance as a set of financial and non-financial indicators that provides
information on the degree of achievement for the objectives and results.
Thus, perceived environmental uncertainty has a significant effect on organizational
performance (Hoque, 2004). Managers are pressured by stakeholders to anchor more
on the prediction of environmental uncertainty, such as crises or changes in the
market, in order to make a relevant decision and achieve better performance (Latan et
al., 2018). In this regard, the managers’ perceived environmental uncertainty has been
considered by companies as a key competitive advantage (Latan et al., 2018). This
entails having access to information on market turbulences referring to the preference
of customers on a product that will aid in product development, similarly, access to
information on demand could reduce wastage, and furthermore intensity of knowing
your competitor is key to performing better.
Researchers tend to focus on perceived environmental uncertainty to understand its
effect on organizational performance (Hoque, 2004; O’Shannassy, 2007; Ajibolade,
2013; Al-Mawali, 2015; Al-Naser & Mohamed, 2017). In this respect, Miller (1993)
expressed concern in relation to measuring perceived environmental uncertainty as a
one-dimensional construct. In other words, Miller (1993) expressed a preference for a
disaggregated approach to measuring perceived environmental uncertainty and
considers it as a multi-dimensional construct for accurately measuring. Thus, this
study considers three dimensions to measuring perceived environmental uncertainty
including environmental volatility, competitive intensity, and market turbulence to
better understanding their direct effect on organizational performance.
Despite that, to date there are limited empirical testing of these relationships, the
direct impact of perceived environmental uncertainty dimensions on organizational
performance has not been sizeable and the reality of emerging economies of

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developing countries has not been taken into account, such as Jordan. Therefore, the
literature argues that more research is pertinent in understanding the condition of
manufacturing companies in Jordan in such environmental uncertainty characteristics
(O’Shannassy, 2007; Al-Mawali, 2015; Purnama & Subroto, 2016; Al-Naser &
Mohamed, 2017; Latan et al., 2018). The direct effect examination of perceived
environmental uncertainty dimension can assist managers to identify aspects of these
dimensions which are favorable and unfavorable to their organizational performance.
A better prediction and understanding of these dimensions can lead managers to get
relevant information and make an accurate decision regarding the strategies and future
direction of the company that leads to better organizational performance
(O’Shannassy, 2007).
Having performance measurement indicators for evaluating and controlling
organizational performance is of strategic importance for companies especially during
high environmental uncertainty (Zin et al., 2013). Studies (e.g., Hoque & James,
2000; Kauhanen & Piekkola, 2006; Zuriekat et al., 2011) have argued that
organizations achieve performance that is high when they use both financial and non-
financial performance indicators. However, the utilization of sole financial
performance indicator has limited the benefits to the organization since it does not
deliver a full picture with regards to the factors that drive long-term success and
maximization of shareholder’s wealth, e.g. quality, ability to innovate and customer
satisfaction. Furthermore, many organizations are still lagging with a lot of them
preferring to base their strategies on financial performance (Ittner et al., 2001). Their
findings suggested that companies that use non-financial and financial indicators are
more efficient in responding to the business environment and have recorded better

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organizational performance than those who only rely on financial indicators only
(Ittner et al., 2003; Hall, 2011).
Many studies (Naranjo-Gil, 2009; Wong et al., 2011; Bastian & Muchlish, 2012;
Akgul et al., 2015) have examined the influence of perceived environmental
uncertainty on the outcome of the companies such as the performance of supply chain
and innovation. For example, a study by Naranjo-Gil (2009) found that uncertainty
has a positive effect on technical and administrative innovation of the Spanish
hospitals. Wong et al. (2011) referred to the positive influence of environmental
uncertainty on the relationship with suppliers and the value chain in Thailand. In
Indonesia, Bastian and Muchlish (2012) revealed that environmental uncertainty has a
positive influence on the strategy and organizational performance of the Indonesian
manufacturing companies. Akgul et al. (2015) investigated the influence of
environmental uncertainty on the firm performance of the Turkish manufacturing
organization. The findings showed that environmental uncertainty has a strong and
positive influence on firm performance of these companies. This is because the
perception of environmental uncertainty has enabled the managers to make sufficient
decision, which in turn enhance their firm performance.
This study is motivated by the limited empirical evidence about manufacturing
companies in Jordan on whether or not the managers' perception of environmental
uncertainty can improve their organizational performance in such a situation of
environmental uncertainty. This study argues that the organizational performance of
manufacturing companies would be improved based on their perception of
environmental uncertainty. This due to those companies may be able to reduce
unpredictability and buffer their organizations from environmental uncertainty and are
likely to produce superior performance. Building on this discussion, this study

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proposed a positive relationship between environmental uncertainty and
organizational performance of manufacturing companies in Jordan. Thus, the
following hypothesis is proposed:
H1: There is a positive relationship between perceived environmental uncertainty and
organizational performance.
2.2 Perceived Environmental Uncertainty and BSC
The environment of the organization is pertinent to the conceptualization of the
contingency theory (Otley, 1980). The literature of management accounting and
control system (MACS) argued that the environment is a critical factor which
determines the MACS to be used in the company (Gordon & Miller, 1976; Otley,
1980; Hoque, 2004; Otley, 2016). Furthermore, it is imperative to note that MACS
differ in a different context (Cadez & Guilding, 2008; Otley, 1980; Briers & Hirst,
1990). Moreover, the environment is seen as the most important factor of actions
taken by the organization based on the external control model (Romanelli &
Tushman, 1986).
Thus, it is imperative to management accountants in companies to note that changes
in the environment are critical, as such these should shape the role they perform
(Gordon & Miller, 1976; Cooper, 1996; Anastas, 1997). Chenhall & Morris (1995)
pointed out that environmental uncertainty has an overwhelming influence on a
company’s information needs, and they argued manager must have information in the
environment that is highly uncertain and this information presented on request, up to
date, frequent, and can be used in future decision making (Chenhall & Morris, 1995;
McManus, 2013).

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BSC is a combination of financial and/or non-financial performance indicators that
the managers use to evaluate their performance, their subordinates’ performance, or
their unit’s performance (Bremser & Chung, 2006; De Waal & Counet, 2009; Jamil &
Mohamed, 2013). BSC is generally shaped by external features in the environment;
this is the general belief by scholars (Cadez & Guilding, 2008; Cinquini & Tenucci,
2010; Taylor & Taylor, 2014). Furthermore, the influence of environmental factors
has been debatable particularly on its effect on the implementation of BSC and
organizational performance (Kattan et al., 2007; Kholeif et al., 2007). Previous
literature has highlighted that implementing BSC helps managers to respond to and
deal well with environmental uncertainty. Thus, when using the contingency theory, it
is important to identify factors that can affect the external environment of a company
and use BSC to help in directing factors towards creating an appropriate matching that
can lead to better organizational performance (Bastian & Muchlish, 2012).
The current research aims to strengthen the apprehension of the effect of
environmental uncertainty on the use of BSC and organizational performance. Based
on the discussion earlier, the current research argues that environmental factor
changes might cause changes in MACS implemented within the organization (Burns
& Vaivio, 2001; Katten et al., 2007; Cadez & Guilding, 2008; Cinquini & Tenucci,
2010; McManus, 2012). In case of high environmental uncertainty, the use of BSC
would be intensified to generate relevant facts to enable correct decisions to be made
to meet the demands of the environment.
Bastian & Muchlish (2012) investigated the influence of perceived environmental
uncertainty on BSC and revealed that there is a positive relationship between the two
variables in the context of the Indonesian manufacturing companies. Jusoh (2010)
investigated the effect of environmental uncertainty on BSC of 120 Malaysian

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companies and found negative effects on the measures of BSC such as financial and
internal processes. However, Hendricks et al. (2012) revealed a positive significant
association between environmental uncertainty and BSC. They argued that future
studies should view BSC through the successful implementation of BSC under
conditions of uncertainty. Rubabah (2014) recommended examining the role of
environmental uncertainty in motivating BSC implementation due to the unstable
conditions of neighboring countries of Jordan.
The above studies (Jusoh, 2010; Bastian and Muchlish, 2012; Hendricks et al., 2012)
have argued that the effect of perceived environmental uncertainty on BSC
implementation is significant and that it leads to better response to uncertainty. Thus,
it can be noted that when companies implement BSC, they are able to respond more
effectively to environmental uncertainty. Accordingly, this study proposes that there
is a positive relationship between perceived environmental uncertainty and the
implementation of BSC. Thus, the following hypothesis is proposed:
H2: There is a positive relationship between perceived environmental uncertainty and
BSC.
2.3 BSC and Organizational Performance
The implementation of BSC affects managers’ decisions and organizational
performance (Ronny, 2016; Yannick & Ricardo, 2016). BSC implementation has an
important role in companies’ life is by affecting their organizational performance
(Azofra et al., 2003). BSC implementation has a significant influence on companies
by achieving performance improvements (Sorooshian et al., 2016). According to
Anca & Rainer (2015), organizational performance can be affected by the
implementation of BSC. This is because when companies implement BSC; their

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future direction will be according to the indicators used to measure the four
perspectives of BSC (e.g. financial, customer, internal process, and learning and
growth).
In this regard, the implementation of BSC should have leading and lagging indicators
specific to each company, linked together by cause-and-effect relationships (Kaplan
& Norton, 1996). For instance, in the event of a change in the indicators with one of
the perspectives of BSC, the company will respond to this change in the indicators
and take necessary action. The improvement in this perspective will lead to an
improvement in other perspectives due to the connection between every perspective,
which ultimately leads to the improvement of organizational performance. Similarly,
Anca & Rainer (2015) indicated that a successful BSC implementation leads to a
broad variety of performance improvements, both financial and non-financial.
In line with previous studies, extensive research rooted in the contingency literature
investigates the impact of BSC implementation on organizational performance. Most
researches reveal a positive relationship between BSC implementation and
organizational performance (e.g., Ittner et al., 2003; Bastian & Muchlish, 2012;
Hendricks et al., 2012; Anca & Rainer, 2015;Yannick & Ricardo, 2016; Al-Naser &
Mohamed, 2017). Therefore, it is important to investigate whether the implementation
of BSC helps firms to enhance their organizational performance (Quesado et al.,
2018). This study argues that the organizational performance of manufacturing
companies in Jordan would be improved with the implementation of BSC. Therefore,
the following hypothesis is proposed:
H3: There is a positive relationship between BSC and organizational performance.

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2.4 BSC as a Mediator
Using BSC as a mediator will holistically improve the relationship between the
contingent variables, such as perceived environmental uncertainty and organizational
performance. In employing the contingency theory to the management accounting
control system design, Dent (1990), argued that some researchers have used the direct
relationship with organizational performance without considering the organizational
design. Dent (1990) mainly concerned was with accounting control system design,
and other researchers have used the design as an intervening variable. Otley (1980)
indicated that the relationship between the contingent factors and organizational
performance is weak because the same contingent factors are likely to be associated
with organizational design. According to Merchant (1998), the contingent factors
effect in the design of MACS and the match between the contingent factors and
MACS characteristics will result in various outcomes of organizational performance.
As a result, the performance management system, as a specific dimension of
accounting control systems, would play a mediating role in explaining the relationship
between the variables of the current study.
Management control systems have been used as a mediator by many researchers
(Jusoh, 2008; Aliyu et al., 2014; Soheilirad & Sofian, 2016; Al-Naser & Mohamed,
2017). For instance, Jusoh (2008) tested the mediating effect of BSC measures
between environmental uncertainty and organizational performance and found that
BSC measures have a mediating role between the variables. However, this paper
focuses on BSC implementation rather than measures. Soheilirad & Sofian (2016)
proposed that strategic management accounting can play a mediating role between
environmental uncertainty and organizational performance. Similarly, Al-Naser &
Mohamed (2017) investigated the relationship between the intensity of competition

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and financial performance and revealed that MCS mediates the relationship. In the
same manner, Aliyu et al. (2014) indicated that the performance measurement system
also mediates the relationship between corporate governance and bank performance in
Nigeria.
In this study, we argue that BSC is a performance management system, plays a
mediating role in the relationship between perceived environmental uncertainty and
organizational performance in the context of manufacturing companies. This research
expects that perceived environmental uncertainty affects BSC implementation, which
in turn, affects organizational performance. In other words, managers’ perception of
environmental uncertainty positively may enhance BSC implementation of
manufacturing companies; this in turn may enhance their organizational performance.
Building on this discussion, the following hypothesis is proposed that:
H4: BSC mediates the relationship between perceived environmental uncertainty and
organizational performance.
3. Methodology
3.1 Research Instrument and Sample
This study employed a quantitative research methodology (survey design). The
construct perceived environmental uncertainty has three dimensions; six items of
competitive intensity, six items of market turbulence, and six items of environmental
volatility measurements that were adapted in (Matanda & Freeman, 2009; Wu, 2010;
Köseoglu et al., 2013).
The BSC measurements are adapted from the work of Al-Sumairi (2009) with three-
dimension which include; organizational commitment towards BSC (8 items), multi-
perspectives of BSC (5 items), and implementation process of BSC (9 items).

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The organizational performance measurements were adapted from the work of
Köseoglu et al.'s (2013). The items are classified into; financial and non-financial
measurements. Eight items for financial and six items for non-financial
measurements. All the constructed items were rated by using a 7- point Likert scale
ranging from “1” (strongly disagree) to “7” (strongly agree).
This study adapted all measurements of the variables from previous studies.
According to Creswell & Creswell (2017), combining and modifying a research
instrument requires re-establishing its reliability and validity. Therefore, this study
conducted a pilot study to assess the reliability and validity of all measurements of
variables, especially after adjusting and expanding some of its measurements based on
the context of research and its objectives.
The main aim of a pilot study is to evaluate the reliability and validity of the research
instruments. The final draft of the questionnaire was tested by a sample of 30 CFOs
from manufacturing companies in Jordan; to find out if the revised questionnaire is
comprehended. The pilot study was only used to determine the reliability and validity
of the constructs; hence it was excluded from the main data analysis.
The CFOs respondents took about 25 minutes to complete the task. Subsequently,
each respondent was approached, and their views were sought on how they perceive
the overall questionnaire. Remarks and feedback received from the CFOs were
gathered and reviewed before making any amendments to the final questionnaire.
The reliability value for all the constructs ranged between 0.710 and 0.944. Therefore,
all the reliability values (Cronbach's alpha) were greater than the recommended value
0.60 (Bagozzi, 1992; Hair et al, 2006). This means that all measurements of variables
were considered reliable and valid.

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The population of the study consists of all medium and large manufacturing
companies operating in Jordan. According to the Jordanian Chamber of Industry in
December 2018, there were 1,915 manufacturing companies; 63 of them are listed and
1,852 are un-listed (Securities Depository Centre, 2018). Small manufacturing
companies were excluded from the study since these companies had only
implemented a low level of BSC because of their small size and because of the high
cost of installation and maintenance of BSC implementation (Rababah, 2014).
The manufacturing sector is the second biggest Industrial sector in Jordan. The
manufacturing sector contributes 18% to the GDP (The Economic Policy Council,
2018). And it also offers job opportunities for more than 20% of the country’s labor
force (Department of Statistics, 2018). Table 1 shows the broken down of the
manufacturing industry into subsectors and the number of companies operates in each
sector.
Table 1: Sub-sectors of Manufacturing Industry
Sub-sectors
Number
Food industry
405
Engineering, electrical and IT industries
350
Plastic & Rubber companies
233
Companies of Packing and packaging
191
Construction companies
186
Chemical companies and cosmetics
170
Leather Industries & Uniforms
167
Wood and furniture companies
98
Medical companies and medical supplies
59
Mining companies
56
Total
1,915
The appropriate sample size for most studies consists of 30-500 samples. According
to Garson (2011) determined the minimum sample size as 300 samples. The sample

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size of this study was determined using Slovin’s formula (Sekaran & Bougie, 2016)
and consists of Garson (2011) who suggest a minimum sample size of 300.
Based on the above, 400 questionnaires were distributed using stratified random
sampling to top management personnel, such as Chief Executive Officers (CEOs),
Chief Financial Officers (CFOs), and managers of departments. The rationale for
selecting top management personnel was that they are thought to be more aware of the
strategic practices and the performance of organizations than any other individuals in
the company (Mills & Smith, 2011). 335 questionnaires were returned, and 312
questionnaires only were valid for analysis. To analyze the study hypotheses, Partial
Least Square Structural Equation Modelling method (PLS-SEM) was employed.
4. Results and Discussion
This section is subdivided into three sections, the first section examines the
measurement model of the PLS-SEM, and the second section similarly explains the
result of the structural model. Furthermore, the finding of the study will be discussed
in the next section. Lastly, the result of the mediation will be highlighted in section
four.

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4.1 Measurement Model
Figure 1: Full Measurement Model
Figure 1 shows the full Measurement Model which indicates that outer loadings of
most items were met as per-recommended-values of 0.5 . All outer model loadings of
less than 0.50 were deleted as argued by Hair et al. (2014). As shown in Table 2 all
outer loadings of the items are above the threshold of 0.50. This indicates adequate
items validity.
Table 2: Latent Variable Correlations
Variable
CI
EV
IP
MC
MT
OP
PR
Competitive intensity
0.716
Environmental volatility
0.4278
0.742
Implementation process
0.2548
0.4935
0.704
Organizational commitment
0.3522
0.5363
0.4562
0.726
Market turbulences
0.3792
0.7064
0.5374
0.4827
0.714
Organizational Performance
0.3389
0.6141
0.271
0.4638
0.5179
0.726
Multi-Perspective
0.336
0.5662
0.5624
0.5839
0.5709
0.533
0.749

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Similarly to measure the internal consistency of the variables, this paper adopts the
composite reliability to measure the construct reliability. One of the advantages of
using this is that the composite reliability takes into account the contribution of the
items in measuring the construct. The minimum composite reliability should not be
less than 0.70 (Hair et al., 2014). As shown in Table 3, all the composite reliability of
the constructs and dimensions are above the threshold of 0.70.
Table 3: Item Loading, Average Variance Extracted (AVE) and Reliability
Construct
Dimension
CODE
Loading
AVE
Composite
Reliability
Perceived
environmental
uncertainty
Competitive
intensity
C1
.760
.512
.806
C3
.649
C4
.651
C5
.790
Environmental
volatility
EV1
.660
.551
.880
EV2
.782
EV3
.752
EV4
.764
EV5
.736
EV6
.753
Market turbulences
MT1
.759
.510
.837
MT2
.775
MT3
.690
MT4
.755
MT6
.574
Balanced
Scorecard
Organizational
commitment
MC1
.707
.527
.870
MC3
.771
MC4
.790
MC5
.680
MC6
.673
MC7
.728
Multi-perspective
PR2
.792
.561
.834
PR3
.853
PR4
.716
PR5
.613
Implementation
Process
IP1
.702
.501
.828
IP4
.594
IP5
.584
IP9
.810
IP7
.798
Organizational
Performance
Organizational
Performance
OP2
.616
.527
.924
OP3
.671
OP4
.771
OP5
.834
OP6
.843
OP8
.764

21
OP9
.721
OP10
.639
OP12
.684
OP13
.735
OP14
.668
Furthermore, in assessing the convergent validity, the average variance extracted
(AVE) is used. The AVE for each of the constructs should not be below 0.50 as
opined by Hair et al. (2014). Similarly, as shown in Table 3, the results of the AVE
for all the constructs are above the threshold of 0.50.
In assessing the discriminant validity, the AVE is considered and also the latent
variable correlations should all be less than the square root of the AVE as elucidated
by the Fornell and Larcker approach (Hair et al., 2014). As shown in Table 3, all the
AVE’s are above the threshold of 0.50. Also, all the square root of the AVE is above
the latent variable correlation. This suggests that there is adequate discriminant
validity amongst the construct.
4.2 Structural Model for all Variables
The study ran a structure model to investigate the proposed relationships. The
structure model shows the relationships among the independent and dependent factors
with standardised estimates . Figure 2 illustrates the structure model for all variables

22
Figure 2: Structural Model
4.3 Direct Relationship Discussion
This sub-section presents the results of hypotheses testing. As it appears in Table 4,
the results support the hypothesis that there is a positive relationship between the
implementation of BSC and organizational performance (p-value ≤ 0.05). Similarly, it
also supports the hypothesis that there is a positive relationship between perceived
environmental uncertainty and BSC (p-value ≤ 0.01). Furthermore, it also supports the
hypothesis that there is a positive relationship between perceived environmental
uncertainty and organizational performance (p-value ≤ 0.01).
Table 4: Test of Hypotheses of Direct Relationships
Relationship
Beta Value
Standard Error
T Statistics
P value
Decision
BSC -> OP
0.164
0.070
2.337
.010**
Supported
PEU -> BSC
0.695
0.052
13.274
.000***
Supported
PEU -> OP
0.509
0.061
8.348
.000***
Supported
Note: ** denotes accept at 95% level of confidence while *** accept at 99% level of confidence
BSC: balanced scorecard; PEU: perceived environmental uncertainty; OP: organizational performance

23
This implies that manufacturing companies considered the performance of
organizations depends on the influence of perceived environmental uncertainty.
Decision making is a critical part of the organizational process; the influences of
perceived environmental uncertainties on organizational performance enable
managers to make better decisions. These decisions may aid the organization in
performing better in manufacturing companies. This is pertinent because of the fact
that the main problems with the sector are related to the perception of environmental
uncertainties. Furthermore, the findings indicate that manufacturing companies
depend on the information of market turbulence and volatility and hence will make a
strategic decision in order to enhance the performance of their organization. The
finding of this study is generally in line with the results of studies such as (e.g., Hoque
& James, 2000; Kauhanen & Piekkola, 2006; Naranjo-Gil, 2009; Wong et al., 2011;
Zuriekat et al., 2011; Bastian & Muchlish, 2012; Akgul et al., 2015).
The contingency perspective on organizational structure indicates that the degree of
perceived environmental uncertainty as a contingent factor will enhance its
performance (Ittner et al., 2003). Thus, this research reveals that the organizational
structure hinges upon the relationship between perceived environmental uncertainty
which aids in enhancing organizational performance. The results of the study provide
support for the contingency theory. The findings highlight the significant role of
perceived environmental uncertainty as a contingent factor in enhancing
manufacturing companies’ performance in Jordan.
This study found that perceived environmental uncertainty has a positive relationship
with the implementation of BSC. One plausible explanation for this is that
manufacturing companies are currently facing uncertainty in regards to the
environment; market, volatility, and competitive uncertainties. Thus, the demand for

24
relevant environmental information is increasing. The implementation of BSC is
considered a solution that may assist top managers in making more accurate
decisions, especially in uncertain environments. BSC implementation offers suitable
information that leads to a better achievement under uncertain environment. This
result is in line with the results of previous studies (Anca & Rainer, 2015; Ronny,
2016; Yannick & Ricardo, 2016).
The influence of perceived environmental uncertainty on the implementation of BSC
as a performance management system is considered an important area in contingency
perspective. The findings of the study indicate that the design and use of management
accounting control system is dependent on several contextual factors. In this regard,
this study considers the effect of perceived environmental uncertainty, as a contingent
factor, on the implementation of BSC in the manufacturing companies’ context of
Jordan.
This finding proved that manufacturing companies in Jordan who implement BSC can
play a significant role in providing top managers with financial and non-financial
information due to the situation of environmental uncertainty. This is because
financial information is not broad in such a situation, while non-financial information
is important which can support the success of their organizational performance. The
finding of this hypothesis is consistent with the results of previous studies, indicating
that the implementation of BSC affects organizational performance (e.g., Ittner et al.,
2003; Bastian & Muchlish, 2012; Hendricks et al., 2012; Anca & Rainer, 2015;
Yannick & Ricardo, 2016).
In applying contingency theory to control system design, the finding of this
hypothesis is consistent with Chenhall (2003) who indicated that many several studies
have linked control system design with organizational performance as a dependent

25
variable. while contingency-based accounting control studies have focused on
contingent factors that should be incorporated with control system design in order to
assist managers in achieving better organizational performance, but this depends on
the appropriate design of the management control system. The appropriate design of
the management control system will be influenced by a set of contextual factors
(Otley, 1999). This study has included contingent factors such as perceived
environmental uncertainty on the design of BSC as a management control system to
achieve better performance of manufacturing companies.
On the other hand, the R squared (R2) as it is usually referred to as explains the
fraction of difference between the independent variables as it is determined by the
dependent variable (Hair et al., 2014). Furthermore, as argued by Hair et al. (2014) an
R2 of above 0.25 but less than 0.50 is regarded as moderate. The R2 of BSC is 0.48
while the R2 of organizational performance is 0.40. This indicates the PEU explains
48% of BSC while BSC explains 40% of organizational performance.
4.4 Mediation Discussion
This section describes the effect of mediation variable, The study hypothesized that
BSC mediates the relationship between perceived environmental uncertainty and
organizational performance. This study found that BSC mediates the relationship
between perceived environmental uncertainty and organizational performance. This
result showed that perceived environmental uncertainty positively influences BSC,
which in turn, affects organizational performance. The study adopts the non-
parametric bootstrap method of Preacher & Hayes (2004) and Preacher & Hayes
(2008). The result in Table 5 highlights that BSC mediates the relationship between

26
perceived environmental uncertainty and organizational performance (p-value less
than 0.05).
Table 5: Test of Hypothesis of Mediating Relationships
Relationship
Beta Value
Standard Error
T Statistics
P value
Decision
PEU-> BSC -> OP
.114
0.052
2.183
.015**
Supported
Note: ** denotes accept at 95% level of confidence
The findings of the study showed that perceived environmental uncertainty has direct
and indirect influences on organizational performance. This means that manufacturing
companies, directly and indirectly, depending on their perceived environmental
uncertainty for determining their organizational performance. The findings of this
study is in line with previous studies (Widener, 2006; Jusoh, 2008; Al-Naser &
Mohamed, 2017)
5. Conclusion, Recommendation and Future Studies
This study examined the mediating effect of BSC on the relationship between
perceived environmental uncertainty and organizational performance in
manufacturing companies in Jordan. The study revealed a significant positive
relationship between perceived environmental uncertainty and organizational
performance. The findings of the study contribute to the literature of management
accounting by proving that perceived environmental uncertainty and the
implementation of BSC are important factors to enhance manufacturing companies’
performance.
Similarly, limited studies on management accounting identified the appropriate
contingent variables within the context of a high level of environmental uncertainty,
which is related mainly to the design and use of BSC as a performance management

27
system. This study provides evidence that the appropriate contingent variables within
the context of study play an important role in enhancing organizational performance
in terms of the contingency framework. Employing contingent variables into the
design and use of BSC is considered an important theoretical contribution. In
particular, this study employs perceived environmental uncertainty into the design and
use of BSC based on the contingency theory. This study utilizes the contingency
framework linking perceived environmental uncertainty and the implementation of
BSC, which in turn, affects the organizational performance.
Furthermore, this study tests the mediating effect of BSC on perceived environmental
uncertainty and organizational performance. The implementation of BSC as a
mediator is considered a solution that assists managers in making relevant and
accurate decisions when faced with uncertain environments. In addition, BSC offers
information that leads managers to rapidly respond to environmental uncertainty
which enables them to formulate their strategies; they will be able to confront the
challenges and enhance their organizational performance. This research contributed to
the body of knowledge by providing empirical evidence on the mediation effects of
BSC on the relationship between perceived environmental uncertainty and
organizational performance as a partial mediator, respectively. In sum, the findings of
this study provide empirical justifications for using a contingency framework in
explaining the assumed relationships within the context of manufacturing companies
in Jordan.
This study provides information to policymakers on manufacturing companies to use
BSC as a performance management system instead of a traditional performance
measurement system. The use of PMS as a traditional measurement system will not be
effective in aiding the firms to curtail environmental uncertainties. However, using

28
the PMS as management systems enables the organization to seek information on
environmental uncertainties. Hence, this study provides information to policymakers
about the importance of training top managers on the implementation of PMS which
will enhance the organizational performance.
It is important for top managers to intensify on information on perceived
environmental uncertainties that affect the performance of manufacturing companies.
Moreover, this study also highlights the importance of perceived environmental
volatility and market turbulence to top managers of manufacturing companies. These
uncertainties are found to be significantly affecting the performance of manufacturing
companies in Jordan.
Furthermore, this study sheds more insights on how the implementation of BSC can
affect organizational performance, as well as can play a mediating role in the
relationships between contingent factors and organizational performance. Finally, it
should be noted that this study is one of the first studies conducted to empirically
investigate the effect of several contingent variables on the implementation of BSC in
manufacturing companies’ context in Jordan, as a developing country, unlike most
previous studies which mainly focused on developed countries contexts.
This study recommends that raising the awareness of top managers about the
importance of BSC implementation in making accurate and relevant decisions based
on the surrounding environment of their organizations. In addition, the BSC
implementation highlighted the indirect role of perceived environmental uncertainty
in enhancing organizational performance. This implies that managers of
manufacturing companies in Jordan should realize that BSC offers information that
leads managers to rapidly respond to environmental uncertainty which enables them

29
to formulate their strategies; they will be able to confront the challenges and enhance
their organizational performance.
Managers of manufacturing companies should focus on the dimensions of perceived
environmental uncertainty due to its unequivocal role in enhancing their
organizational performance. In particular, the dimensions of perceived environmental
uncertainty have a significant role in their organizational performance. Furthermore,
managers should pay attention to customer preference by regularly conducting market
surveys. This would aid in producing products that are suited to the customer’s
preference. Similarly, information on the volatility of the market demand is quite
important to avoid wastage. Thus, managers should equally source information of
demand and supply, competitors, so as to make closely accurate forecasts and
formulate effective strategies to face the volatility, competitive intensity, and market
turbulence.
Managers of manufacturing companies in Jordan should take the importance of
including both non-financial and financial indicators in their organizational
performance evaluation into consideration in order to come up with appropriate
strategic decisions. Thus, managers should consider using either financial or non-
financial depending on the dynamism of their companies in relation to their strategy
and the degree of environmental uncertainty.
Future research should consider other contingent factors by different industry
characteristics, including organizational structure, and types of business strategy and
technology that may influence the design and adoption of effective performance
management systems within the manufacturing sector. Furthermore, future research

30
may use longitudinal studies that allow for the investigation of the changes in the
practice of performance management systems over time.
The results of this study apply only to medium and large manufacturing companies
operating in Jordan. Consequently, these results may not be generalizable to small
manufacturing companies or to other companies operating in other industrial sectors
such as the service sector. Future research, however, needs to be extended to other
industry sectors in order to generalize the results. It has also been argued in the
management accounting literature (e.g. Drury, 2013) that the use of management
accounting techniques generally does not differ across countries. Therefore, an
interesting area of research would be to examine if this assertion is true by examining
the implementation of BSC in other countries.
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