Abstract
This paper examines the association between a differentiation strategy and the emergence of innovation using a package of management control systems (MCS) tools at the operational level. We empirically test theory developed by Simons [(2005). Levers of Organizational Design. Harvard Business School Press, Boston, MA (2010). Accountability and control as catalysts for strategic exploration and exploitation: Field study results. Harvard Working Paper 10-051.] and Chenhall et al. [(2011). Journal of Management Accounting Research, 23: 99-128.] to examine organic innovation culture, formal controls, and an entrepreneurial gap job design (EG), as a package of MCS tools at the operational level. There is evidence that all three MCS tools are both selected or are effective in enhancing innovation. However, internally, staff activities, and line activities show significant variation in their use of MCS tools. Formal controls and EG are effective for staff activities but not for line activities. For line activities organic culture is effective but formal controls are detrimental.