Determinants of company adoption of a top down - bottom up budget process procedure

In this paper we explore the meaning and determinants of companies' adoption of top-down/ bottom-up budgetary procedures. Building on the management accounting literature on the advantages of various budgeting procedures, we first identify three formal design characteristics that together summarize companies' position on a continuum from top-down to bottom-up budgetary procedures. Then, using questionnaire data from a sample of 141 middle-large companies operating in Italy, we analyze the antecedents of these sets of characteristics to explain the likelihood that companies' adopt a certain position on the continuum of procedures. We integrate this evidence conducting a focus group with a sample of respondents. Overall we find that company's position on the continuum of procedures depends on four antecedents: the complexity of business unit budget responsibility; business unit strategic diversification; company geographical dispersion and business unit geographical distance.