The influence of politics, economics, social and technology of management accounting practices and performance of small and medium enterprises (SMEs) in Yemen

Abstract

As Yemen has been in a war crisis since 2015, the political and economic stability, technological advancement, and social dynamics (PEST factors) have been subjected to mounting uncertainties. Yet, businesses, specifically the small and medium enterprises (SMEs) that are still operating, must continuously advance and improve their strategic focus, including their management accounting practices (MAPs), to survive. This study proposes that appropriate MAPs design in Yemeni SMEs will enhance the business performance despite operating in such complex conditions. The MAPs design, however, is influenced by the PEST factors. Drawing from a contingency approach and utilizing the PEST framework, MAPs are considered as a mediating factor in the relationship between PEST factors and SME's performance. Hence, the study identified the elements of PEST factors that influence MAPs implementation on Yemeni SMEs performance and the mediating role of MAPs in the relationship between PEST and SMEs performance. A total of Two hundred eighty-seven (287) questionnaires were completed by the top management of SMEs in five Yemeni states (Sana, Aden, Hadhramout, Taiz, and AlHodiadah). The low mean scores for all the PEST factors support the perception of the crisis in Yemen. To test the hypothesis, two clusters of SME firms were formed. It was found that Cluster 1 which displays SMEs in a more stable political and economic situation and a more advanced social and technological situation, has emphasized the use of traditional MAPs compared to contemporary MAPs. While Cluster 2, which displays a less stable political and economic situation and a less developed social and technological situation, placed almost equal emphasis on traditional MAPs and contemporary MAPs. Nevertheless, SME firms in cluster 1 that are closer to the ‘fit’ proposed by the contingency framework have shown better firm performance compared to cluster 2. Furthermore, data analysis revealed that two of the four PEST factors, namely, politics and technology, have significant and positive relationships with the implementation of traditional and contemporary MAPs (TMAPs and CMAPs). When dealing with environmental complexity or when the technology is committed, Yemeni SMEs will use MAPs more frequently. When it comes to the claim of the firm's performance, the study discovered a mediation impact of MAPs. Consequently, SMEs in Yemen are combining TMAPs and CMAPs, even though traditional MAPs are slightly more used than contemporary MAPs. Considering all aspects of politics, economics, society, and technology with information systems, the current research offers a unique theoretical framework for MAPs implementation in SMEs in a country facing a war crisis. Findings from this study imply plenty of room to raise both knowledge and understanding of the necessity of MAPs among SMEs, where the framework of this study may be extended to various crisis conditions faced by countries around the globe.