TITLE:
Contingent Determinants and Performance Consequences of Activity-Based Costing Adoption in UK Services
AUTHORS:
Hanadi Mohammed Alshamlan
KEYWORDS:
Activity-Based Costing, ABC Adoption, Contingency Theory, Structural Equation Modeling, Non-Manufacturing Firms, Cost Structure, Financial Performance
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.16 No.10,
October
9,
2026
ABSTRACT: Costing-systems research has produced inconsistent evidence on why some firms adopt activity-based costing (ABC) and whether adoption is associated with performance. This study examines contingent determinants of ABC adoption and its cross-sectional associations with operational and financial performance among 204 medium and large UK non-manufacturing business units. Because ABC adoption is binary (43 adopters; 21.08%), the revised analysis uses a recursive generalized structural path model in which the adoption equation is estimated with a Bernoulli-probit specification and the continuous equations use Gaussian identity links. Robust standard errors and 2000 case-bootstrap replications are reported. Competition, service diversity, and differentiation strategy are positively associated with the probability of ABC adoption, whereas cost structure, cost leadership strategy, and organisational size are not significant at the 5% level. ABC adoption is positively associated with service quality, service cycle-time reduction, and cost reduction, but not directly with financial performance. Specific indirect associations with financial performance operate through service quality, cycle-time reduction, cost reduction, and several serial pathways. These findings are associative rather than causal because the cross-sectional measure records current ABC use but not implementation timing, maturity, or intensity. The study extends contingency-based costing evidence to UK services while showing that conclusions about a binary adoption outcome depend on using an estimator appropriate to its categorical scale.