Why Management Control Systems Fail or Succeed: A Legitimacy-Based Process Explanation of Financial Performance

Abstract

In increasingly complex and uncertain environments, where activities are project-based, organisations rely on management control systems (MCS) to support decision-making and improve performance. However, their effectiveness cannot be explained solely by their technical design. This study examines the role of MCS legitimacy as a key factor in reducing organisational uncertainty and improving coordination, thereby contributing to enhanced financial performance. Drawing on legitimacy theory, a conceptual model is developed, establishing a link between MCS legitimacy, uncertainty reduction, coordination and performance. The empirical analysis is based on data collected from 175 large construction firms in Morocco. Using regression and mediation analyses, the results show that the perceived legitimacy of MCS significantly reduces uncertainty and enhances coordination among organisational actors. In turn, better coordination leads to improved financial performance. The results also indicate that legitimacy influences performance indirectly through these intermediary mechanisms. This study contributes to the literature by offering a more comprehensive understanding of how management control systems operate in complex environments. It highlights the importance of legitimacy as a practical and managerial lever for improving organisational effectiveness in project management contexts.