Institutional Environmental Impact on the Use of a Performance Measurement System: The Mediation Effect From Organizational Renewal

ABSTRACT Institutional environment is affecting how organizations are managed and operations renewed, but their effect on PMSs is rarely investigated. This study investigates the relationship between companies' institutional environment, organizational renewal, and performance measurement systems (PMSs). The study aims to examine whether institutional environment affects the use of a PMS and whether organizational renewal facilitates the relationship. The empirical data for this study were gathered by utilizing a survey of a randomly selected sample targeted at small and medium‐sized enterprises (SMEs) in Finland. The study found support for organizational renewal playing a mediating role in the relationship between company institutional environment and PMS use, and that companies' institutional environments alone do not contribute to the configuration of PMSs. The results not only add to evidence of institutional environments' effects on the use of PMSs within SMEs, but they also aid in understanding companies' own renewal activities.