Lean service, business strategy and ABC and their impact on firm performance

This paper aims to address an underdeveloped area in the lean system literature by developing and testing a model which clarifies the current confusion on the role of different costing systems and business strategies in the implementation of lean service practices and their impact on financial performance. Using data from UK service firms, the proposed positive effect of lean service on financial performance is supported. Further, activity-based costing (ABC) has a positive impact on lean service, and therefore to indirectly on financial performance. Interestingly and in contrast to previous studies, both the differentiation and cost leadership strategies are directly and positively related to lean service. However, whilst ABC positively intervenes in the lean-differentiation relationship, it suppresses the lean-cost leadership relationship resulting in a situation of inconsistent mediation.