Degree Name

Master of Accountancy - Research


School of Accounting and Finance


Activity-based costing (ABC) appears to be under-utilised in many developing countries despite its huge success in the developed world as a refined costing system that provides effective information for cost management. Previous research conducted on ABC has examined numerous issues and problems with implementation. However, the vast majority of these studies have been conducted in developed countries. Since the economic, business and political environment in these countries is vastly different to developing countries, previous research on ABC practices in developed countries provides little insight for successful implementation in developing countries. Despite the fact that an increasing number of companies in developing countries have introduced ABC into their businesses, relatively little is known about the current status of ABC in these countries due to the dearth of studies in this area. Previous studies provide little evidence on issues such as the reasons for adopting ABC in developing countries, the factors affecting successful implementation of ABC in those countries, associated problems and measures taken by companies to address those problems etc. Therefore, the main objective of this study is to conduct an in-depth analysis of a company in a developing country, the People’s Republic of China, examining the above mentioned issues. This study investigates these issues through a case study of a Chinese multinational company, PetroChina, which has implemented ABC successfully in one of its four core business segments since 2004.

A qualitative approach is adopted and a case study method is applied to collect and analyse data. An analysis into eight cases covering eight branches of PetroChina in China is carried out separately. A replication approach to multiple cases studies promoted by Yin (1984) is utilised. Under this approach, a cross-case analysis across all individual cases is undertaken so that the results generated from individual cases are replicated and tested in multiple cases.

The findings of the study reveal that the main reason for implementing ABC across eight branches of PetroChina was a top-down order emanating from and enforced by headquarters due to the incessant pressure of maintaining and sustaining its profitability and competitive position in the domestic and overseas markets. The study also finds that the main objective of implementing ABC at PetroChina was to obtain more accurate costing information and many branches of PetroChina have been able to achieve this objective successfully. It is found that both technical and behavioural issues were encountered throughout ABC implementation within PetroChina, this is in contrast to the findings of Cobb et al. (1993), Cooper (1990) and Shields (1995) who provided that in developed countries, behavioural issues overwhelm technical ones. One of the major difficulties and obstacles faced by PetroChina was poor cooperation and coordination between different departments within the branches. This is one of the behavioural and organisational factors, and the result corresponds to findings in Innes and Mitchell (1991) and Major and Hopper (2005). In order to overcome these issues, branches such as Dalian-P, Daqing-R and Harbin-P have taken positive steps towards fixing the problems while Jinzhou-P and Changqing-P seemed to be experiencing trouble in finding solutions. It is noted that the conflict of interests occurred with ABC implementation in the case of Jinzhou-P and Changqing-P, and this resulted in strong resistance.

This study is limited by the fact that it is based on an analysis of a single company limiting any generalisation of the results to other companies in developing countries. However, Yin (1984) argued that with multiple case studies which involve a cross-case analysis across separate single case studies, findings can be generalised as such case studies are generalisable to theoretical propositions rather than populations. It is hoped that this study may provide some insights into the existing accounting literature on ABC practices in China while providing useful lessons for managers who are considering an adoption of the ABC system in companies in developing countries.



Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong.