Competitive Environment and Corporate Constructs of Price and Costs in the UAE

Target costing is a cross-disciplinary subject with several unexplored academic dimensions besides having applied business practices and economic policy implications. In this paper, we use a unique combination of mixed methods research approach to investigate the adoption of target costing by manufacturing firms in the United Arab Emirates (UAE). The first employed method is the new Dumitrescu-Hurlin (D-H) Granger non-causality test for heterogeneous panel data, while the second is a survey. The D-H test with annual data indicates the adoption of target costing by the publicly listed manufacturing firms. When using quarterly data, but with a smaller sample of firms, the results show bi-causality between costs and sales revenues; thus target costing is possibly corroborated but within a feedback mechanism. Survey results, based on self-reported data and again on a smaller sample, show mixed results. The relationship between target costing and the intensity of competition seems moderately corroborated by the survey results. This paper contributes to the literature by employing a unique mixed methods research approach, to the best of our knowledge not found previously in the literature, and by its findings on the adoption of target costing by manufacturing firms in a relatively open and dynamic economy such as the UAE.