Investigating the effect of budget goal difficulty on budget holders’ performance in a hybrid environment

This study advances management accounting research by proposing and testing a mediational model within a hybrid budgeting setting. Specifically, it investigates how budget goal difficulty transmits directly and indirectly on budget holders’ performance the beneficial cognitive and motivational effects of budgetary participation. To explore this relationship, survey data were collected from a sample of hybrid budget holders, and the hypotheses were tested using structural equation modeling. The results confirm that higher levels of budgetary participation are associated with more challenging budget goals. In turn, increased goal difficulty prompts medical managers to invest greater effort in achieving these goals, thereby enhancing their budgetary performance. Notably, budget goal difficulty fully mediates the relationship between participation and performance. The findings suggest that the cognitive benefits of participation are internalized as stronger beliefs in one’s ability to set challenging yet attainable goals, which indirectly foster improved motivation, effort, and task focus. This study contributes to the management accounting literature by offering a novel perspective on the mechanisms linking participation and performance in hybrid contexts. It also carries important policy implications, demonstrating that the introduction of business-like techniques—such as budgeting—can improve performance, provided that attitudinal and behavioral variables are adequately stimulated.