The purpose of this study is to examine whether the ABC as an innovation can be diffused in the Institutions of Higher Education (IHE). It also intends to investigate the relationship, the influence of the individual selected contextual variables as well as the contribution of those variables toward explaining the diffusion of ABC as an innovation in IHE. By using the disproportionate random sampling method, 258 quesitonnaires were sent to the administrative staffs and head of departments to two universities which represented the public and private university for each. 53.8% (139) of the responses were returned and considered complete and useable for the analysis. The results showed that the implementation of ABC in IHE was affected by the environmental and organization factors but not by IT. The private IHE was shown to have better possibilities towards the diffusion of ABC. The selected variables contributed 22.7% towards explaining the diffusion of the ABC in IHE in Malaysia. The main contribution of this paper is to provide a useful milestone, particularly in Malaysia, to claim that the capability of ABC as the most potential management accounting tools as an integral component of modern IHE landscapes. However, this study only considered one university to each type of IHE, public and private. Other than that, it also covered three out of five elements of innovations. Future research might extend the theoretical model investigate to cover all five elements of innovation with a large sample size.