Accounting, Organizations and Society 34 (2009) 738–754

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Accounting, Organizations and Society
journal homepage: www.elsevier.com/locate/aos

Short and long translations: Management accounting calculations and innovation management
Jan Mouritsen *, Allan Hansen, Carsten Ørts Hansen
Department for Operations Management, Copenhagen Business School, Solbjerg Plads 3, DK 2000 Frederiksberg, Denmark

a r t i c l e

i n f o

a b s t r a c t
Management accounting calculations relate innovation to the firm through translations where both can change. Based on examples of the management of innovation from three firms the study shows how management accounting calculations rather than describe the properties of innovation add perspective to them mediating between innovation concerns and firm-wide concerns. This mediation happens through short and long translations. In short translations, management accounting calculations extend or reduce innovation activities via a single calculation. In long translations innovation activities are problematised via multiple calculations. When calculations challenge each other in long translations they problematise not only what innovation should be, but also where it should be located in time and space. In the three examples, calculations mobilised alternative propositions about the relevance of technical artefacts and linked this to innovation strategy and sourcing strategy in the firm’s inter-organisational relations. Tensions between calculations associated with technological, organisational and environmental entities framed considerations about the value of innovation to the firm strategically differently. All this happens because management accounting calculations are partial rather than total calculations of firms’ affairs and value. Ó 2009 Elsevier Ltd. All rights reserved.

Introduction Management accounting calculations relate innovation activity to the firm through two types of translations; a short translation which helps extend or reduce innovation activities in view of an actual or a possible performance variance; or a long translation which develops competing contexts for innovation and impacts firms’ innovation strategies and sourcing arrangements. This conclusion, which will be developed and justified later, adds weight to theories of management accounting calculations which see them as inscriptions that produce knowledge (Robson, 1992), create visibility (Cooper, 1992), mediate between complementary resources (Miller & O’Leary, 2007), and identify objects and objectives to be managed (Chua,
* Corresponding author. E-mail addresses: jm.om@cbs.dk (J. Mouritsen), (A. Hansen), ch.om@cbs.dk (C.Ørts Hansen).

ah.om@cbs.dk

1995; Hoskin & Macve, 1986; Miller, 2001; Preston, Cooper, & Coombs, 1992; Vaivio, 1999). Management accounting calculations are related to organisational practices either in relation to individual managers’ localised, embedded decision making (e.g., Boland & Pondy, 1983; Ahrens & Chapman, 2004,2007), or in relation to change programs that reach deep into the organisation to manage the labour force and transform the firm (e.g., Ezzamel, Willmott, & Worthington, 2004; Ezzamel, Willmott, & Worthington, 2008; Miller & O’Leary, 1994). We follow these ideas but add one nuance suggesting that management accounting calculations are not only mobilised by others – they also mobilise others. In this study, this means that accounting calculations create contexts for something, and in this research this something is innovation. The research question is: how do management accounting calculations mobilise innovation activities? The central finding, which is based on the empirical study of relations between management accounting

0361-3682/$ - see front matter Ó 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.aos.2009.01.006

interactive management control systems such as planning and budgeting are used to set agendas to debate strategy and action plans in these rapidly changing conditions. Birnberg. 1977. 2004. . For example. 1996. 2005. 1978. Davila. but also about their location in time and space. Brownell. many aspects of the business that are important in terms of current competitive advantage are highly controllable and managers need only focus on strategic uncertainties – often related to product or technological changes that could undermine current low cost positions. increasingly it is proposed that management control systems enable innovation (Clark & Fujimoto. Then the findings are discussed and finally conclusions are provided. Management control systems can be enabling for corporate activities (Ahrens & Chapman. Amabile. 2004. 1990). Long translations have multiple calculations that create tensions about the role of innovation. / Accounting. Ouchi. Dougherty & Hardy. formal management control systems can – under certain circumstances – help firms facing rapidly changing product or market conditions. is that management accounting calculations link innovation activities to firm-wide concerns rather than describe and represent innovation activities. Here. Verona. but needs to encompass a broader set of measures. 2007). The empirical section presents three examples of translations between management accounting calculations and innovation management. They develop competing propositions about the relevance of technical artefacts and link them to innovation strategy and sourcing strategy in the firm’s inter-organisational relations. Here. and Simon’s ‘levers of control’ framework (1987. However. Hansen & Jönsson. Davila emphasises .. Yet. Rockness & Shields. Ziger & Maidique. 1997). drawing on aspects of actor-network theory we trace relations between proposed management accounting calculations and innovation activities. Defenders. 1991. organisational and environmental entities by framing considerations about the value of innovation to the firm strategically differently. Rockness & Shields. Davila & Wouters. 141) suggests that ‘‘the prototypical prospector faces strategic uncertainties owing to rapidly changing product or market conditions. p. p. 2000. Then the research strategy and methods are presented. 1985. 1995. Davila (2000. Cooper & Kleinschmidt. The visibility. 1988. 1994. Long translations develop new possible versions not only of preferred types of innovation activities. it typically creates insight about links between innovation and wider organisational concerns which are mediated via short or long translations. 1987. The remainder of this paper is structured as follows: first we analyse central discussions about the role of accounting calculations in innovation. management accounting calculations and associated management control systems have been understood to hinder the development of innovation. innovation and R&D settings (Abernethy & Brownell. Gerwin & Kolodny. Like Simons. Tushman & O’Reilly. by contrast. & Herron. As the theory predicted. or at best are irrelevant in. This finding suggests that researching management control systems in new product development cannot be restricted to traditional accounting measures. 1961. 1995) suggests that interactive use of management control systems stimulates innovation (Bisbe & Otley.” Depending on the type of uncertainty facing managers they will use different combinations of financial and non-financial information. Widener. 2004. but an emerging literature suggests a positive link between management accounting calculations and innovation finding that management accounting calculations are abundant in innovative contexts.J. Likewise. Rationalisation is seen as incompatible with the creativity required for innovation (Burns & Stalker. 1979. uncertainty and product strategy are related to the design and use of management control systems. Ouchi. 1991. In short translations innovation activities are mobilised by a single calculation and related to a variance from a standard or budget which will reduce or increase innovation activities depending on whether the deviation is positive or negative. 2004). 1988). 2004. use planning and budgeting less intensively [because they] operate in a relatively stable environment. . The innovation management literature usually denies a constructive influence of management control systems on product innovation (Damanpour. Hall. Simons (1990. Lasenby. 1992.” When environments are complex and dynamic firms have management control systems which foster dialogue and interaction about the development of products and markets and the innovative pressure may be accommodated via interactive use of management control system (Bisbe & Otley. 1999). Here. 1977. accounting calculations are typically not accorded a constructive role. 1991. Bessant. Conti. calculations challenge each other and develop organisational tensions and dialogues beyond innovation activities. Raelin. 404): ‘‘The study reinforces a broader definition of management control systems to go beyond financial measures and also include non-financial measures. Short translations mediate between innovation activity and the costs and revenues of the firm. 2007). 1997. . Hayes. Ittner & Kogut. 1985). 1990. The tensions within long translations mobilise technological. 1995. where length reflects the number of elements taken into account. Mouritsen et al. 1996. 1991. & Pavitt. Leonard-Barton. 402) identifies uncertainty and product strategy as drivers of management control systems in new product development and he adds that a broad definition of management control systems is necessary to understand their role in relation to product development (ibid. They are obstacles to creativity and incapable of supporting innovation (Abernethy & Stoelwinder. Organizations and Society 34 (2009) 738–754 739 calculations and innovation in three firms. Miles & Snow. p. Coon. Tidd. the literature is silent on how the calculation influences elements of innovation. 2001. 1984. . 1997. Management accounting calculations and innovation management Often. Cooper & Slagmulder. It rarely creates deeper knowledge about the intricacies of innovation activities. insight and knowledge produced by management accounting calculations rarely concern the details of innovation practices. Formal control systems constrain.

Secondly. They demonstrate that many calculations exist. such as interactive use of calculations or combination of financial and non-financial information. Actors are ‘‘made to act by many others” (Latour. were the introduction to data collection. 2005. p. 1988. as Yin (1994) would recommend. by defining what comes before and what comes after. we used Callon’s (1986) diagrammatic form to illustrate the movements around the calculations. of revenues and development in profitability (Hines. 1990). Focusing more on the procedure of making a calculation than on its correspondence with an underlying reality. the stakes and rules of the game” (Callon & Latour. we noted how the power attributed to calculations translated into proposed effects on management of innovation activities (reduction or extension of innovation activities). by building up balanced sheets. 286). but often the dialogue would quickly develop its own momentum. It defines space and its organisation. cumulate and recombine the world” (Latour. Management accounting calculations are likely used for many other purposes as well. and of what the future consists. In each of the firms certain calculations were accorded particular significance when managers accounted for innovation performance.g. Firstly.740 J. 71). 1987). The three firms not only claimed to be innovative and could all be characterised as ‘HighTech’ companies.e.. 1997. The concern was not whether innovation was useful. and the calculations impose an agenda requiring a response (Miller. procedures of how traces such as receipts and statistics are put together and ends in a calculation (e. the claim is to have researched how management calculations are related to decisions about innovation (technology). The following sections present how management accounting calculations were mobilised to account for and influence innovation activities. are outcomes of this analytical procedure. p. we identified propositions about causal relationships between innovation and value creation mediated by calculations.. 1995. We explained managers that we were interested in their efforts to control and account for innovation. 2005). Translations between management accounting calculations and innovation activities The empirical material was collected in three firms that all invested in innovation and made this a priority. organisation and market may be brought forward and made visible by calculations of. Our interviews were reflexive (Alvesson. Miller & Rose. 2005) which acknowledges that our theoretical issues. 1992. but rather on episodes of translation between management accounting calculations and concerns for technology. So. These authors emphasise that a management accounting calculation is an inscription which develops visibility by ‘‘stating what belongs to the past. e.5 and 3 h. How does a calculation make a difference? Robson (1992) argues that accounting calculations develop visibility and create organisational time and space. Law. sizes and their measures. 1–4. 2005. This is not a claim to have researched three firms in their totalities. Approach and research strategy The empirical domain is three small and medium sized companies. it imposes its own space and time. the calculation prioritises elements to be accounted for. Indeed. 1981. By making things visible. We paid attention to how calculations were accorded power to do things. Through the analysis it was possible to draw out two propositions about innovation and two associated management accounting calculations in each example. Mouritsen et al. we then paid attention to the time and space suggested to be informed by the calculation and noted how changes in innovation activities would transform into something else such as sourcing strategies which turned out to be surprisingly important. i. by drawing up chronologies. but which innovation should be conducted and how it should be organised. No actor acts alone therefore the calculation is always part of a larger collective that acts together with it.. He analyses how accounting mobilises distant places and make them parts of managers’ world. Simons and Davila forcefully argue that management accounting calculations do not hinder innovation. Briers & Chua. In all firms there were many management accounting calculations but not all were able to stand for or represent innovation. 2001. they suggest that in innovative context there may be many more calculations than in situations where innovation is less prevalent. Thirdly. The calculation is an actor.g. / Accounting. They also all produced measurement technologies and systems used in different industries but there were commonalities in product technologies (such as a mechanism to receive and record signals. His diagrams show how entities are included in or excluded from an explanation and they seek to identify the movement of changing relations. graphic (or cultural) entities. which will be presented later. Quattrone & Hopper. values and standards. Management accounting calculations provide a good deal of the knowledge that is available for management (Cooper. influences decisions about innovation activities can be usefully extended. 46). Figs. HighTech and LeanTech. We interviewed 20–25 managers in each firm each taking between 1. 1996). Yet the analysis of how a control agenda. Chua. The analysis of the empirical material was organised to identify translations between calculations and innovation activities. Organizations and Society 34 (2009) 738–754 characteristics of the situation as drivers of management accounting calculations. Each has been given a fictional name to preserve their anonymity: SuitTech. p. Calculations influence how ‘‘different spaces and different times may be produced inside the networks built to mobilise. We did not focus on the firms as ethno- . a computer to manage the signals and a screen to present the signals in a relevant form). 2001). 2003) or analytical (Kreiner & Mouritsen. which were presented to mangers explicitly. We had a semi-structured questionnaire. Robson makes the management accounting calculation one proposition about the financial affairs of the firm. Last. According to Latour ‘‘any thing that modif[ies] a state of affairs by making a difference is an actor” (Latour. We traced how a presentation of a calculation would propose to influence innovation activities. This knowledge is an effect of procedures of inscription.

Actual gross revenue was an accumulated measures of all orders signed for at given technological area in a given quarter.” Supplies of external components were used to refine the customer’s solution and allowed SuitTech to be and stay innovative. The calculation. in situations where such aspirations were not met. they developed many different propositions about the measurement problem at hand and about its targeted performance. which was observed by a sales engineer: ‘‘You see the results of what we do in the sales measures. How could such a process be stopped and transformed into an order? When sales budgets were met and aspirations achieved. and yet other customers measured turbulence in flames. the characteristics of an eventual order could not be predicted at the outset of the process and it was therefore its effect rather than its precondition. innovation was negotiated principally between sales engineer and customer and when needed with the suppliers of special components. Sales performance framed sales engineers’ experimentation with complex designs that prolonged the sales process as only ‘the best’ was tolerable. The process of selling. the sales variance was modest and typically unconnected to the process of developing and closing orders. it could go on for a long time because both sales engineer and customer would always be able to invent or think about new improved details. However. customers and sales engineers had a long and intensive dialogue about customer needs and technical characteristics. sales performance was recognised in SuitTech’s accounting system when customers signed a contract and an order was made. which involved inventing the product. Mobilisation of sales performance and innovation through specialised and customised components To sales engineers. Its mission statement emphasised its ability ‘‘in providing solutions and solving problems. Each product was bent tightly around the individual customer with extreme customisation. The measure calculated the actual gross revenue minus budgeted gross revenue for each of the major technological areas quarterly. A business controller noted the inferiority of .3 mm lens instead of a 1 mm lens. Unfavourable variance oriented them to cash flows away from leads. sales performance was an authoritative performance measure. choose from special and customised components delivered by a broad range of suppliers or developed and produced by SuitTech itself. to budget-variances rather than to customisation. Unfavourable variance recast sales engineers’ interests and problematised the dilemmas between SuitTech’s and customers’ needs. sales engineers and customers assembled the measurement system according to detailed require- ments and specifications which were developed as part of the process. These could be sourced from a large network of carefully selected suppliers.” and it singled out that customers ‘‘have depended on the quality and reliability of its products and services to solve their problems. Both were professionals and both knew the intricacies of the technology. an order symbolised the end of a prolonged process of interaction where numerous propositions were defined and considered. If we let forego the option to choose from many different items in the design (and only use internally produced components) I think SuitTech will create bad customer solutions and thereby loose competitiveness.” SuitTech’s measurement systems were presented as unique offerings. we do not get the order. lenses. sales engineers could. And unless we can come up with something convincing. lasers.J. It defined a strategic uncertainty about the innovation agenda in SuitTech. chasses. In order to make a unique solution with precisely customised technical functionality. in cooperation with the customer. It prevented much financial problematisation of the firm’s innovation. Finding special and customised components along with developing and producing unique components internally was suggested to be a core competence of the firm. etc. These different measurement situations confronted SuitTech with demand for product innovation. the process of developing an order was inspired and would not necessarily stop: more time meant more detail and more quality. In principle they could choose any combination of components such as optical receivers. Before signing the contract. others measured water-currents when designing oilrigs. Together. Thus. was time consuming. the sales manager and the CFO of the firm. When sales performance was favourable it extended technological innovation while when unfavourable it reduced technological innovation. In SuitTech. The budget was set between the teams of engineers. Unfavourable variance influenced sales engineers to redirect their efforts from developing orders to closing orders within a short period of time and they were thus persuaded to bracket concerns about the products. sales performance. In principle. Organizations and Society 34 (2009) 738–754 741 Example 1: SuitTech – the role of special and customised components in innovation SuitTech. Some customers measured turbulence in wind tunnels. and made innovative solutions to the customers’ measurement problems possible: ‘‘We can easily be in situations where we need a 1. Mouritsen et al. The sheer number of possible different components allowed huge flexibility in design. Therefore. Therefore. illustrated precisely that a long process had been ended. and to closing orders more than to creating new and elegant combinations of specialised components. a small HighTech firm. Sales performance created the tension between customisation and closing orders. Extending translations of innovation – mobilising direct costs Innovation was in many ways predicated on expansion of the number of possible components that could be put into a product. A customer never makes an order before we have had serious discussions with him or her about the measurement problem. The sales budget problematised the interests of the firm compared with those of customers and suppliers. / Accounting. produced and sold measurement systems to R&D departments and university laboratories whose measurement problems varied considerably. the sales variance transformed the network of activities performed by sales engineers.” Sales performance marked the end of a process of interaction.

if we used programmable standard components. but remember the special and customised components are beneficial to us in many ways.” This addition to sales performance of cost items developed a new type of tension in relation to the value of innovation. Of course the customer has to pay for it but we do not keep record and set targets for these things. We should not be spending our time on reducing costs but instead on finding the right solution. was used to create a benchmark for technology. The sales manager explained: ‘‘As soon as we start to use contribution margin as a performance measure some would probably be tempted by the fact that they could increase performance by reducing direct costs. We do not compete on costs. That is probably good in some situation but I think that many engineers would probably also start to apply cheaper components and new – and less efficient – technology in order to reduce the costs which would be a disaster for us.. The focus on constructing unique measurement systems to the individual customer and producing to order make cost indicators less relevant. I mean. sales performance did not consider direct costs. the commitment to customisation challenged control of direct cost as well as delivery time since the supply situation often became complex and impossible to forecast due to the use of specialised items sourced from external suppliers.” . Organizations and Society 34 (2009) 738–754 cost in accounting for the firm’s sales performance in SuitTech: ‘‘A performance measure that is very important for our sales engineers is sales. but I think that we should start considering these things as well. I think the sales engineers do a great job. The business controller contended: ‘‘It is the contribution margin and not sales that matters when it comes to value creation. You may say that it is critical to our success.. What I as a management accountant miss are indicators for direct cost.” Tensions related to the omission of direct cost in the performance measure was raised by controller who claimed that sales engineers should mind costs and reduce the use of the special and customised components: ‘‘I do not want to be a pessimist.” If they had knowledge of direct cost sales engineers would perform innovation in new ways and ask questions about the appropriateness of special and customised components. I think this omission to a large extent comes from the way we innovate. Currently.” The contribution margin made revenues less direct cost visible. Adaptable software programming and a narrower range of standard components presented an alternative to the large variety of special components. So why don’t we start to incorporate it in our performance measure. This concern was. Programmable components can never replace special components totally but this is another possible technological strategy. Actually. It framed the economics of the firm in relation to innovation activities but it did not specify how innovation activities should be organised because its focus was more external than internal to innovation activities. The production manager emphasised that ‘‘Actual costs are always different from forecasts. However. As a management accountant I would say that it is a much more representative calculation of sales engineers’ value creation. Sales performance motivated expansion of activities and propositions in innovation. The production manager explained: ‘‘There are alternatives to special components.” Thus. Programmable component development. A sales engineer commented: ‘‘We are free to choose any special or customised component that fulfils the customer’s need. The strong form of customer orientation did not favour conventional forms of planning and control. It is possible to be aware of direct costs even if we are a bunch of innovators.742 J. it is a bit of a relief and it makes our job easier. We compete on the solution that we are able to come up with for the customer! We sell a differentiated product – a solution that the costumer is willing to pay for. They would reduce the use of such components and substitute them with programmable standard components. It is a strategic cost. Such inclusion of cost in performance was proposed as a more relevant concern with value creation. through such behaviour a whole new technology strategy that included a focus more on programmable standard components and software would become desirable.” Sales performance motivated a strategy of tight customisation through liberal use of externally sourced special and customised components but lurking closely in the background was the proposition to reduce direct costs. Reducing direct costs is not a performance criterion. We quite often debate this. But is it more the fact that they should keep in mind that the special components costs us actually quite a bit in terms of direct costs and time. As calculation. only loosely coupled to SuitTech’s strategies as delivery time was proposed not to be crucial to the customer. / Accounting. It creates room for innovation. we spend a lot of resources nursing the large network of suppliers delivering customised and special components.” Such a strategy would also affect supplier-relations the production manager suggested: ‘‘This would also imply that we have to think about our suppliers in a different way. Mouritsen et al. we can go far by programmable standard components and by the help of software programming from our software engineers. we would reduce this network and the resources we consume in the purchasing department significantly. It did not propose standardisation and it did not stress technological predictability and stability. however. but it was also challenged. which was an appendix to sales and not obligatory to sales engineers. in particular direct costs depend upon specific measurement problems that the customer has and these are hard to forecast and there are no incentives to reduce them for the sales engineers.

It was standardised. The contribution margin subtracted expected direct costs from expected sales and the targets set for direct costs as well as sales prices became a measure that coordinated and motivated actions taken in each development project.J. however. hospitals). also HighTech’s customers demanded high technology but they shared industry where the measurement system had to perform various but specific kinds of medico-technical analyses. This is what gives us profit. Product developers proposed that they knew more about relevant uses of the measurement system than customers and often customers simply accepted that HighTech’s latest product had to have better solutions than what the customer would be able to think of. Now we consider them all as one big supermarket. Technology development pushed the boundaries of supplied technology to the point where HighTech knew more about possible measurement tasks than customers or users would normally do. Mobilisations of contribution margins and innovation through technological superiority The product contribution margin was standard vocabulary in the new product development department of HighTech. HighTech proposed its extensive investment in experimentation and R&D in their development projects as a reason for this capability. The individual product was not customised. it created its own demand. software is an alternative to the hardware delivered by suppliers. They would rather deliver a relatively limited number of standard components.g. It required SuitTech to upgrade its internal software competences to convince sales engineers about the real relevance of standardised programmable components for customisation. The director of research and development suggested this very clearly: ‘‘We must develop the technology. It saw itself as a market-maker that set the de facto standards of the industry. This would also affect the way we see our suppliers. HighTech’s R&D organisation was separated in two: a R&D department and a development organisation.” The development engineer referred to a concern in HighTech whether product development project managers were to be accountable for the indirect costs of the R&D department carried out HighTech. there are many more possibilities – and I think it is beneficial for the organisation as a whole.” HighTech was committed to R&D and prided itself to be able to see customer wants before customers were aware of them. and HighTech experienced a high degree of ‘technology elasticity’ which connected technology development with high growth in prices and revenues. The visibility created by calculating costs of special and customised components would encourage a wholly different strategy for innovation. Organizations and Society 34 (2009) 738–754 743 Sales performance privileged heterogeneity in component selection. The R&D department carried out technology projects about chemical fluids and electronics and was presented as a service department for development projects. We are not as accountable for the resources we spend on each project as we could be.. Mouritsen et al. The concern was whether research resources should be reflected in product profitability or not. Like SuitTech. ‘‘If we focus more on the components that we can programme ourselves we might change the way that we are innovative today. It makes no sense to us just to copy the products from our competitors. This challenge was mobilised by associations made by direct costs and contribution margin which were in stark contrast to the ideas of components and inter-organisational relationships made by sales performance. Before I came to HighTech I worked in a development organisation where this was always was an issue. Lots of opportunities exist out there. In fact. but as HighTech continuously set new standards for what a measurement system could do. HighTech saw itself as a market-driving firm where customers would buy latest technology when it was made available to them. Here. Direct costs problematised the use of special and customised components and proposed to influence inter-organisational relations. Individual technology projects produced deep technological competences in chemical fluids as well as electronics and not merely applications hereof to a .” The tension between the two strategies was to a large extent created by the demarcation between performance according to sales and direct costs. The alternative would be to focus more on the components programmed by SuitTech itself where variation was created by software rather than by hardware: ‘‘We might challenge the way that we innovate today. A development engineer explained: ‘‘There is not much focus on indirect costs in our research projects and this is fortunate because it gives us freedom to experiment. HighTech’s innovation aimed to develop products’ ability to perform all relevant medico-technical analyses. would it be advisable to develop a profit margin after indirect cost or maintain the focus on the contribution margin accounting primarily for indirect cost? Technological innovation was important to HighTech that had a history of high quality products. Our mission is to develop the new products to the market and we have to be the leading technological firm. Example 2: HighTech: the concern with technological superiority HighTech produced and sold measurement systems typically to the health sector (e.” The perspective suggested by direct costs related new elements to the translation of innovation. Technology projects initiated to solve technological issues in one new product development project could often produce knowledge that could be used in a wide range of other development projects. The performance measure. / Accounting. paid little attention to indirect costs which was suggested to have created a significant room for innovation. HighTech emphasised application of new technology. It was less a market-driven firm than a market-driving firm.

Organizations and Society 34 (2009) 738–754 product line. They are too specialised. e. The requested laboratory tests. etc. A development engineer commented: ‘‘Currently. because technological development at HighTech was largely considered a combination of capabilities in electronics and chemical fluids. Development engineers raised the contribution margin as a justification for complexity in product development.’ They can be shared by everyone. this is of less importance in regard to the innovation lead we get from the development of our key technological capabilities.” Product development was concerned with revenues and production with cost. as it is a key towards our key competitive advantages. Inter-organisational relations modelled this difference. And if we start costing technology requests things will change. ‘‘We have unique capabilities in HighTech that combine electronics and chemical fluids. we do not pay for the copper-wire of the spool. number of requests made to the R&D department.” HighTech’s innovation concerned learning in relation to its technological bases in chemical fluids and electronics. I think it is crucial that we do this. The detours in technology projects created extra knowledge that could be used in later projects. It makes the projects much more expensive in total. were central to solve the technological problems that emerged during the new product development projects. The R&D director argued: ‘‘Many of the results we get from the technology projects are like ‘public goods. Mouritsen et al. The costs of R&D were not allocated to new product development. we do not use suppliers much when it comes to our technology development. to pay for a number of spools but we will only cover the direct cost and not any profits. This would make certain costs of R&D visible for new product development managers who could then economise R&D activities. So. It can be used for other customers.g. the contribution margin justified attention to complex organisational development capabilities: ‘‘We are allowed to develop our key technological capabilities: electronics and fluid chemicals. and external partners were considered to be promising while for electronics this would be difficult. / Accounting.g. Concerns with efficiency in production processes were in large part exported to subcontractors. But the things that we learn provide us with the extra knowledge that is so decisive to us if we want to keep our position on the technological edge. as suggested by the purchasing manager: ‘‘In our contracts we promise.744 J.” In particular in the area of chemical fluids possibilities for finding external support. New products were considered to produce additional revenues which would by far outweigh additional direct costs. Technology development is something .” A new product development manager continued: ‘‘Often we take detours in the projects. But it is a thing that I think that we are good at in HighTech. or man hours in the R&D department traceable to individual new product development projects. Nevertheless. However. e. Controllers suggested that they start focusing on the resources that product development project consumed in the R&D department. product innovation was driven by experimentation with new technologies and large inhouse development projects. This would have important consequences as a controller argued: ‘‘To include a strict focus on indirect cost in our performance measure would be to introduce an entirely new idea about our business. Some may say that we are too careful [in research] and spend too many resources in the development projects. But we learn things that we can use later in other projects. We cannot get that from the outside. We will only cover the spool. Sometime we even have to compromise design in order to keep direct cost low. Costing technology projects would focus too narrowly and hinder corporate-wide value creation the director of R&D argued: ‘‘I am sceptical towards the idea of costing our technology activities. It is a delicate balance. the subcontractor does not suffer a direct loss but neither does he gain any profit. This was noteworthy. Innovation was for purposes beyond the products at hand.” Costing would problematise technology projects and new product development managers would ask questions about HighTech’s knowledge banks and look for technological solutions elsewhere. experiments. One controller stated: ‘‘It is as if you can get technological advice for free. And cost control here is very difficult. It seemed that product development projects initiated many activities and incurred significant costs.” Sometimes – infrequently – direct cost could compromise design but generally. If we need less that the number of spools we only have to pay for the specific and direct cost of the items. But it is definitely an option that we should consider in order to become more cost efficient in our development processes.. But when it comes to direct cost we all have a responsibility.” The possible external sourcing of innovation in fluids suggested that relations between the two technological areas were to be cultivated in new ways and the R&D department’s technological capabilities would change and perhaps even diminish. Even if direct cost was part of the contributing margin and some concern had to be mustered to manage these costs.. Different types of cost drivers were suggested. For example. Extending translations of innovations – mobilising indirect cost From time to time frustration about the cost consciousness of the R&D department was aired.” One way to direct more attention towards the cost-consequences of technology development was to allocate the costs of the technology projects of the R&D department to the new development projects of the development department.

But I am not sure what the ‘real costs’ for HighTech are if we start sub-contracting technology development. In this inter-organisational relation an open book arrangement had provided time and cost information about the productions processes of the subcontractors. Information about set-up-time and mounting costs in the production process motivated a reduction in component selection from 15. Organizations and Society 34 (2009) 738–754 745 that emerges gradually and it may involve external partners. In particular. The past 5 years’ sharp growth in revenues was explained by the firm’s innovation activities. And in addition to sharing components yet another activity – modularisation – was proposed as a way to improve the manufacturability of the product. we should also think about the cost of the other alternative [i. but the activity-based costing calculation focused differently: ‘‘The number of set-up had grown by more than 150% and the machines do not run full time and we had too much waste in process time. they have lots of technical arguments for using many different components but with the open book.” This imperative to use common components challenged designers because the implication was to reduce number of components. All LeanTech’s products were customised and historically one central challenge had been to integrate software and hardware in a connected offer to the single.e. Activity-based costing dramatised certain consequences of digital rather than analogue technology related to design for manufacturability. Customisation could be a question of digitalisation (software) that could quickly be configured according to customer needs. Mobilisation of activity-based costing and innovation through sharing components. machines had to be stopped and the labour force had to switch manually between types of components thus increasing time consumption and cost.. If we do this we can increase our productivity and we can deliver very quickly. LeanTech was concerned with designing and assembling analogue devices but modularisation pushed customisation into digitalisation. In the development department.e. produce and market high quality products for audio and video transmission. and by being production innovative we can produce everything within 2–3 weeks. Mouritsen et al. Together these elements problematised the relationship between hardware and software components in innovation activities.” The suggested ‘real costs’ were different from accounting costs. individualised customer. The market condition is that we have to produce as quickly as possible.and television stations all over the world. As a result. the concern with modularisation opened a new innovation ambition where the distinction between software and hardware gained new significance. When we start costing one alternative [i. The resulting growth and expansion had made LeanTech outsource a large part of its production capacity to selected suppliers that had invested in advanced production technology. Hardware and software could be distinguished and introduce a principle of technology development and production taking into consideration predictability in production and creativity in development. An activity-based costing calculation visualised economic effects of complexity of engineers’ design for manufacturability initiatives.and cost-consequences of using many different components. because of costing. Software programming could provide innovation for customers. as explained by the logistics manager: ‘‘There is simply a potential in software that we have to exploit. / Accounting. The logistics manager explained: ‘‘By modularisation we pack more potential functionalities into fewer modules and thereby get a fast reaction to customer orders and eliminate non-value-added time.and production-aspects the role of engineer’s innovation was to reduce technological features and components of the products. Through design and sales work its development. the internal technology requests]. the focus would be on narrow product line effects rather than corporate-wide effects across time and space. various types of software could be implemented on largely the same hardware platform.” Modularisation developed a limited number of possible product configurations which would make the production and assembly process more predictable. we would be able to deliver within just a few weeks irrespective of .” A large number of different components proposed many set-up operations in the production process.and salesefforts had focused on expanding markets through customisation and a flexible product program. Example 3: LeanTech: the challenge of hardware modules and software programs Aiming to develop. Focusing on process. LeanTech had developed a customer base across telecommunication companies and radio. Historically. modularisation and digitalisation Design for manufacturability was considered an element in LeanTech’s competitive success and use of common component for modularisation and use digital and software solutions to customisation problems in product innovation made manufacturing effective. external technology requests]. In principle.J.. and the development work and supplies of software modules could be outsourced more freely to a pool of independent software suppliers in LeanTech’s supply chain. Historically. ‘‘We were confronted with very high resistance from the development engineers when we started to talk about preferred types. In particular he was concerned whether the connections between chemical fluids and electronics could be upheld in a situation where. designers had paid attention primarily to direct cost. we could show the time. we have been able to make the development engineers reconsider the design and perform some creativity in their design work to reduce the variation of components.000 to 5000 components. To meet the market conditions we simply have to enable the use of common components that can be used within and across modules.

746 J. changes and new features had to be studied and documented.” Activity-based costing expanded the use of digital software solutions and technology because it presented analogue solutions as costly compared with the digital solutions. In most of our work on software we don’t know the original design concept and the changes we make will be inconsistent with the original concept. Not doing so would reduce the durability of software. This risk was partly related to critical components being so special that only a small number of suppliers would be able to deliver them. At the same time the aging of the software packages fastened and then it became increasingly complicated to make it work with other packages. The logistics manager explained: ‘‘Our software packages are growing bigger and this weight gain is caused by our fragmented supply of software from internal and external programmers. were not taken into account by activity-based costing. we can see that from our accounting statements. Secondly. which is time consuming and a expensive to maintain. increase in waiting time for critical components. it was cumbersome to make components plugand-play because they were changed over time and more recent components had to integrate with older components. Mouritsen et al. in fact they will degrade the original concept and speed up the aging of the software. In some situations. As a consequence the time when new software had to be developed was moved ahead. put pressure on the programmers in LeanTech to add new features quickly for connecting different software packages. they had to have more capabilities and functions. Both increased the workload of changes to software. as it was explained: ‘‘Often there is already a long history of patches and bilateral interfaces resulting in spaghetti of interconnected applications. Making documentation and review of changes and new features were not prioritised. This. and software that has been repeatedly modified in this way becomes substantially more expensive to change and update. It does create a set of advantages to orient ourselves more to software. Firstly. and inventory cost was suddenly a challenge. Instead of several suppliers of software the innovation potentially could be based on market standards from major suppliers instead of own design and programming and externally delivered software packages. / Accounting. suppliers had to put new resources into pre-programming the software of modules and in hardware a broader variety of functions required more expensive components. and increase in R&D costs. modularisation and digitalisation could increase cost. In software. To avoid this and accumulate the specific knowledge that future deliveries could benefit from. Translation of innovation mobilising cost of capital Yet the activity-based costing calculation could be challenged by its disregard for capital costs and depreciation that accrued from three types of events: increase in the average cost per unit on inventory. the average cost per unit increased. Thirdly. software applications were not only designed by different software-programmers but also at different periods of time by different project teams at different suppliers. For example. Because of postponed customisation the priority of software work was often to make customisation work and deliver to the customer. some of the components were critical components that could be difficult to source and unexpected waiting time could occur. Concerns with cost of capital and depreciation would not only economise R&D but also encourage its substitution towards larger. One process of additional customisation concerned the challenge of changing needs. The logistics manager explained: . due in part to new surprising competitors. another was a result of the number of changes that were made. Since all modules and components had to be combinable with all other components and modules. Organizations and Society 34 (2009) 738–754 what the customer wants because our production is geared towards it. In other words. This made LeanTech suggest that software changes were costly and that future changes could only be designed consistently if the programmers’ work was based on proper documentation of the design and code. together with the fact that the modularisation had postponed the product differentiation to a point closer to the customer. the value of inventoried components and modules increased since.” Complexity increased investments in R&D activities which increased depreciation charges by what was suggested to be 50–60%. A team of software engineers would review the codes in different versions and the differences recorded and then agree on the proper structure that all future changes had to be based on. each with subtly different structures and based on slightly different design concepts and assumptions. and therefore a substantial amount of customisation work was needed in LeanTech. the frequent changes speeded up the aging of the software and the work to review and document became more difficult and time consuming as the size of the software increased. standardised software packages which in turn would impact inter-organisational relations. or as the logistic manager explained: ‘‘Of course the hardware modules we now produce result in more expensive inventories and if for example Motorola designs a new product and use some of the same components as us it also creates extra costs in sourcing and delays – but we are not making any calculations on those costs.” Such increase in inventory costs and risk of waiting time in the supply of these components. although reduced in total numbers due to digitalisation and modularisation. The result was that a single delivery could exist in different versions.” Software tended to grow bigger and become more complex because the easiest way to add a new feature or fit two or more functionalities and packages was to add a new code. But this is a discussion whether these costs relate to re-engineering cost of the product portfolio or if they are development costs that also relates to future products.

2004. The surprise arising from the three examples is that the management accounting calculation is able to problematise not only innovation activities but also central strategic properties of the firm such as its boundaries and capabilities. sales performance only intervenes when there is a shortfall which happens when sales engineers invest excessive time in assembling a customised product. / Accounting. but it extends the probability that sales engineers will use external components. 2007. as the technology has to have applicability in an existing product range. be integrated with technological capabilities of existing product ranges. There is a constraint to innovation. Jönsson & Grönlund. The software package would last longer before modifications were needed and its maintenance costs would be much lower. These three examples of short translations illustrate how a management accounting calculation can work on innovation even if it does not directly represent innovation activities. They hardly make the innovation more transparent because they do not model it. over a time period. however. The R&D activity has to develop a market response in demand and in price increase. 2005. Our R&D activities should not be reinventing the wheel. many decisions in innovation are interesting not only in R&D settings since their effects spread to manufacturing and sales and therefore. In SuitTech. It stipulates a context for innovation that requires it to be profitable. it also reduces innovation by insisting that technology development. In LeanTech the short ABC calculation reduces the number of components that sales people can muster and use in a particular product thus reducing the elements in innovation arrangement. Boland & Pondy.. Innovation. The usefulness of management accounting calculations is paradoxical because they are not inherently connected to the activities they help organise. large suppliers with standardised software packages. While the contribution margin expands innovation by emphasising R&D innovation as a general drive towards increasing prices. The calculation also increases the use of more powerful components thus substituting analogue solutions by digital solutions because it presents costs of flexibility. Sales performance is not the same as choices about components in SuitTech. An ABC margin is not the same as complex components in LeanTech but it helps sales engineers to be interested in a limited set of preferred components. rather they mediate between innovation activities and firm-wide concerns and influence the intensity and direction of innovation activities. 2004. 1983) management accounting calculations do influence situated decisions and managers do use such information in managing R&D projects (Nixon. Hansen & Jönsson.and inter-organisational spaces and times. 1988).J. When sales variance is unfavourable. A parallel movement can be found in HighTech where the contribution margin justifies new technology in innovation projects and thus encourages developers to experiment. management accounting calculations help to make the effects of innovation economic (Davila & Wouters. Sales performance re-frames sales engineers’ attention towards closing orders when it is in jeopardy. This happens in short translations where innovation activities are related to revenues. The short translation The primary quality of management accounting calculations in relation to innovation activities is hardly that they describe innovation activities and make them increasingly transparent. The perspective suggested by capital cost and depreciation charges required LeanTech to upgrade the use of external software suppliers to fewer. Thus. Sales performance thus translates a complex question of technology into a simple question of time. There is an indirect link between management accounting calculations and specific innovation activities. inter-organisational relations and management accounting calculations Short and long translations The main observation from the empirical account is that management accounting calculations do not calculate innovation activities per se but they mediate it. Table 1 shows that the management accounting calculation speaks for much more than it describes. contribution margins and ABC margins. the calculation requires . as has been proposed also by others (e. Management accounting calculations add a new perspective to innovation activities. 1998). Ahrens & Chapman. or in larger translations where innovation activities are linked with sourcing strategies and changes in the competencies of firms through competing calculations. Mouritsen et al. Management accounting calculations rarely become meaningful and powerful by an appeal to their definitional correctness but only by connections with concerns developed when they participate in mediating multiple actual and potential intra. which starts from adding perspective and context to innovation. Table 1 presents and recounts the systems of innovation at stake in the three examples. By substitute many of our current software packages with larger and well-designed software packages we can slow the aging of our software and minimise the modifications and documentations work we need to make ourselves. The contribution margin helps to explain whether in fact R&D is able to translate into increasing prices far beyond the limited direct cost added from innovation.” By using standardised software packages with more functionality LeanTech’s programmers could meet specific customer needs by adding switches and create systems that appeared to be different by various functionalities but were only small variations on one basic software package. There is a limit to the time a sales engineer can spend combining components into a product. In all examples. but it extends development engineers’ experimentation in HighTech. The short translation links the innovation to the firm by problematising when the innovation activity is in excess and has departed from its contribution to making the firm viable. Contribution margin is not the same as electronic components and chemical fluids. Organizations and Society 34 (2009) 738–754 747 ‘‘We have the option to use software suppliers that offer a broad variety of functionalities in one integrated software package with standard interfaces. attention is directed to finalise orders rather than to produce leads.g. Yet.

It omits direct costs and extends innovation by expanding types of available components. SuitTech Innovators Dominant calculation Short translations Reduction/extensions of innovation Sales engineers Sales Sales performance focuses on orders closed and contracts signed. However.748 Table 1 Translations of innovation management by management accounting calculations in three examples<!Query id="Q5" desc="Please check the column headings in Table 1. It expands innovation by protecting technology experimentation but reduces it by insisting that technology has to fit an existing product program when unfavourable contribution margin variance occurs Electronics and chemical fluids mobilised in technology development Innovation concerns development of new products setting industry standards and create new customer wants. Innovation adjusts the product through combinations of physical entities Suppliers play a significant role in delivering the wide range components to be drawn in as needed in combinative innovation Direct costs/contribution margin (costs of customisation) Programmable standard components HighTech Development engineers Contribution margin Contribution margin visualises increasing difference between steep revenue effects and moderate direct cost effects of new technology and justifies indirect costs of experimentation (with electronics and chemical fluids)." /–>. It reduces innovation by stipulating hardware choices but extends innovation by using stronger components Hardware modules and software programs developed in a lean supply chain Innovation concerns process innovation through modularisation of hardware and internal software design. There is considerable ‘technology elasticity’ as customers want ‘latest technology. when sales variance is unfavourable it reduces innovation and motivates closing orders quickly Combinations of special and customised components sourced from anywhere Innovation concerns product variation vis-à-vis customer requirements. programming and documentation J. Through different combinations of special and customised components sales engineers search for distinct solutions fulfilling individual customer needs. suppliers play an important role in optimising direct cost new products Indirect costs of R&D department/gross margin (costs of experimentation) External technology development Suppliers play an important role as suppliers of hardware and specialised software packages Competing calculation Substituting innovation element Alternative innovation strategy Cost of capital (costs of simplification) Larger software packages from suppliers with surplus functionality and standard interfaces for configuring modules Innovation created by increasing use of software packages with surplus functionality and standard interfaces Innovation from the outside Innovation through close relationship with suppliers of standardised software modules Innovation created by software engineers Innovation from the inside Innovation created by suppliers with close relations Innovation from the outside Innovation through suppliers’ unique knowledge Alternative interorganisational relations Arm’s length relationship with suppliers of standard components .’ Innovation embeds technological capabilities of electronics and chemical fluids and concerns structural adaptation of products to new technological possibilities LeanTech Production engineers ABC margin ABC margin visualises cost of complexity of customised designs and constrains the number of technology choices but it increases the power of each hardware module. Mouritsen et al. / Accounting. Yet. Organizations and Society 34 (2009) 738–754 Materialisations of the innovative practice Long translations Innovation strategy Inter-organisational relations Suppliers play no role in regard to developing technological capabilities.

Mouritsen et al. develop markets though new technology (in HighTech). and including direct cost in the performance measures economises innovation activities by shifting attention to programmable components that are more readily available and whose variation can be guaranteed by software flexibility rather than by hardware components. cess of translation while a dotted arrow identifies a competing calculation which requires a different settlement of innovation and (inter-) organisation. This work on the boundary of the firm may be central in the management of innovation in a period of time when firms’ strategies change much faster than they can develop their competencies (Castells. innovation strategy. 1. It bends the innovation to its context by presentation of financial effects in revenues. These translations become longer because they develop complex problematisation of the role of innovation in the firm strategic consequences beyond the firm by taken many more entities into account. Specifically. When direct cost is mobilised. Innovation through combination of special components appears to be costly. 1 illustrates that the stake in innovation management is a struggle over with technological artefacts. 2000. Each management accounting calculation defines some rules in this struggle which proposes not only different compositions of technological artefacts but also different innovation strategies and sourcing arrangements. Parolini. Fig. Thirdly. The bold arrow identifies a dominant pro- 1 These elements are clearly the ones identified in our research. the maps of the translations show connections between management accounting calculations. It is short when it economises innovation through influencing the time. 2 illustrates the production of tensions between the two calculations in SuitTech (sales and direct costs) over the amount of special components that sales engineers can legitimately take into consideration. and make manufacturable solutions (in LeanTech). mobilising this calculation. 1999). / Accounting. 3 illustrates that. The more standardised the set of possible components the more amenable innovation is to control through a form of standard cost system. In principle. Inter-organisational relations are then proposed to be an inventory of a limited range of standard components that can be supplied steadily and predictably. well-assorted and heterogeneous inventory. Elements in the analysis of the role of management accounting calculations in long translations. The two calculations guide this decision differently. in contribution margins and gross margin. Fig. Adding the direct cost to the picture makes problematisation of this relation possible. The contribution margin approach sees the costs of the R&D department as a period costs and allows it to develop its own distinctions and . 1. resources and orientation of innovators. the new product development manager (in HighTech) and the production engineers (in LeanTech). there are also long translations generated by competing calculations. in HighTech. technological artefacts. and it can be illustrated generally as in Fig. Fig. there are two arrows – one bold and one dotted.J. Innovation is here to a large extent met by software programming. 1 on the three examples. Figs. Organizations and Society 34 (2009) 738–754 Calculation 2 749 Calculation 1 Inter-organisational relation Technological artefacts Alternative Inter-organisational relation Innovation strategy Alternative Innovation strategy Fig. Thus. and (inter-) organisational relations. The long translation In addition to the short translation. A relevant management accounting calculation is specific and therefore partial. engineers focus on customisation of products through combination of components and the inter-organisational relation is a large. Sales performance expands the number of possible components because it makes revenue considerations more important than cost considerations and develops innovation through combination of components arriving from an extended space. the struggle is whether a large R&D department which takes pride in developing general knowledge and not only product specific knowledge is appropriate. and its mobilisation requires support from others such as the order manager (in SuitTech). A short translation relates the calculation with changes in innovators’ conduct but it does not question the innovation strategy. The calculation connects the innovation activity to other concerns.1 Secondly it illustrates that there are competing calculations which propose decisions about innovation and (inter-) organisation differently. managers identify a tension between resources and efforts invested in designing an order. there could have been others. help because its tension is difficult to appreciate without mediation: economise time (in SuitTech). 2–4 show the application of Fig. The tension between calculations is important.

Mouritsen et al. The cost calculation suggested as a way to convert the period costs of the R&D department into a product costs. in contrast. the allocation of the period cost to projects proposes to develop a stronger association between individual R&D projects and individual product development activities. Contribution margin Indirect costs Supplier only manufacturing Electronics/ chemical fluids Suppliers invovled in technology development Experimentation Product innovation efficiency Fig. innovation. Long translation between management accounting calculations. These activities are discretionary investments and only to a lesser extent associated with product profitability calculations. A positive contribution margin is proposed to arise from increase in price rather than reduction in cost. / Accounting. 4. Long translation between management accounting calculations. innovation. Thus. ABC margin Capital costs Suppliers of special hardand software Hardware/ software Few suppliers of standard software Software design. and inter-organisational relations in HighTech. programmingand documentation Configuration of modules Fig. In addition it also makes directed . 3. Organizations and Society 34 (2009) 738–754 Direct cost Sales Performance Broad range of innovative suppliers Special component/ standard components Arm’s length relationship Combination of physical components Software programming Fig. concerns protecting in-house capabilities related to electronics and chemical fluids. and inter-organisational relations in SuitTech. focuses on the efficiency R&D investments and costs and it proposes external competences in electronics fluids as possible new sources of knowledge. 2. Long translation between management accounting calculations. innovation. and inter-organisational relations in LeanTech.750 J.

risk management and strategic uncertainty by adding sequences of proposed effects. in LeanTech. The short and long translations both create contexts for innovation activities but there are differences. it will not operate on its own. The management accounting calculation does not judge the relative merits of different propositions about innovation. Mere mental interpretation is not enough. also because of time and cost information it is possible to contemplate outsourcing of R&D and in SuitTech again because of cost information it is possible to conceive of in sourcing of many production tasks. 1995. Sales performance. sometimes exotic. however. When the three examples draw new possible calculations into play they pay attention only to those parts hereof that will make its propositions different from the existing arrangement. in contrast. Mouritsen et al. / Accounting. 4 illustrates. Inscription is not a copy of the world but only a particular ordering of the revenues and costs accumulated in the accounting system. they gain power in interaction with the development of the entities they engage. Direct cost was added to a sales figure in SuitTech. The calculation requires a network of practices and commitments to operate.’ another voice would immediately say ‘show me what you mean’ and then the calculation has to emerge. contribution margin and ABC margin are powerful because they can motivate actions to be performed by innovators.g. a struggle over the use of exotic components or general standard software. For example. that innovation should be ‘more efficient.. These propositions reach into the inter-organisational space because exotic and specialised components require concerned and intensive interaction with suppliers about the components’ performance while the use of standard software packages requires that the firm interacts with large suppliers who can develop the technologies of their application largely by themselves as they define the industry standard. in LeanTech because of cost and time calculations it is possible to propose an integrated. Even people who are inside an innovation – such as the R&D Director in HighTech – have to step out and mobilise the management accounting calculation when they want to say something to justify innovation. Simons. Standing out is a movement. effects and character innovation in relation to firm strategies. innovation has to be inscribed and made a calculation before it can be acted on. Accountants’ proposition to add completeness in calculation is. Mere cognitive interpretation of innovation is not collectively actionable. expensive components. 76-7) which suggests that the contribution margin is more complete than sales performance. even if. surveyed and compared. If someone would claim. they can be less complete in the world of activity and strategy. calculations gain strength not because they are inherently good or reasonable but only by their outside found in the activities and strategies it participates in shaping and developing. it opened a new space for increased cost of capital and depreciation charges.2 2 The management accountants in the three firms claimed that their extensions of the calculations were more complete than other calculations. rather than represent the innovation choices. p. Even if some parts of the accounting calculation are strengthened. indirect cost was added to contribution margin in HighTech and cost of capital was added to Activity Based Costing in LeanTech. Therefore. This point extends questions about the completeness of calculations (e. Lawler. The short translation develops immediacy between innovation activities and economic effects. This translation. The tension is that there is not one but at least two ways in which choices over technological components can be made. for the inscription to work. The calculations provide these justifications which are inside the process of translation rather than outside it. that if the cost strategy would gain power in SuitTech and HighTech managers would also quickly concern themselves with revenues. say. . In order to combat one calculation another one is needed. power.J. however. Fig. In LeanTech the ABC calculation is able to rally interest only because it is possible to calculate the cost of huge inventories. The tensions arising in the three examples of proposed transformation are minimalist. The ABC margin motivates a limited range of complex. lean supply chain governed from one place. This is the context that the calculation develops and makes possible. ABC calculations reduced production costs in SuitTech. for example. Rather than seeing the opposing calculations as suggestions of effective management control systems. the world of innovation activity and management has to be added and therefore even if more complete stylistically and formally. If managers do not follow the calculation. creates a context for innovation activities to occur. they have to produce another calculation to make their point. indirect cost can be proposed to drive value (HighTech) and to destroy value (LeanTech). they are much more problematising devices which challenge dominating arrangements by highlighting the special features they problematise. The problem of heterogeneity of components is not visible before it has been made a calculation. cost of capital and depreciation charges. reduce complexity of components and draw on standard software packages. Any particular economic category performs differently across the three examples. In the long translation some of the power of a calculation derives from its tensions with other calculations over the appropriate way in which to make innovation a productive resource for the firm. But the three examples show that completeness is not a property of the calculation. it flows over in new ways. The tensions between calculations are important because they frame decision making. The power of the calculation derives from its intertwinement with action. Likewise. and ABC margin is more complete than contribution margin. In HighTech. the management accounting calculation is part of the proposition that it mediates. a stylistic and formalistic concern with the mathematics of inscription. Management accounting calculations in tension The three examples illustrate that innovation strategy can be an effect of management accounting calculations. Organizations and Society 34 (2009) 738–754 751 outsourcing of R&D initiatives possible and thus develops a new inter-organisational R&D agenda. It is likely. Calculations play a role in the development of new propositions of the relevance. 1983. The calculations do not determine their impact. A calculation is stronger. It is a movement into a calculation where some effects can be proposed. It is useful to substitute concerns about completeness with the relational qualities of the whole network which constitutes the power of the calculation. but not a movement from one place to another.

The solution appears simple – change the role of the calculation in the system of explanation and the environment emerges as an effect of the analysis. / Accounting. the manage- ment accounting calculation may also gain by relating the economy to other entities such as innovation and environment. It may be that Simons’ (1990. In the three examples. They are prospectors exactly because they have become knowledgeable about many aspects of the environment which is then used to design and cultivate the prospecting abilities. Jönsson & Grönlund. The calculation can never be total. The three examples illustrate that management accounting calculation can be mobilised to extend strategy in addition to implement strategy. The management accounting calculation is strong because it helps to develop context (see also Mouritsen. The calculations are involved in coordinating the firm’s inter-organisational field by extending existing configurations of actors and interests into alternative possible configurations. One of the possible effects of such . Nixon.. Based on examples from three firms. In effect the management accounting calculation is part of a relationship between economy. This is when there is maximum pressure on innovation activities to show their strategic significance. 1999). focus attention to certain ways of seeing the firm through more details and more interactions. The management accounting calculation speaks for the firm and puts pressure on innovation to account for its contribution in this respect. surprisingly. science and organisation are co-produced via mediating technologies. profitability. This mechanism is stronger when a calculation is challenged by another one. The management accounting calculation works by extending or reducing the number of entities that innovation can take into account. paradoxically. dependent on the management accounting calculation being partial because then it presents tensions. More particularly. productivity. but it adds perspective to them and relates them to the firm. Like Håkansson and Lind (2004) and Miller and O’Leary (2007. Perhaps this is why Simons’ (1987) prospectors use a lot of information. The addition proposed by the three examples is that the calculations do not only work by moving closer to innovation and by looking more carefully at details of innovation practices.752 J. capabilities and market requirements. Management accounting calculations mobilise the environment and a variety of propositions are added that make up not only existing environments and but also possible ones. The three examples show. 2004. 2005) the three examples illustrate that innovation activities are often inter-organisational and that mediating technologies help firms enrol others in this accomplishment. 2005. Contribution margin speaks for the role of technology in developing markets in HighTech. and the corollary probably is that managers know more about the details of affairs and develop a unitary interpretation of the demands of complex markets. innovation and environment. It transports concerns about innovation by relating them to other concerns such as production within the firm more than to the individual concern of the innovation situation. Short translations exist when management accounting calculations encourage extension or reduction of innovation activities when it proposes performance to be adequate or inadequate. Even if the calculation produces visibility. Management accounting calculations mediate and mobilise innovation through short and long translations. They all relate concerns about innovation and inter-organisational relations to concerns of other situations and events in the firm and beyond. sales performance speaks for the firm and identifies the difference between firm. Hansen & Jönsson. Simons. Conclusions A management accounting calculation does not describe or represent innovation and sourcing activities in any detail. knowledge and actors are co-produced in the development of innovation activities: markets. p. Long translations mobilise at least two calculations to problematise the role of innovation for corporate purposes differently.g. In this optic. Organizations and Society 34 (2009) 738–754 Management accounting calculations as context for innovation and sourcing arrangements Research which suggests a constructive role for management accounting calculations in developing innovation observes that managers develop dialogue about calculations in the pursuit of innovation (e. The tensions between calculations bend organisational activities such as innovation to considerations such as growth. Mouritsen et al. The tensions between calculations produce this opportunity. Management accounting calculations can motivate very long sequences of translation as they are associated with strategic propositions about technology and the boundaries of the firm. Davila. in contrast.. Management accounting calculations challenge each other and develop organisational struggles not only about the role of innovation. in relation to sourcing and strategy. management accounting technologies mediate the development of firm boundaries. but also about its location in time and space technologically.. Ezzamel et al. less by describing the dimensions of innovation and inter-organisational design and more by adding perspective to them. management accounting calculations – sales performance. organisationally and environmentally. Rather than making a claim to increase visibility more and more into details of organisational spaces (e. 2000. and ABC margin – are mobilised in relation to innovation and in turn. The three examples illustrate how the composition of the environment is in process. it is not primarily about the contours of the objects it proposes to manage. or use of multiple financial and non-financial calculations. 1998.. Ezzamel et al. The process of developing relations is. suppliers and customers in SuitTech. markets. and liquidity. 1990). Simons. In effect management calculations can command much more than they calculate. It may be that interactive use. ABC margins speak to reduce the cost of production complexity developed by innovative arrangements in LeanTech. 1988. 1987. this means that it is possible to contemplate and prepare for the environment through calculations. As Miller and O’Leary point out.g. 142) concerned question ‘‘How do managers identify strategic uncertainties?” can be addressed by the three examples. 2008). that the important link is the movement of innovation away from its place into diverging concerns about the sourcing and strategy. contribution margin.

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