Qualitative Research in Accounting & Management

Innovativeness and accounting practices: an empirical investigation

Margaret Healy, Peter Cleary, Eimear Walsh,
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QRAM-06-2017-0047
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Innovativeness
Innovativeness and accounting and
practices: an empirical accounting
practices
investigation
Margaret Healy, Peter Cleary and Eimear Walsh
University College Cork, Cork, Ireland
Received 1 June 2017
Revised 28 November 2017
Accepted 19 February 2018
Abstract
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Purpose – Innovation, the outcome of innovativeness, is a collaborative activity, requiring an

integrated approach to the development and management of organisational capabilities (Tushman and
Nadler, 1986), and therefore inextricably implicated in the accounting practices of organisations. Extant
research however is not conclusive as to the influence of accounting practices on organisational
innovativeness with some considering them enabling while others view them as restricting. This study
aims to investigate the process of innovation as suggestive of a greater understanding of innovativeness
as a dynamic organisational capability and therefore requiring greater consideration of the enabling
conditions underpinning this.
Design/methodology/approach – Using a case study approach, and from the perspectives of three
separate functionally specific organisational actors, this paper investigates the role of accounting practices in
managing innovativeness within one high-technology organisation. Structuration theory is used as a lens
through which the data collected are analysed.
Findings – Creative tensions (Simons, 2000) at the operational level between innovativeness and
performance measurement are managed through the development of creative boundaries (“guide rails”),
within which innovative solutions must be developed.
Practical implications – The findings support the assertion that the use of performance metrics (i.e.
accounting practices) can support organisational innovativeness thereby potentially contributing to enhanced
organisational performance.
Originality/value – Accounting metrics are simultaneously enabling and constraining, whereby the
tension created from this dual functionality generates ways of empowering organisational capabilities for
innovativeness throughout the organisation.
Keywords Performance measurement, Innovativeness, Structuration theory, Accounting practices,
High-technology
Paper type Research paper

1. Introduction
Innovation, which refers to the process whereby organisations introduce new ideas,
products and services to satisfy the current and future demands of their customers (Clarke,
2016), is widely regarded as a key strategic capability for survival and growth (Crossan and
Apaydin, 2010; Saunila and Ukko, 2012). Alternatively, innovativeness describes the
attitudinal awareness and openness of individuals (i.e. employees) to new ideas and ways of
doing things (Bisbe and Malagueno, 2009). The use of accounting practices, with their
primarily internal focus on improving efficiency and effectiveness while maintaining
goal-congruent control over organisational activities, may simultaneously stifle the creation,
enablement and enactment of various innovative capacities. Qualitative Research in
Accounting & Management
In this regard, the work of Simons (1995, 2000) considers how managers in organisations © Emerald Publishing Limited
1176-6093
balance the need for innovation and control to co-exist and describes the necessity for them DOI 10.1108/QRAM-06-2017-0047
 QRAM to successfully manage a range of inherent tensions competing for their limited attention.
Specifically, the Levers of Control model (Simons, 1995) distinguishes between interactive
control systems (aligned with beliefs systems) and diagnostic control systems (aligned with
boundary systems), with Simons careful to point out that the difference between the two lies
in their use, rather than in the technicalities of their design. Diagnostic use implies goal
setting, measurement of outputs, determination of variances against predetermined targets
and the use of feedback to bring performance in-line with expectations, whereas interactive
use focuses on the management of strategic uncertainties whereby managers at multiple
levels of an organisation generate action plans for the future (Simons, 2000). The tensions
between these levers are, in Simons’ (2000, p. 304) view, “capable of reconciling the tensions
between innovations and efficiency”.
However, in considering how this occurs, Simons (1995) cautions against the paradox of
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central tendency, in which individual actors (agents) are ascribed with the average traits of
the group. Instead, increased thought is required in considering the role of individual agents
as part of the coordinated whole comprising the entire organisation. Furthermore, despite its
focus on how management control systems are deployed, the Levers of Control model is
regarded by some as limited due to its development and focus on the actions of senior
management only (Berry et al., 2009). As accounting (as a form of organisational control) can
influence innovative activities throughout organisations (Mouritsen et al., 2009), additional
research is needed to investigate managerial actions at lower levels (Marginson, 2002) – a
requirement specifically addressed in this paper. Additionally, there is also a body of
research which directly contradicts Simons (1995, 2000) and others such as Davila et al.
(2009a) by suggesting that accounting practices may actually constrain the ability of
organisations to successfully engage in innovative activity (Davenport, 2006; Marginson,
2002).
Having regard to these two opposing views, the aim of this paper is to explore the tension
between innovativeness and accounting practices. Despite the large body of extant research
on performance measurement in organisations, there is little evidence of how this tension is
effectively managed. This paper contributes to the existing literature through the provision
of one account of the synergistic inter-relatedness of aspects of simultaneously maintaining
control while enabling creativity, as presented from the individual perspectives of a variety
of organisational actors representing a number of distinct functional areas of organisational
expertise. In so doing, the paper also addresses calls for empirical research in management
accounting using Stones’ (2005) strong structuration theory, to generate greater
understanding of agents’ context analysis and conduct analysis, enabling consideration of
what motivates agents’ actions.
The remainder of the paper is organised as follows. The next section positions this study
in terms of existing literatures on accounting practices and innovativeness. The data
collection approach is then described before structuration theory is used as a “sensitising
device” (Englund and Gerdin, 2014, p. 171) through which to view the research evidence
presented. The paper then considers the insights generated through those findings before
offering some concluding comments and suggestions as to how future research in this area
might proceed.

2. Theoretical background
2.1 Innovation, innovativeness and accounting practices
For innovation within an organisational setting to occur, collaboration is required,
necessitating a coherent strategy for the creation, nurturing and continual management
of distinct capabilities (Tushman and Nadler, 1986). From a research perspective,
 academics tend to study innovation from within their own individual disciplinary-based Innovativeness
platforms and paradigms, without necessarily reflecting on, or incorporating ideas from and
other cognate areas (Hart, 1996). For example, if seen in relation to outputs, innovation
can be classified in terms of product (radical or incremental), process or market, whereas
accounting
if understood in relation to the marketplace, innovation can be described in terms of being practices
continuous or disruptive (Tushman and Anderson, 1997). Notwithstanding these
differing perspectives, the process of innovation includes the consideration of market as
well as technical opportunities, is cumulative in nature, and is impacted by
irreversibilities and path dependencies (Teece, 1996). Innovative activity generally
involves collaboration amongst professionally and functionally specialised groups
of individuals willing to share and apply their explicit knowledge and perhaps more
importantly, their tacit knowledge gained through experience and/or education (Nonaka
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and Takeuchi, 1991; 1995; Pavitt, 1992).

Innovativeness refers to the “attitudinal openness to new ideas, products and process”
(Bisbe and Malagueno, 2009, p. 374). Organisations that thrive, via innovative activities (the
outcomes of innovativeness), do so because they have “developed an architecture that helps
them to innovate and adapt to situations no leader can fully foresee or understand”
(Tushman and Anderson, 1997, p. 157). Furthermore, research conducted by Marginson
(2002) found that in addition to the existence of a culture of innovativeness, managers were
much more likely to engage in innovative activities if they felt that their suggestions would
be well received by their superiors, and subsequently acted upon. Prior work has largely
focused on innovation in terms of its outcomes (exploratory, exploitative or ambidextrous)
(Bedford, 2015) and thus far has placed limited emphasis on the interaction between the
different forms of innovation and the creation and sustainability of the underlying
conditions enabling innovativeness.
Consequently, the influence of accounting practices on innovation has not been conclusively
established by prior research in this area. In considering how managers balance innovation and
management control (encompassing a range of accounting practices), Simons (1995) revealed
what he termed “a puzzling anomaly” (p. 9): contrary to his expectations, the most innovative
companies used their accounting systems more than the less innovative firms in his sample.
MacKenzie (2006) subsequently reported that the use of calculative practices such as
accounting (specifically he wrote about the Black–Scholes–Merton financial model) can be
regarded as “engines” that facilitate the creation of knowledge leading to both innovation and
the potential for future innovation. This position was further substantiated in research
conducted by Revellino and Mouritsen (2015, p. 47) who stated that:
Accounting helps to organise the world but it does not remain stable, just like the innovation that
it contributes to developing. Innovation, once generated, is subject to new forms of calculation
which then add new things to it.
In a similar vein, Davila et al. (2009a) have argued that innovation appears to benefit from
there being “tight” and “loose” performance controls, to provide both support and direction
for it to occur. However, offering an alternative perspective, others – for example, Davenport
(2006) and Marginson (2002) – found that the use of performance metrics had the potential to
create tension, resulting in reduced motivation, thereby limiting the capacity for innovative
activity to occur within organisations.

2.2 The role of management controls

Two of the primary roles historically occupied by management accounting within
organisations are those of planning and control. While the former reflects attempts by
 QRAM management to forecast various possibilities and their likely consequences, the latter aims
to ensure that such future plans are actually achieved or modified as circumstances dictate.
Simons (1995, p. 5) defined management controls as being “the formal, information-based
routines and procedures managers use to maintain or alter patterns in organisational
activity”. Examples of management accounting-based control systems include; budgeting
and variance analysis, cost accounting and performance measurement.
Simons (1995) subsequently developed the Levers of Control model which includes four
levers (belief systems, boundary systems, diagnostic systems and interactive control
systems), which through their continual interaction generate what he termed “dynamic
tension”. Specifically, Simons (1995, p. 153) states:
The power of the control levers does not lie in how each is used alone but rather in how they
complement each other when used together. The interplay of positive and negative forces
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generated by these systems creates a dynamic tension between the opportunistic innovation and
predictable goal achievement that is necessary for profitable growth.
Simons later expanded on this dynamic interplay of forces in his use of the term “creative
tension” (Simons, 2000), arguing that the various levers of control in his model were capable
of reconciling the demands and consequent tensions between innovation and efficiency,
thereby potentially leading to profitable growth.
Davila et al. (2009b) describe Simons’ (1995) definition of management control [systems]
as being consistent with the concept of dynamic capabilities and suggest that the Levers of
Control model (Simons, 1995, 2000) creates a paradigm shift in terms of the extant literature
on control, offering a way to create rather than to limit or eliminate the conditions necessary
for innovative activity to occur. Rather than consider the organisation itself as the basic unit
of research activity, Davila et al. (2009b) suggest considering instead the process of control.
When viewed from this perspective, it has been claimed that accounting practices can be
seen as offering a balance between the freedom for creativity and the discipline required to
harness that creativity towards generating economic returns (Davila et al., 2009b), i.e.
interfering with and transforming given innovations based upon their organisational and
social contexts (Revellino and Mouritsen, 2009, 2015).
Similarly, Widener (2007) argues that many of the studies investigating control have
thus far focused on a single aspect of it, despite widespread acceptance of its multifaceted
nature. Based upon evidence collected from a survey of 122 Chief Financial Officers in US
firms, she suggests that the existence of inter-dependencies amongst the various control
systems, as posited in Simons (1995, 2000) Levers of Control model are in fact
complementary (as the term is put forward by Milgrom and Roberts, 1995). Specifically,
Widener (2007) claims that the diagnostic and boundary systems provide the structures
enabling the effectiveness of the interactive control system, with the beliefs system
positively influencing the other three, thereby implying the existence of complementary
relations between all four levers.
It has been claimed that management accounting (partially as a control mechanism) can
influence innovative activities throughout the organisation by spanning the various levels of
its hierarchical reach (Mouritsen et al., 2009). However, research is needed to determine how
the creative tension proposed by Simons (1995, 2000) is considered at management levels
below that of the most senior ranks (Marginson, 2002). This is especially important as it has
been suggested that many firms are increasingly relying on the ingenuity and
innovativeness of their middle management to safeguard their existence (Dutton et al., 1997;
Simons, 2000). Englund and Gerdin (2015) investigate how and why performance
measurement systems were transformed by a group of middle-managers, from monitoring
 devices, to enabling mechanisms, with the dynamic, “reciprocal inter-weaving of accounting Innovativeness
and operational knowledge” (Englund and Gerdin, 2015, p. 279) bringing greater and
transparency to decision-making. The inherent tensions identified by Simons (1995, p. 4)
accounting
between freedom and constraints; empowerment and accountability; top-down direction and
bottom-up creativity; experimentation and efficiency, ultimately require the consideration of practices
and reaction to strategic uncertainties by all levels of management. Indeed, Simons (2000)
acknowledges this in defining the criteria for an interactive control system as including use
by managers at multiple levels of the organisation. Therefore, additional research at levels
other than that of senior management is needed to allow for a greater understanding of the
functioning of such management control systems.
This view is supported by Franco-Santos et al. (2012), who based on an in-depth review of
76 empirical studies, argue that despite some work, most notably that of Henri (2006) and
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Mundy (2010), the impact of performance measurement on organisational functioning still

remains unclear and in need of further research. Henri (2006) recommended the use of
qualitative studies to provide explanations and insights (he used a survey methodology in
researching a sample of Canadian manufacturing firms), to which Mundy (2010) responded
by using a case-based methodology conducted within the confines of a multinational
financial services organisation. More recently, Busco et al. (2012) describe the use of
collection briefing meetings at Monnalisa, an Italian clothing manufacturer, which competes
on the creativity, differentiation and quality of its product range. Here, formal control,
defining objectives in both financial and developmental terms, was used in conjunction with
other formal controls such as the balanced scorecard and strategy maps; as well as the
monitoring of intellectual capital, through a set of key performance indicators (KPIs)
relating to innovation capacity. From observing how this firm operates, Busco et al. (2012,
p. 31) propose the idea of a “twofold purposeful imbalance” between creativity and control;
and between the formal and informal mechanisms constituting an organisation’s “package
of controls” which represent one element of a larger system of controls. The evolution of this
system at Monnalisa has allowed them to successfully manage the inevitable trade-off that
exists between the simultaneous need for both creativity and control coupled with the
underlying requirement for an acceptable financial return.
In summary, two opposing views exist as to the influence of accounting practices on
innovation and innovativeness. On one side of the argument, it has been suggested that
accounting practices constrain innovative activity (Davenport, 2006; Marginson, 2002). This
criticism of the role occupied by accounting is not entirely new, as some accounting
researchers have previously cited the negative impact associated with the use of traditional
approaches to feedback as a means of implementing strategy (Brownell and Dunk, 1991;
Hopwood, 1972; Otley, 1978). However, an alternative and expanding stream of empirical
literature has emerged suggesting the opposite viewpoint (Bisbe and Malagueno, 2009;
Busco et al., 2012; Davila et al., 2009a; 2009b; Mouritsen et al., 2009; Revellino and Mouritsen,
2009, 2015; Simons, 1995, 2000), i.e. accounting practices can enable or stimulate
organisational innovation, potentially even representing a source of competitive advantage
(Henri, 2006).
Consequently, this paper seeks to contribute to this debate through its investigation of
the interaction between accounting practices and organisational innovativeness, at one high-
technology firm. It proposes a focus on the process of innovation as suggestive of a greater
understanding of innovativeness as a dynamic organisational capability and therefore
requiring greater consideration of the enabling conditions underpinning this. The next
section outlines the research approach adopted in attempting to address this objective.
 QRAM 3. Research method
Data for this study were collected at a single Irish site of a global high technology
multinational organisation (hereafter known as Hytek), thereby facilitating the investigation
of how accounting practices are implicated in innovativeness in a naturally occurring
context (Birnberg et al., 1990). Highly rated by its parent company, Hytek is characterised as
“leading edge” and a force for change within its industry. The global organisation describes
and presents itself as a worldwide leader in its chosen industry and a review of secondary
data sources support this assertion. The global organisation employs over 60,000 people, of
whom 3,000 are employed in Ireland (across a number of locations); its shares are publicly
traded and it is included on the S&P 500 index. The specific, individual Irish site providing
the location for this research study is mature (i.e. over 25 years in existence); therefore,
formal, well-established performance measurement systems could reasonably be expected
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to exist (Simons, 1995). Innovation is listed as a core value of the entire organisation.
Birnberg et al. (1990) argue for the use of multiple methods in carrying out empirical
research in the management accounting area. In response, this study used a combination of
interviews, documentation and secondary data sources, thereby minimising the inherent
weaknesses of each one. This approach also provided a triangulation or validation function
for the entire research findings, as it allowed the researchers to have greater confidence in
documenting an understanding of the control systems in operation (Stringer, 2007). The
study focuses on the experiences of individual managers in three distinct areas of functional
expertise: finance, customer support and research. Throughout Hytek, the Finance function
is viewed as the “owner” of the performance measurement system. Customer Support
activities centre on the importance of having products and services that meet (or preferably
exceed) customer expectations and/or the ability to solve customer problems (sometimes
even before those customers are aware that a particular problem exists). Research activities
focused on identifying emerging technologies and considering if, and how these could be
used to enhance existing product and market opportunities for Hytek.
Details of the interviewees (i.e. “Andrew” from Finance, “Declan” from Customer Support
and “Kate” from Research) whose views are presented later in this paper are outlined in
Table I. Interviewees were selected based on how the function they represented constituted a
core aspect of innovativeness. Finance typically claims ownership of accounting practices
(at least at the outset); research represents the typical forum within which innovative
activities occur; and customer service represents a primary component of Hytek’s business
model and has been presented in prior literature as another source of innovation (Curtis and
Sweeney, 2017). The actual names of each interviewee have been changed by the researchers
to protect their anonymity as per the terms and conditions for each of them agreeing to
participate in this study.
Prior to each interview occurring, an outline of the issues to be addressed was prepared
by the researchers. Offering advantages similar to those of a questionnaire, this facilitated
greater concentration on the replies provided by the interviewees, both verbal and non-
verbal, to questions asked as each interview conversation unfolded. Each individual
interview lasted for a minimum of one hour. All interviews were conducted at the
interviewee’s place of work, recorded with their permission and subsequently transcribed as
part of the data analysis process. At the beginning of each interview, a rationale for the
research being undertaken was provided by the researchers before each interviewee was
asked to describe their employment history and current role in Hytek. In addition, the
following elements were also addressed during each interview: the role of innovation in the
case study site; consideration of the performance measurement system in use at Hytek (with
questions here guided by reference to Ferreira and Otley (2009)); the interviewee’s
 Innovativeness
Name Functional expertise Employment history and current role and
accounting
Andrew Finance Employed by Hytek for 12 years; an accountant with professional
qualifications practices
Role:
Supports business units with financial analysis, budgeting,
forecasting and business partnering (pricing strategy; supply chain
optimisation; investment appraisal)
Describes himself as linked back to the global organisation, whilst
working with the local organisation
Declan Customer support Employed by Hytek for 13 years
Role:
Co-ordinates the different groups needed to resolve customer problems
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in a timely manner
Co-ordinates teams who carry out their work in the customer’s
environments, resolving various issues; Interacts with other teams
across the global organisation
Kate Research Employed by Hytek for 13 years
Role:
Co-ordinates and manages research programmes generally, as well as
being directly involved with specific research projects internationally;
Sees her role as identifying new and emerging technologies that can Table I.
create opportunities for the company in terms of new products and Details of
markets interviewees

experience with and of performance measurement systems; and the interaction between
performance measurement and innovation. Questions in relation to the performance
measurement system itself centered on how performance metrics were devised,
communicated and measured, with interviewees providing detailed descriptions of the
processes in place, including their benefits and limitations. Prior to concluding each
interview, each interviewee was thanked for their participation and asked for permission to
contact them again if the need arose to clarify/confirm any particular aspect of their
responses.
Following each interview, written observations and working notes were immediately
recorded by hand, based on initial interpretations of the interview and site visit. These
handwritten notes were then converted into a more formal record and added to the growing
research file. A number of secondary data sources were also used, in advance of, during and
after the interview process. Press releases (both “local” and “global” in orientation) served as
an important means of triangulating the primary research evidence acquired. Examples
include Hytek annual reports which provided insights into the financial and strategic
positioning of the case study organisation at a global level, and reports published in the local
popular and business media concerning the case study site were also used. In addition, the
interviewees provided access to screen shots, internal company newsletters and blogs,
customer satisfaction survey data, data input screens and internal reporting templates, all of
which collectively enriched, triangulated and re-enforced the research data being gathered.
Specific quotes from secondary sources are not provided in this paper for reasons of
confidentiality regarding the identity of the research site.
To gain greater insight into how accounting practices were implicated in the
innovativeness capabilities of the case study site, structuration theory (Giddens, 1984;
Stones, 2005) was used. According to Giddens (1984, p. 327, cited in Conrad, 2014, p. 129),
 QRAM structuration theory provides a useful way “for thinking about research problems and the
interpretation of research results”. More recently, Coad et al. (2015) argue for the potential of
strong structuration theory as a way of exploring how management accounting contributes
to encouraging innovation in organisations. Prior research has already determined the
utility of taking a strong structuration approach (for example, Coad et al., 2016; Feeney and
Pierce, 2016; Harris et al., 2016)) as well as explaining the theory in broad terms.
The quadripartite nature of structure, as proposed by Stones (2005), posits four
analytically distinct aspects:
(1) external structures – both enabling and constraining – which form the structural
context of action (Coad and Herbert, 2009);
(2) internal structures – within the agent comprising general-dispositional (habitus)
and conjuncturally specific aspects (knowledge of the three dimensions of
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structure and the ways in which these are understood by other relevant agents-in-
context, as concluded upon by the agent-in-focus);
(3) active agency, which reveals how agents draw on their internal structures and act
in given situations (Coad and Herbert, 2009); and
(4) outcomes, which reveal the intended and unintended consequences of agents’
actions.

As a central tenet of this theory, each agent’s actions must be considered in the context of
each of the others. However, rather than focus primarily on matters of structure, emphasis is
also given to agency and praxis, recognising the recursive relationship underpinning the
duality of structure and the dialectic of control concepts (Busco, 2009; Busco and Scapens,
2011; Conrad, 2014; Englund et al., 2011; Macintosh, 1994). As stated by Macintosh (1994,
p. 174), in relation to accounting systems:
The structuration framework highlights how these systems can give legitimacy to the actions and
interactions of managers throughout an organisation. This is because accounting systems set
forth values and ideals about what ought to count, what ought to happen, what is deemed fair,
and what is thought to be important.
The case findings are considered and interpreted in light of these aspects, contributing an
empirical exploration of how innovativeness is enabled and enacted in the Irish subsidiary
of a large multinational organisation, through the situation-specific knowledge and actions
of each agent in situ.

4. Research results
4.1 Innovativeness at Hytek
Hytek is one of seven centres of excellence throughout its parent global organisation; hence,
there is a strong focus locally on research and development, and on incremental product and
process innovation. This ethos was succinctly described by both Andrew and Declan, as,
when referring to Hytek they stated that, “its lifeblood is innovation because in this sector
you have to evolve and you need to survive” [Andrew, Finance] and “there’s a huge
emphasis now on innovation” [Declan, Customer Support]. In fact, Hytek has transitioned
from being led by and from its parent, to now being viewed as one of the more innovative
sites of the global organisation. Innovative activity “would always be a big part of company
DNA” [Kate, Research] and is seen as generating healthy internal competition amongst
organisational members (i.e. divisions compete against each other to be awarded strategic
 capital investment funding from the centre), focused on the value proposition of the global Innovativeness
Hytek entity. The interviewees described this in the following terms: and
The philosophy is that it isn’t about the one big idea; it’s about many, many small incremental accounting
ideas which improve what you’re doing and people are encouraged to come up with those practices
[Andrew, Finance].

Generally speaking we don’t do too much blue skies research, right, we would keep pace with it,
definitely, right, to see who’s developing what and how things are evolving, but in terms of
getting actively involved [. . .] wouldn’t be areas that we would jump in and do [Kate, Research].
As one means of actively promoting the process of innovation across the global
organisation, Hytek organises an annual internal innovation conference. This is a company-
wide event (i.e. across the global organisation), whereby individuals or teams can submit
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ideas and proofs of concept, based on what they are doing (or in some cases, not doing); and
what opportunities they see “out there” for the organisation internationally. Employees
wishing to participate at this conference are encouraged to submit their ideas in areas such
as technology, business processes, marketing activity and customer support services. The
conference is regarded as a way of capturing ideas (i.e. making tacit knowledge explicit),
leading to collaboration and the sharing of ideas and expertise across the global
organisation. Internal company newsletters highlight the success of the conference,
presenting its outcomes as an “innovation roadmap” which during the period 2010 to 2013
resulted in over e200m increased revenues across the global Hytek organisation. Prizes are
offered as incentives to the employee(s)/team(s) deemed to have proposed the best ideas.
Kate describes it in the following terms:
Those ideas don’t have to be big, you know, huge rocket launches or anything like that, they can
be very simple, straight forward but effective ideas within their own work groups, so by having
that whole system in place you’re encouraging a set of behaviours [Kate, Research].
However, the caveat for all new ideas is that they will be evaluated against, and must be
closely aligned with organisational strategy as well as offering some form of commercial
and or financial return (e.g. cost reduction; revenue generation). This is tangibly evident and
reinforced as a business imperative via the website through which the new ideas are
submitted: as very prominently displayed on the input screen is the current share price of
the global organisation, with additional motivation also provided in terms of a share
ownership scheme which operates throughout the company. During the time frame of this
research project (late 2013-2014), over 4,000 “ideas” were submitted to that year’s innovation
conference in response to 28 different challenges identified as facing the global organisation
as articulated by senior management. Internal (Hytek) company documentation summarises
the outcomes of winning bids in the form of a matrix, based on technologies involved (new
or existing) and market space impacted (new or existing). Innovations were thus categorised
under four headings: incremental, radical, adjacent and disruptive. No one category was
dominant; however, the balance of innovations was in the disruptive, adjacent and
incremental categories. Winning ideas ranged from the design of sustainable, low-cost data
storage systems for developing nations, to home entertainment storage solutions, as well as
submissions incorporating the organisation’s customer experience philosophy, and
advances to its internal infrastructure supporting operational excellence.
Additionally, innovation workshops are organised regularly at the local level, in an
attempt to instil a culture of innovation, but always within the confines of targets and
challenges generated at the global level. External industry observers of the organisation
note the importance of this strategy in bringing new topics to the attention of the executive
 QRAM levels of the organisation, both in individual sites such as that of the case study organisation
and ultimately to the leadership of the global entity. The process was explained as follows:
To meet our targets there will be measures put around that; if there’s a gap there – then back to
creativity. We use the likes of Kaizen events [. . .] where you get people together for maybe a week
or two or three days and they’re just totally free from the business and they just brainstorm under
a defined methodology in terms of here’s our problem, what are the possible solutions, how can
we tackle this. So that’s where creativity comes in, tied to the metrics [Andrew, Finance].
Based upon the responses outlined above in addition to the information contained in Table I,
it seems reasonable to conclude that Andrew’s outlook and consequent agency is strongly
rooted to the global (as opposed to the local) perspective of Hytek as he contextualises
innovation and innovativeness in terms of the global value proposition of the organisation
as a whole. In a similar manner, Kate also acts out her role with a regard for commercial
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returns, but those actions are contextualised from a pragmatic, functional (i.e. Research)
perspective. However, in contrast with the others, Declan identifies primarily with the
“Customer” and situates his actions on that basis. For Declan and Kate, the main issue is
managing the metrics within their respective business groups; whereas for Andrew, it is
about the global perspective.

4.2 Performance metrics at Hytek

A top-down approach is used to develop high-level financial and non-financial measures
across Hytek, with general acceptance of the broad need for such metrics across the
organisation for example, Kate states: “you need to have metrics because if you don’t
measure, you don’t know whether you are right” [Kate, Research]. The performance data
used is captured through the organisation’s Enterprise Resource Planning (ERP) system
(observed during the research process, as part of the data collection phase of this study) and
standardised reports are generated to publish the results throughout the organisation. Hytek
has a number of critical success factors (CSFs) at the local level, the results of which are
compared to other “local” contexts across the global organisation. These CSF’s are
categorised under the following headings; “People”, “Infrastructure” and “Business
Environment”, examples for which are listed as follows:
 People: cost per head; attrition rate; language skills; customer focus; spirit of
collaboration; profitability per employee;
 Infrastructure: ease of access to Europe and the Middle East; stable physical
infrastructure; time zone in relation to global business outlook; and
 Business environment: Corporate tax rate; similar IPP laws to parent; close
alignment with and relationship with national government.

The KPIs associated with these CSF’s are mandated centrally by the parent company. They
are then drilled down to the functional level, based on the particular activity of that given
function. Prescriptive, top-down measures are therefore in operation at the local level.
Despite stating that at the global level there is openness to the development and amendment
of performance metrics, Andrew notes:
Global consistency is a massive driver so nobody wants, you know, home-grown bespoke metrics
for your own location [Andrew, Finance].
A very formal planning and forecasting process is in place, and this is regarded by Andrew
as the most critical view into how the business is performing. Forecasting of revenues and
costs are carried out each month, and this allows for adaptive change and flexibility.
 Performance metrics underlying this process are primarily used to manage performance and Innovativeness
to control activities; to “inform the situation” [Andrew, Finance]. Because of this, the way in and
which metrics are interpreted at both global and local levels becomes very important:
accounting
At a functional level, each function has their own KPIs, which is driven by the type of activity practices
that they’re involved in [. . .] In manufacturing, it’s output, so the volume of production that’s
going through – they will look at various sort of measures around what that output is and it’s
measured on a daily basis, so if you were to walk around our manufacturing floor you would see –
very visible in fact – there are TV screens with the metrics on them as opposed to white paper put
up on a board, but you would see, you know, the progress in terms of what the capacity of the
particular production line was versus what’s going through. You’d look at the output per person;
you’d look at the cost, the average cost of producing within that particular cell [Andrew, Finance].
However, there does appear to be some conflict evident between parent company external
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reporting needs and locally “useful” information to inform decision-making. The corporate
side of the organisation is outwardly focused on reporting to the marketplace; for example,
expected earnings per share (EPS) numbers. Performance metrics flow from this, down
through the layers of the organisation, based on the selected aspects of it that corporate
(parent company) headquarters consider relevant to individual local organisations. The
resultant lack of a global overview, leading to individual sections focusing narrowly on
specific aspects of the overall picture, is described in the following terms:
[Hytek] is also unique in the sense that it doesn’t typically give you a view of the full P&L so what
you’ll find is from a forecasting point of view – well at a corporate level they get the whole picture
and you’re a piece of the puzzle, so you’re measured, so you’re minding in isolation, you’re
working your piece to optimise it [Andrew, Finance].

Most of the reporting you will find are centrally designed and then exploded out and you get to
influence and input some of that [. . .] so from an Ireland perspective, you know, depending on, I
suppose your level of seniority maybe within that functional organisation you get involved
[Andrew, Finance].
At the local level, each business group has leeway to work out the best way to implement
their (mandated) goals. Teams are given specific targets to achieve from senior
management. Examples of such targets were clearly visible and displayed prominently
throughout the Hytek site. However, there are opportunities to provide feedback to senior
management on the targets chosen. This contingency approach to the setting of local,
business group targets is viewed as appropriate to managing each of those groups:
[. . .] but then if you’re not flexible about how you define and go about your measurements [. . .]
and if you try and use the same measurements in areas, across all areas, and then some areas are
not applicable, then you’re going to get the wrong behaviours right [. . .] you could get certain
scenarios where you get people trying to march to a cost efficiency thing, whereas you might be
better off trying to generate more revenue right, for example, so I think it, it varies, it really
depends on where you are within the business [Kate, Research].
Thus, the high level measurements are very much prescribed from the top, but there is the
possibility of two-way communication between the different levels of management. The
emphasis for business groups then becomes how to gather the performance data and how to
put together the mechanisms to produce the reporting. In general, the metrics are centrally
managed with certain KPIs mandated from a corporate perspective such as revenue and
cost measures. All interviewees stressed how the metrics were aligned to the corporate
requirements. Thus, metrics are communicated and shared regularly between
organisational levels.
 QRAM Customer-driven metrics (viewed during the site visits to Hytek, but not specifically
reported here due to confidentiality reasons) complement internally focused measures such
as cost and revenue. Indeed, according to Declan [Customer Support], “we are ruled by the
metrics a lot of the time [. . .] but that’s the problem with metrics”. Financial and non-
financial performance metrics are published globally across the entire organisation,
allowing Hytek to compare and be compared against other global centres of excellence.
These data are highly visible and available to all employees, instilling a competitive
atmosphere that can be used to drive performance at the local and consequently
the corporate level. Accounting practices in the form of variance analysis and “cost bridges”
are produced to investigate any unexpected results and to determine the steps that must be
taken to rectify matters. In essence, the “common denominator in all metrics is money”
[Andrew, Finance].
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4.3 Managing within the metrics

The need to manage within the metrics was clearly evident and articulated by all three
interviewees and confirmed through researcher access to the data collected via various
modules of the ERP system. For Declan and Kate, whose respective individual focus was
more local than global (Table I), this also included the negotiation and resolution of conflicts
between managing within the business group (local) and across Hytek as a whole (global).
Indeed, it was suggested that some performance measures can potentially have a negative
impact on the achievement of others, with all three interviewees stressing the importance of
bringing the local context into the interpretation of globally reported measures.
Consequently, within Hytek, it was found that metrics could be used to hide as well as report
problems:
When you pull one string, it has an influence on another [Declan, Customer Support].

I’m here long enough now that I kind of look at the numbers and say that’s the issue but
sometimes when you actually try to make the numbers you’re just covering over the cracks
[Declan, Customer Support].
Conflict between a focus on performance metrics on the one hand and on the need for
innovation on the other are clearly identified and described in terms of being a political
balancing act:
You’re even taking the time out from delivering these results to do the innovation, as in, let’s say
if you want to work on a project or ideas and stuff like that [. . .] you might be impacting these
numbers because you’ve somebody that’s going out looking at this idea, trying to create
something but this is time they’re spending away from the queues, and spending away from day-
to-day work that they should be doing you know [. . .] There’s a big balancing act. There’s always
politics involved in everything as usual you know [Declan, Customer Services].
Competing demand for resources forces individuals into thinking and acting creatively, both
in terms of managing innovativeness and in terms of managing the metrics to enable and
underpin them:
We can’t boil the ocean, so you kind of prioritise all the time depending on what resources you
have available [. . .] a bit of rejigging to be done in the background [Kate, Research].
Tension invariably arises when there is conflict between meeting high level goals mandated
from parent company headquarters and sustaining innovativeness at a local level. This
occurs when resources are taken from day-to-day work focussed on meeting production
targets and transferred to innovative activities. There is pressure on teams to reach their
 targets while simultaneously providing new creative ideas within a constant, fixed set of Innovativeness
resources. This view was acknowledged by Declan [Customer Support] when he states that and
“it’s like, make the numbers, while still give us the innovation, with the same amount of
people”.
accounting
Hytek acknowledges that investing in innovation in the short term can be costly, but the practices
benefits are realised over the medium and long term. Focusing completely on research and
innovation is risky, so a balance is required between running a profitable business at the
local level and conducting research activities, to maintain its positioning as a leader and
driver of excellence at the global level. Without innovation, performance will deteriorate,
and this will subsequently be reflected in the achievement (or not) of the prescribed
performance indicators. One interviewee sums this up succinctly as follows:
If you keep going and don’t do the innovation, no matter what you do [. . .] these metrics are going
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to go down anyway at some stage [Declan, Customer Support].

The interaction between innovativeness and performance metrics can be described in simple
terms as synergistic and circular, whereby new processes and ways of working are needed
to develop and grow Hytek both locally and globally. The “tension” between the two was
addressed by Andrew [Finance] when he suggests, “logically you would say that one would
inhibit the other because it’s so controlled you can’t have freedom”. However, in response to
this, he also states that:
[. . .] the metrics, I think they’re complementary [. . .] in the sense of the metrics will identify
problems that need to be solved. . . then the creative piece will come in and

[. . .] the metrics side of it actually helps create some of the boundaries but within that there
should be freedom to develop [Andrew, Finance].
This view was also reflected by Kate [Research] when she states that within Hytek
innovation does occur, “[. . .] but it happens within a framework”.

5. Discussion and conclusions

Accounting practices at Hytek, which include the incumbent performance measurement
system provide a way to ensure the necessary control of activities (e.g. ensuring that both
financial and/or non-financial targets are met or that shocks can be anticipated) while
simultaneously enabling the necessary innovations for longer term survival and prosperity.
Any significant deviations from the prescribed targets are immediately controlled for by
management to ensure that the overall strategic direction of Hytek is not compromised. The
accounting system, in so acting, provides a “guide rail” [Andrew, Finance], in that individual
agents can make sense of innovative activities (e.g. their contribution to a predetermined
strategic imperative as articulated by senior management), thereby giving broader meaning
to those activities beyond their individual functional, technological or customer service
roles. In this context, it also creates a boundary whereby creative solutions are expected in
response to specific organisational problems, but cognisant of the predetermined
performance metrics by which the employee and their functional area will ultimately be
evaluated against. Innovativeness becomes a common language, understood and (re)acted
upon by all. Creative tension materialises in the simultaneous interactive and diagnostic use
of the performance metrics at Hytek. Table II presents this as individual agency, in terms of
each of the three interviewees, using the terms and constructs of strong structuration theory
(Stones, 2005), towards expounding a composite view of the accounting practices in the
context of organisational innovativeness.
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Table II.
Individual agency
Andrew
Element [Finance]
External Accounting practices underpin and guide
structures organisational activity and innovativeness
Internal An accountant
structures Identifies with the parent company, rather
than the local organisation.
Values the rules, routines and structure
associated with accounting practices.
Loyalty lies primarily with the global
parent
Active Finance at local level is motivated by and
agency committed to the “moral undercarriage”
(Macintosh, 1994) of share price
maximisation, as determined by, mandated
and driven by the global parent
Opportunities are formed through
performance metrics
Outcomes Accounting practices represent the
communicative space between the global
and the local; discursive practices are
operationalised through accounting
representations
The guide rails determine the way forward
Declan
[Customer support]
Accounting practices can and must be
managed; they can detract from the real
focus of satisfying customers on an on-
going basis
Customer-focused;
Identifies with the customer; sees himself as
acting for the customer
Loyalty lies primarily with the external
customer, at the local level
The customer/customer service is the
priority – but to achieve desired outcomes,
these must be managed as part of the
reported metrics, either in terms of
‘plastering over the cracks’ or placing
emphasis on measured domains of action, to
achieve underlying functionally driven and
internally determined action imperatives
Accounting practices can restrain day-to-
day activity and restrict innovativeness,
unless they are actively managed to create
the enabling “opportunity space” (Simons,
1995, 2000)
The guide rails must be managed to enable
the way forward
QRAM
Kate
[Research]
Accounting practices can constrain
innovativeness, placing limits on innovative
activity
International outlook
Sees her role as identifying new and
emerging technologies that can create
opportunities for the global organisation.
Loyalty lies primarily with the innovative/
research function, both locally and globally
Opportunities are initially expressed in
terms of technical/business process
innovativeness rather than in profitability/
share price gains per se; however, the
business arguments for same must be
articulated using the accounting logic in
place across the global organisation
Accounting practices can be used to
translate innovativeness into a
representation of “business value”, thereby
facilitating their implementation; the
innovation conference process includes a
business case element; accounting practices
used to build the business case serve to
prioritise certain “innovations” over others.
The guide rails form the language in which
the way forward must be articulated
 Hytek uses an accounting-based signification structure to coordinate innovativeness on the Innovativeness
part of its individual actors. Each has significant power resources of their own, in terms of and
the extent to which they are interested in, and willing to put forward good ideas for
collective consideration. The actors (agents) are “positioned” within a network of social
accounting
relations (as explained by Busco, 2009); they are not governed by the structure, but act practices
reflexively within, through and in light of it, through monitoring their conduct, and that of
others, and making choices (Busco, 2009). As each individual agent-in-focus is considered,
the others become agents-in-context to that analysis. Recognising the potential of the
concept of “position-practices” as proposed by Stones (2005), the strategic conduct of
individual agents at the case study site can be considered, in terms of an ontology in situ,
within what Coad and Herbert (2009, p. 179) term “the ebb and flow of position-practice
relations”.
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External structures are both enabling and constraining the actions of agents; they form
the structural context of action (Coad and Herbert, 2009) and can be acknowledged or
unacknowledged by the agent and include position-practice relations (the agent located in
the network of agents generally). It is difficult for agents to challenge external structures; as
a lack of power, knowledge or critical awareness to reflect on such challenges may impede
action (Neville, 2014). Internal structures consist of both the taken for granted skills, habits
and dispositions used unconsciously by the agent (for example, attitudes, principles,
personal values, technical skills, ambitions) and the conjuncturally specific knowledge each
individual agent has of the other agents, including how they can be expected to act. Active
agency, according to Coad and Herbert (2009, p. 180), “reveals the ways agents draw on their
internal structures, and apply their knowledge and understanding to their situations”.
Active agency involves a number of aspects of practice: shifting horizons of action;
creativity, improvisation and innovation within an agent’s conduct; degrees of critical
distance and reflection; conscious and unconscious motivations; and the sorting out of
priorities into a hierarchy of purposes (Neville, 2014). Outcomes refer to the impact of agents’
action, whether deliberate or unintended.
Each agent makes sense of organisational activity through the signification structure of
the performance measures – these are reported within Hytek on a global basis and linked to
the share price. Performance metrics rein in agency but also enable it, with individual agents
able to draw on accounting discourse to promote and legitimise their actions. In Nicolini’s
(2012, p. 45) terms: “structure and agency are not thought of as only mutually constraining
but also as mutually generative”. This duality of structure (Giddens, 1984) – most visible in
Hytek in the form of guiding performance metrics (“guide rails”) – gives meaning to
innovativeness, governing individual actions, while still allowing those individuals the
flexibility to act strategically in terms of their respective business functions and in
protecting the local Hytek position as part of the global Hytek organisation. Described by
Macintosh (1994, p. 170) as “the DNA for agents’ social action and interaction” structures
bring order to the decision-making process. The “guide rails” of the performance metrics at
Hytek exist independently of each individual agent, providing the blueprint for actions as
those agents interact and react with each other. In Macintosh’s terms, they are “grooved and
regrooved by humans in social situations” (Macintosh, 1994, p. 170).
This paper explores the tensions between innovativeness and accounting practices,
providing evidence of how these tensions are managed in practice at one high-technology
organisation. The simultaneous enactment of control and creativity is documented from the
perspectives of three individual actors, each representing distinct functional areas of the
overall organisation. The study provides evidence of how the actions of each individual
collectively contributed to the enactment of organisational innovativeness within the
 QRAM confines of a formal performance measurement system. Unlike other studies using
structuration theory, the emphasis here is not on the establishment or legitimatising of
particular accounting artefacts, or other aspects of the structures (internal and external), but
on the agency role through which each individual agent-in-focus constructs priorities and
uses those structures to legitimise and further his/her concerns in the pursuit of
innovativeness. The dynamic tensions thus created through the accounting practices
present as both a source of autonomy and as a means of coordination of action, in terms of
function areas of expertise and between the local initiatives and global oversight. Rather
than presenting the “moral undercarriage” (Macintosh, 1994) of share price maximisation,
determined by, mandated and driven by the global parent, as the dominant focus to all
decision-making, its translation into locally recognised and accepted performance metrics
supports the ongoing fostering of innovativeness and innovative capabilities.
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The Levers of Control model proposed by Simons (1995, 2000) would appear to be
supported by the research findings generated here through the use of “guide rails” for
addressing problems identified by the performance metrics. There is a parallel process in
existence between innovativeness and performance measurement as employees are
encouraged to think “outside the box”. The evidence suggests that performance
measurement is used both diagnostically and interactively at the case site. There were a
number of control mechanisms identified as being part of the performance measurement
system within the case setting. These included performance measures, budgets (e.g.
research and development expenditure accounts for 12 per cent of annual revenue),
forecasting plans, customer surveys, benchmarking, management meetings and various
reports. From a diagnostic perspective, all of these were used as a means of monitoring
performance and driving behaviour towards the achievement of the firm’s strategic
objectives. They also formed part of the company’s interactive control system with heavy
involvement from senior management. In this instance, the performance metrics were used
as a means of fostering learning among employees and to create opportunities for
innovation and problem solving. Thus, in this particular context, overall performance
measurement did not stifle organisational innovativeness but instead enabled creative
thinking. This set of findings contradicts earlier research conducted by Marginson (2002)
and Davenport (2006), while offering support to others, for example, Revellino and
Mouritsen, 2009; 2015; Davila et al., 2009a, 2009b; Bisbe and Malagueno, 2009.
The organisational issues that require the development of innovative solutions within
Hytek are instigated by senior management. For example, the ideas for the innovation
conference described earlier were based upon 28 different “challenges” proposed by them as
representing some of the most pressing issues facing the business at that particular time.
These challenges were posed to employees who were then encouraged and supported in
being as imaginative as possible in suggesting possible solutions but within a “common
sense” structure. In addressing these “challenges”, creativity is required, but employees are
also restricted by certain expectations around cost, time and limited resources, in their
construction of individual, functionally driven, distinctive “opportunity spaces” (Simons,
1995). Overall, this has had a positive impact as individuals are inspired by those
constraints. The constraints are not regarded as a barrier but rather an opportunity for
creativity. Creative thinking and new ideas form a solution that functions within these
predefined “guide rails”. Thus, while performance measurement, via performance metrics
imposes standardisation, signalling particular preferred modes of action, it does not act as a
deterrent to innovativeness, but rather as an encouragement. Controls act as an enabler as
opposed to a constraint, legitimising a search for and the process of justifying the competing
outcomes of individual innovativeness at a global level, translated to the local context.
 Teece et al. (1997, p. 516) define dynamic capabilities as being: “the firm’s ability to Innovativeness
integrate, build and reconfigure internal and external competencies to address rapidly and
changing environments”. Because the resource-based view is largely silent on the role of
agents, focusing instead on existing resources of the firm or organisation, the dynamic
accounting
capabilities viewpoint offers a less static representation of organisational activity and its practices
impact, in terms of sustaining competitive advantage, beyond its creation in the first place.
Dynamic capabilities for innovativeness are constituted in the “guide rails”, as socially
embedded individual agents act and react within the structures of signification, domination
and legitimation so provided. The practices of each individual agent collectively reproduce
those “guide rails” as a legitimising device, while being simultaneously constrained by
them. Strong structuration theory (Stones, 2005), via the concept of position-practices, has
provided the researchers with a lens to view this in terms of each of the three agents-in-focus
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in this study. The role of agency is central to structuration theory, be that in Giddens (1984)
exposition or that of Stones (2005). The actions of those agents can eventually become
constituted as routines, adapted by the agents in response to and in line with their internal
and external structures. It could therefore be argued that the extent to which agents can do
this (agents conduct) in the action contexts which they face, is somewhat unique and
potentially dynamic – therefore an enactment of dynamic capabilities.
Even if others become aware of the routines inherent in the dynamic capabilities of the
organisation (or of its agents), they are difficult to replicate, given that routines are modified
and impacted upon by agents’ actions, which in turn are informed by those aspects
implicated in agency as defined in the context of and put forward in structuration theory. In
a sense, this is what makes such capabilities dynamic, pushing forward from simply
strategically significant resources or routines, i.e. it is in the enactment act, as distinct from
the routine enacted, that creates or is the source of ongoing sustainable competitive
advantage. Thus, the routines need to “fit” the context; agency and structure need to
interact. Overall, the performance measurement system within the case study enabled
creative thinking while simultaneously serving multiple objectives. Accounting metrics
provided a language for negotiation between competing priorities, firmly rooting
organisational strategy into operational decision-making at both the local and global levels.
The “guide rails” or creative boundaries for developing solutions are set as loosely as
possible. Creative tensions evident at operational level between innovativeness and
performance measurement are managed through the development of creative boundaries
within which creative solutions must be developed. Control and creativity are
synergistically harnessed towards creating customer value, with performance measurement
constraints acting as an enabler rather than a barrier to innovativeness. There are strong
links between innovativeness and strategy, with metrics enabling rather than restricting or
constraining creative thinking. The parameters through which these metrics are enacted at
the case study site were not fixed, permanent structures; however, essentially, they
represent the outcomes of knowledgeable actions of individual agents in selectively drawing
on such structures as suited to the particular instances of innovativeness forming each
individual agents’ actions and reactions.
As with all academic research, the research underpinning this paper contains a number
of limitations as well as offering suggestions as to how further research efforts in this area
might proceed. First, the research reported upon here is based upon a single case study.
Consequently, the findings cannot be generalised as representing the status quo in other
similar-sized organisations. However, it should be re-iterated that this was not the intention
of this paper which was to explore the role of accounting practices in the management of
innovativeness within a single high technology organisational setting. However, to address
 QRAM this limitation, future research could be extended to include a larger sample of organisations,
thereby ensuring that the subsequent findings are more generalisable. Second, the three
interviewees selected to participate in this study will inevitably all possess their own
personal biases which could potentially distort the findings presented here. However, to
mitigate against this possibility, documentation and secondary data sources were also used
here to corroborate the answers provided by them. Future research in this area could seek to
include a number of interviewees from each organisational function so as to further reduce
the risk of bias occurring. Finally, the contribution of this study is focused on the notion of
innovativeness rather than on a particular instance of innovation per se, rendering the
identification of specific accounting artefacts more difficult and less relevant to the broader
research issue of agency. Future research might fruitfully explore specific accounting
practices (outcomes) via a longitudinal study.
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Corresponding author
Peter Cleary can be contacted at: p.cleary@ucc.ie

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