Review of Management Accounting Control Change Research with special

reference to the Public Sector and Less Developed Countries: A Critical Evaluation.

Junaid Ashraf
Essex Business School
University of Essex

And

Shahzad Uddin*
Essex Business School
University of Essex

* Corresponding Author
Review of Management Accounting Control Change Research with special
reference to the Public Sector and Less Developed Countries: A Critical Evaluation

Abstract

This chapter critically evaluates ‘Management accounting control change research’ in

general, with special emphasis on the public sector and less developed countries in
particular. Recent trends in researching the public sector in less developed countries,
focusing on management accounting control change are identified and discussed in the
chapter. The extant accounting literature on management accounting control change is
broadly divided into two theoretical camps i.e. ‘mainstream’ and ‘alternative’. The
alternative camp is further subdivided into three perspectives namely ‘agential’,
‘structural’ and ‘third ways perspectives’. After a review of the literature on management
accounting control change in general, research carried out in public sector organizations
and in less developed countries is also reviewed. The chapter argues, in order to make
robust explanations of management accounting control change, structural, ‘ideational’
and agential perspectives need to be incorporated in a theoretical framework. Without
denying the contributions from other perspectives, the chapter points out that the
Habermasian theory and labour process/cultural political economy do seem to provide
some acknowledgements of all three aspects of our social and organizational life.

Keywords: Less Developed Countries, Public Sector, Management Control Change,

Theoretical Perspectives, Mainstream and Alternative theories.

1.0 Introduction

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This paper stems from interests in management accounting control change, the public

sector1 and less developed countries (LDCs)2. Many studies have been devoted to

understanding changes to management accounting controls by drawing insights from

various theoretical perspectives (e.g., Burns and Scapens, 2000) in different settings.

Certain geographical and country-specific cultural factors have been examined in respect

of their influence on the path dependency of management accounting control change

(Granlund and Lukka, 1998; Burns and Vavio, 2001, p. 391-92; Busco et al., 2007).

However, few studies have provided critical accounts of the theoretical approaches to the

understanding of management accounting control changes adopted by the researchers

(Guthrie and Broadbent, 2008)

The public sector in both developed and LDCs is key to overall economic growth and

development. The strong presence of the public sector in both developed and LDCs may

have led to a number of studies of management accounting control in the public sector.

Nevertheless, structural adjustment programs involving privatization and new public

sector management (NPM) during the last two decades have put a dent in state

interventions and growth in the public sector. Recent transformation in the public sector

has further led to growth in research on management accounting control. It is also

apparent that a variety of theoretical approaches have been adopted by researchers to

understand the complex phenomena of public sector reforms and associated changes to

management and organizational changes. Considering the significant growth in research

on the public sector, a critical review of management accounting control change research

3
in the public sector especially in LDCs would be useful for new entrants in this area

(Hopper et al., 2009).

The chapter critically reviews the usefulness of different ‘theoretical perspectives’

commonly used in the accounting literature to explain management accounting control

change especially in the public sector. The literature review also encompasses

management accounting control change research carried out in the public sector in LDCs.

The authors believe that this review stimulates interest in the area of management

accounting control change in the public sector, gives voices to LDCs and provides debate

on fruitful ways forward, and hopefully contributes to better policies and practices. This

chapter is pertinent to the research aims of the book on “Reviews of Management

accounting control Research”, as it focuses on the advancement of knowledge by making

a contribution to management accounting control change literature in a neglected area,

namely LDCs.

The chapter will proceed thus. Firstly, the extant accounting literature on management

accounting control change is divided into two camps i.e. ‘mainstream’ and ‘alternative’.

The alternative camp is further subdivided into three perspectives namely ‘agential’,

‘structural’ and ‘third ways perspectives3’. After a review of the literature on

management accounting control change in general, research carried out in public sector

organizations and in LDCs is also reviewed. The last section deals with a synthesis of this

literature and the identification of research gaps.

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2.0 Review of Management Accounting Control Change Research

Figure One describes the classificatory scheme used for the review of management

accounting control change literature. With respect to each perspective, the inherent

ontological and methodological assumptions and issues in relation to management

accounting control changes are outlined.

[Insert Figure One]

2.1 Management Accounting Control Change Research in the Mainstream

Mainstream management accounting control literature has its ontological basis in

physical realism. The mainstream research, also termed the positivistic tradition, looks

for universal laws from ‘objective’ empirical observations (Ryan et al., 1995). The

fundamental assumptions of the mainstream management accounting control research are

that managers are economically rational agents with an overarching goal of ‘utility

maximization’. Conflicts of objectives between different stakeholders are manageable

given appropriate contractual relationship and control system.

In this paradigm, economic rationales dominated the management accounting control

change literature (Johnson and Kaplan, 1987). Nevertheless, use of non-economic

variables appeared in contingency theory driven management accounting control change

research (Lapsely and Mitchell, 1994; Bruns and Waterhouse, 1975). Contingency theory

adopted by accounting researchers as early as the 1960’s, suggests that the content and

the style of the use of management accounting controls changes with various contingent

situations such as the level of competition, environmental uncertainty, the size of the

5
organization and lately the strategy of the firm. Among the earliest managerial

accounting research which adopted a contingency perspective was Hofstede's (1967)

classic field work, which found that economic, technological and sociological

considerations have a significant impact on the way budgeting systems function. The

research concludes that managers used budgetary information in difficult economic

environments to pressurize workers; but in lucrative environments, the budget was used

more in a problem solving mode (Covaleski et al., 1996).

Contemporary accounting researchers, based on contingency theories, exploiting both

quantitative and qualitative methodologies, have attempted to provide explanations of

management accounting control development and change (Innes and Mitchell, 1990;

Amat, et al., 1994; Cobb et al., 1995; Vaivio, 1999; Sulaiman and Mitchell, 2005;

Chanegrih, 2008). Inns and Mitchell (1990) attempted to explain management accounting

control change in the electronic sector drawing on seven field studies. Driven by

contingency tradition, they identified and classified at least three sets of factors namely

motivators, facilitators and catalysts that are involved in the process of change in

management accounting control. Amat et al., (1994) recognized some internal and

external variables such as organization structure, change of ownership, competition and

technologies that are responsible in transforming the nature of controls (informal control

into a formal control style). Suliaman and Mitchell (2005)’s work sought to categorise

management accounting control change utilizing a simple typology. ‘This was derived

from the existing research literature, consisting of addition, replacement, output

modification, operational modification and reduction. This classification was combined

6
with information on the incidence, location, importance and success of management

accounting control changes to provide some analytical insights into the variety and

patterns of change within these companies’ (p.422). More recent studies such as

Chanegrih (2008), covering 65 French manufacturing companies, replicated Sulaiman

and Mitchell's study. The study found the Sulaiman and Mitchell’s typology useful but

further argues how national culture and macroeconomic context influence the nature and

location of change in management accounting control and control systems.

While the positivistic tradition gives us important information about generally reported

combinations of management accounting controls and firm/environmental variables, it

has its limitations. These limitations stem from both ontological and methodological

issues. Given the ontological and epistemological underpinnings, the methodology

(cross-sectional, survey based) adopted by positivist researchers becomes problematic for

explaining management accounting control change. For instance, most of research that

has been done on management accounting control research involves cross sectional

analysis (Chenhall, 2003, p. 156). Since cross-sectional analysis presents a static picture,

non-positivistic researchers argue it does not capture change per se. The positivistic

tradition is claimed to be more focused on predictions than the explanations (Ryan et al.,

1995). For example, positivist research will be concentrating more on, for example,

whether the firm size has anything to do with a change in the budgeting system than on

how and why those changes occur. Contemporary researchers argue that it limits the

‘wider’ understanding of ‘actual practice’ of management accounting control and changes

therein (Ryan et al., 1995)

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2.2 Alternative Research

Contrary to the ‘mainstream’, which flourished in North America and is still considered

as the only credible research methodology (Zimmerman, 2001), alternative accounting

research has found fertile grounds in the UK, Australia, New Zealand and Europe.

Alternative accounting research is very diverse in terms of theoretical perspectives and

approaches that have been used to explicate management accounting control change

(Laughlin, 1995). The alternative management accounting control research does not

assume that managers are being driven by exclusive concerns of economic efficiency and

‘corporate objectives’ are unproblematic. Thus, the varied theoretical perspectives used in

alternative accounting research shed light on different facets of management accounting

control change. For example, in contradistinction to ‘mainstream research’, this research

genre finds management accounting control change to be “(non) linear, (un)predictable,

(non)controllable, (neither) exclusively technical nor well-behaved” (Baxter and Chua,

2003, p. 106-107). The following subsections discuss some of the ‘alternative’

accounting research perspectives using three broad categories, namely agential

perspectives, structural perspectives and third ways perspectives.

2.2.1 Management Accounting Control Change Research in the Agential Perspective

According to the ‘agential perspective’ (individualists/interpretive), social collectivity

(family, business organization, society) is nothing but the sum total of actions of a

number of individual actors. Management accounting control practices are seen as social

practices and meaning systems that have arisen out of interaction sequences between

8
organizational actors. These practices are a ‘reality’ constituted through social interaction

and play a part in creating ‘other realities’ within corporate life. Accounting practices are

thus presented to be of a ‘constructed’ and ‘constructual’ nature (Chua, 1988).

Accounting researchers have a long history of using the interpretive sociological

framework (agential perspective) to explicate management accounting control changes.

For example, Dent (1991) in his famous study highlighted the significance of

management accounting in creating a different ‘organizational reality’ within an

organization that was being previously driven by engineering and operations logic.

Changes to management accounting control procedures created a different set of

‘visibilities’ within the organization which led managers to make different choices, which

would not have been possible otherwise. In this research genre, the highly subjective

nature of management accounting control practices is highlighted whereby different

organizational actors assign different meanings to these practices and take different

actions accordingly (Boland and Pondy, 1983; Covaleski and Dirsmith, 1986; Boland

1993; Mouritsen, 1999).

Many management accounting control change studies in the interpretive paradigm have

raised the issue of conflict and politics in the change processes (Boland and Pondy, 1983;

Covaleski and Dirsmith, 1986). For example, Covaleski and Dirsmith (1986) show the

power struggle and political bargaining process between nurses, administrators and other

health professionals in terms of the budgeting process. Similarly, Covaleski and Dirsmith

(1988a) describe the politically rife budget development process between University

9
officials, the Governor of the State and the State Legislative Assembly of the State of

Wisconsin.

The major criticism often attributed to interpretive researchers is the neglect of ‘social

relations of production’, which may shape the management accounting control change

processes within which actors operate. This neglect also influences their interpretation

frames in terms of supplying underlying, taken-for-granted assumptions that influence

their behaviour (Armstrong, 2008). While interpretation and human subjectivity are

important, reducing social reality to this subjectivity creates problems for interpretive

researchers that are not easy to solve - a problem that has been described by Margaret

Archer (1995) as ‘upward conflation’. Take the example of Covaleski and Dirsmith’s

(1988a) case study (details in the section below). Can the relationship between the

University-Governor-Legislative Assembly of the case study be reduced to the thinking

and actions of present generation actors? And when all three are operating within larger

economic and political relationships, can these material relationships and their effects

e.g. economic downturn, also be reduced to thinking and action of present role

occupants? Are these (material) relationships not affecting these individuals, independent

of their conceptions and perceptions? The same can be said about ‘ideas’ and ‘principles’

such as management accounting principles/ideas. These principles have been logged by

previous generations and they stand in independent logical relationship with each other,

irrespective of agents’ conceptions and perceptions (Archer, 1995; Willmott, 2000).

10
This upward conflation is also evident in interpretive research’s treatment of ‘conflict’

which inevitably arises in management accounting control changes (see , for example,

Covaleski et al., 1986, 1988; Mourtisen, 1999). This research reduces conflict to an

‘interpersonal issue’. In this research, actors are struggling for pursuit of interests

subjectively determined by them in a ‘free floating’ manner. But if determined

subjectively, is it not too much of a coincidence that generations after generation of

industrial sociologists have found a particular class of employees in conflict with another

class? Armstrong (2008), criticising interpretive management accounting control change

research, highlighted its exclusive focus on social interaction. He argues that the social

interaction is the structural conditions with which this interaction is taking place, and

below this is the subjectivity of individuals, which itself is shaped by what is above

(ibid).

2.2.2 Management Accounting Control Change Research in the Structural Perspective

The structural perspective, commonly associated with Marxism, claims that social

collectivities (i.e. structures) have properties and powers that are more than the sum of

individuals that make up the structure. Structures and their properties are seen in

relational terms. So, structure can be defined as a system of human relationships between

social positions (referred to as class positions) which create a social system that Marxists

characteristically call modes of production. In every mode of production, there are classes

with interests objectively defined according to their position in the mode of production,

which also determines their particular way of acting or tendencies. So, domination,

11
exploitation and competition, are all behavioural tendencies of the capitalist mode of

production associated with the ‘position’ of capitalists’ vis-à-vis other ‘positions’ in the

system.

In accordance with the tradition of this research, accounting researchers have tried to

explain the emergence, changes and use of specific management accounting controls (e.g.

standard costing, overhead accounting, Activity Based Costing etc.) in relation to changes

in macro structures prevalent in society. For example, Armstrong (1987) finds the reasons

for the eminence of financial controls in the relationship between capitalist organizations,

the state and investors in different historical times which led to the importance of the

accounting profession, and in turn the eminence of accounting controls. In another

seminal paper, Hopper and Armstrong (1991) traced the history of the emergence of

control regimes, starting from subcontracting to foremen based controls to large-scale

multi-division bureaucracies and the interface between these control regimes and cost

accounting. The formation of large companies with divisional structures in the early part

of twentieth century created its own problems of control for corporate headquarters.

Johnsons and Kaplan (1986) contended that cost accounting techniques have not

developed since 1930 and attributed this to the influence of financial accountants over

managerial accountants. On the contrary, Hopper and Armstrong (1991) claimed that the

lack of improvement in cost accounting practices in organizations in the post-1930 period

was due to the ‘new deal’ era in which lay-offs and speed-ups in the primary labour

market of large monopoly organizations went down. This ‘new deal era’ was again linked

12
with larger political economic conditions of ‘under-consumption’ and intervention of the

State in management-labour relations.

In another paper employing a structural perspective, Bryer (2005) traced the evolution of

management accounting control techniques within British industrial history, especially

during the British industrial revolution. In tracing this history, Bryer (2005) contends that

sophistication in management accounting control techniques within this period (e.g.

standard costing, integration of financial and managerial accounts etc.) was linked with

variations in the social relations of production within capitalist firms of the era. In a

similar vein, Toms (2005) traced changes in financial and managerial controls within the

British cotton industry from the early 18th century all the way to the present times. Toms

(2005) linked these changes with changes in industrial structure and capital and credit

markets in the time period under study. These papers primarily look at organized

collectivities and their inter-relationships - for example, political economic conditions,

capital markets, professions and their competition etc. - to explain management

accounting control changes taking place over a time tract of more than a hundred years.

These papers are also very insightful in the sense that they not only look at the top-down

relations which necessitate management accounting control relations but also examine

lateral relations between professions, which have an important bearing on management

accounting control practices. However, given the time scale and canvas of these historical

accounts, the role of individuals, their perceptions and reflections and their identities

could not have been prominently highlighted in the narrative. These papers thus account

13
for management accounting control changes using a more ‘structural’ perspective

neglecting human agency.

2.2.3 ‘Third Ways’ Perspectives

While agential and structural perspectives represent a kind of lopsidedness, whereby

either agency or structure is given primacy at the expense of the ontological status of the

other, there have been quite a few social science theories that suggest ways out of this

problem. In this chapter, these different theories, which have been used extensively in

explaining management accounting control as third ways perspectives, have been

grouped together for the purpose of the review. These theories vary substantially from

each other in terms of their ontological and epistemological assumptions but have all

contributed towards understanding certain aspects of management accounting control

change. This section discusses three such theoretical perspectives/theories, i.e. Post

Modernism/Post Structuralism (Foucauldian and Structuration Theory within this

perspective), Old Institutional Theory and New Institutional Sociology. The other ‘third

ways perspectives’, i.e. Habermesian Critical Accounting Research and Cultural Political

Economy/Labour Process Theory, - based research on management accounting control

change, will be discussed in the next two sections.

2.2.3.1 Management Accounting Control Change Research in Post Modernism/Post

Structuralism

While there have been several post-modernist and post-structuralist scholars whose work

has been used by accounting researchers to explicate management accounting control

14
change, only two such works have been selected in this paper, i.e. the works of Michael

Foucault and Anthony Giddens. The selection is primarily based on the extensive use of

these two approaches for the explanation of management accounting control change

within accounting literature (Baxter and Chua, 2003).

Management Accounting Control Change Research using Work of Michael Foucault

Michael Foucault’s (1970, 1977, 1991) work exemplifies post-modernism, and has been

used extensively in accounting research (Hopwood, 1987; Miller and O’Leary, 1987,

1993; Ezzamel and Willmott, 2004). Broadly speaking, Foucault’s inspired work on

management accounting control change focuses on discourses and how these create a

particular form of subjectivities and practices, including changes therein, such as the

introduction of standard costing within factories (Miller and O’Leary, 1987), the

introduction of cost accounting systems (Hopwood, 1987) or introduction of modern

advanced manufacturing and accounting technologies within a factory (Miller and

O’Leary, 1993).

An example of Foucauldian-inspired management accounting control change research,

which was later subject to severe criticism by realists, is Miller and O’Leary’s (1993)

account of the introduction of advanced management accounting control techniques

within an American heavy vehicle manufacturing plant. It was claimed that changes in

management accounting control practices (advanced manufacturing techniques) within

the plant were linked with new discourses at firm and national level and spatial

rearrangement within the plant. This, according to Miller and O’Leary (1993), amounted

15
to the creation of a ‘new economic citizenship’ discourse, with its own requirements of

the subjects and practices within this discourse. However, the Foucauldian approach is

often criticised for not providing due attention to structural and wider issues such as class

analysis, economic conditions and resistance (Arnold, 1998; Froud et al., 1998). Arnold

(1998), in her interviews with workers at the same plant studied by Miller and O’ Leary

(1993), reported that these workers were feeling of insecurity, frustration and work

overload which was characterised by Miller and O’Leary (1993) as ‘new economic

citizenship’. Thus, critics argue, in the absence of consideration of the material structural

conditions and the effects of these conditions on the subjectivities of the individuals

concerned (Arnold, 1998), the resulting analysis was of a very dubious nature

(Armstrong, 2006).

Management Accounting Control Change Research using Structuration Theory

Anthony Giddens, a contemporary British sociologist, recognising the importance of

structure and agency, tried to incorporate both in his theory, which he termed

Structuration. According to Giddens (1984) social structures do not exist independent of

human agency. They are constituted by human agency, and yet at the same time are the

very medium of this constitution; what he termed as ‘duality’. Structures, in effect, are

memory traces in the minds of actors in the form of rules and resources, instantiated only

when action takes place. There is a fairly large body of accounting research that has

adopted Gidden’s structuration theory to explicate management accounting control

change (Capps et al., 1989; Scapens and Roberts, 1993; Conrad, 2005). Macintosh and

16
Scapens, (1990)’s paper was amongst the first papers that introduced structuration theory

to management accounting control research4. The seminal nature of this paper is evident

from its extensive quoting in accounting papers that have used structuration theory ever

since its publication. Using Structuration theory, Macintosh and Scapens reframed the

empirics of a field study originally published by Covaleski and Dirsmith (1988a). The

objective was to demonstrate the value of structuration theory for management

accounting control research in the alternative paradigms. The paper argued that Covaleski

and Dirsmith (1998a)’s paper failed to explain the process of management accounting

control change e.g. “Why and how do control systems become the mechanisms through

which interests are negotiated” (p 463). Papers inspired by structuration theory generally

argue that management accounting control should be considered as a virtual modality

involved in linking structure with agency (Macintosh and Scapens, 1990; Conrad, 2005).

However, this conceptualisation is subjected to criticisms not only in terms of the absence

of material structural conditions from the theory, but also due to the denial of the

independent existence of ideas (Archer, 1995). Critics argue that management accounting

control ideas not only exist in the minds of actors but also have an independent existence,

i.e. in accounting books and manuals. Using Structuration theory to conceptualise

management accounting control, thus gives a totally ‘virtual’ and ‘subjective’ status to

management accounting control. Thus, understanding management accounting control

change research in the structuration tradition often leaves the power and external

conditions unexamined (Uddin and Tsamenyi, 2005; Thompson, 1989).

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2.2.3.2 Management accounting control Change Research Using Old Institutional
Economic Theory

Old Institutional Economics rejects the neo-classical economics assumption of ‘utility

maximization rational behaviour’ and instead suggests that human action is influenced by

institutions. An Institution is defined as ways of thinking or action of some permanence

and prevalence, which is embedded in the habits of a group of people (Burns and

Scapens, 2000). However, these institutions themselves evolve as routinized actions of

actors. According to Burns and Scapens (2000) framework, accounting activities and

routines are studied as social practices, influenced by institutions (collective taken-for-

granted assumptions of a group of people about some action or thought) and institutions

are in turn influenced by actions. Rules and routines are influenced by existing

institutions, i.e. these rules and routines are enacted and reproduced through actions. Yet,

through this ongoing enacting and reproduction, changes to rules and routines emerge,

and under specific conditions, can be institutionalised. Once rules and routines have been

institutionalised, ‘in the absence of –external ‘changes’ such as advances in technology,

or a take-over crisis, there is unlikely to be a reopening of previously agreed

arrangements and therefore routines may become somewhat resistant to change’ (Burns

and Scapens, 2000, p. 10). These institutional arrangements comprise the taken-for-

granted assumptions that a certain pattern of behaviour is the norm for the social group of

which one is part. Management accounting control practices, according to the Burns and

Scapens (2000), are ‘rules and routines’ which link the realm of thought to realm of

action.

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A number of accounting researchers adopted OIE to study the process of management

accounting control change (Granlund and Malmi, 2002; Scapens and Jazayeri, 2003;

Nabiha and Scapens, 2005). Nevertheless, OIE is subject to the same criticism as the

structuration theory which is the confluence of structure and agency (Archer 1989: 103-

104). Management accounting control Practices, according to Burns and Scapens (2000),

are ‘rules and routines’ which link the realm of thought to the realm of action. But can

management accounting control practices exist independent of a manager-managed

relationship? According to OIE, ‘context’ can be identified as routines or the related

‘habits’ of organizational members. As discussed in the ‘structural perspective’, we have

witnessed many changes in management accounting control practices in the industrial

world during the last three hundred years. There have been major changes in management

accounting control practices including the accounting practices of western countries.

However, can these changes be explained with reference to the ‘habits’ of managers and

employees, or the ‘thoughts’ of managers? Can these habits be explained with reference

to changing rules and routines within the organization, as suggested by the Burns and

Scapens (2000) model? Changes in the ‘habits’ of managers towards employees in terms

of tougher management accounting control practices are actually linked with declining

opportunities for employees in the labor market, which in turn are linked with weak

economic conditions (Sayer, 1992; p 113). These habits can change in the opposite

direction, as discussed in the ‘structural perspective’, depending upon changes in material

structural conditions.

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As discussed above, both general habits of thought of employees, and rules and routines

(of management accounting control practices) are influenced by management structures

(i.e. the nature of the relationship between the position of managers and employees),

which in turn are linked with political and economic structures prevalent in society. It is

primarily because of the omission of firms’ external structures (relationships between

positions within firms), which are interlinked with wider political and economic

structures (relationship of firm with other entities, such as the political and economic

system; political and economic systems themselves are relational in nature), that OIE has

been charged as being an inward-looking framework. While it tries to analyze changes in

management accounting control practices within the firm, it remains totally ignorant

about changes in the wider political and economic context in which the organization

operates (Dillard et al, 2004).

2.2.3.3 Management Accounting Control Change Research Using New Institutional

Theory

New Institutional Theory in sociology is an evolved and radically different form of Old

Institutionalism (e.g. Selznick, 1949). New Institutionalism agrees with old

institutionalism in terms of its rejection of rationality and value maximization behaviour

of firms. This new line of sociological thinking emphasized the role of institutions in

terms of their rules, like taken-for-granted status that orders social behaviour (Dimaggio

and Powell, 1991; p.21). In this regard, Berger and Luckmann (1967) emphasised the role

of repeated social interaction amongst members of society (routines) that leads to

20
‘reciprocal typifications’ or rules of conduct that, over time, acquire the ontological status

of ‘facticity’.

In organizational research, the general theme of the New Institutional theories has been

that an organization's survival requires it to conform to social norms of acceptable

behaviour as much as to achieve high levels of production efficiency. Thus, many aspects

of an organization's formal structure, policies and procedures serve to demonstrate

conformity with institutionalised rules, thereby legitimising it, to assist in gaining

society's continued support (Meyer and Rowan 1977; Scott 1987; DiMaggio and Powell

1983, 1991). DiMaggio and Powell (1983) have identified three control mechanisms that

bring this isomorphism to firms operating in the same industry settings. These are

Coercive isomorphism, Mimetic isomorphism, and Normative isomorphism.

Another important concept that was prominent at least in early writings on new

institutionalism was the distinction between the technical environment and the

institutional environment. The conflicting demands of the technical and institutional

environments are met by the process of decoupling. ‘Decoupling’ is a process whereby

organizations can comply with norms and values in the society by having structures and

practices that are ceremonial, while the actual ways of working are not greatly affected.

DiMaggio and Powell (1983) argue that this decoupling allows the organization to adhere

to various institutional demands, while organising its primary processes more efficiently

than would be possible if it were to adhere to all institutional requirements.

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Accounting researchers have followed the same general trend as was the case with

organizational and management researchers, i.e. to observe the effect of institutions on

accounting and control practices and changes therein. However, there were two

peculiarities about this research and these peculiarities are interlinked. Institutional theory

is a theory that has a macro scope. This means that institutions (institutionalised

practices, rules, ‘culture’) develop and operate at the level of society or larger segments

within society. So, the appropriate scale for investigation was either organizational

sectors or professions or society as a whole (Dimaggio and Powell, 1991; p13). So

instead of focusing within the organization (as was the case with old institutionalism),

NIS’s focus was inter-organizational (ibid).

On the contrary, in the majority of research that has been done in accounting on

institutionalism, the focus was on a single organization (Granlund, 2001; Tsamenyi et al.,

2006; Abernethy and Chua, 1996; Hussain and Hoque, 2002; Collier, 2001; Covaleski

and Dirsmith, 1988b). The majority of research reported two issues: firstly, institutional

forces (in terms of three forces bringing about isomorphism, as mentioned by Scott,

1987) could only be attributed as one of the factors in explaining the emergence,

persistence or change of management accounting control practices within their case

firms. Most researchers reported market forces to be important determinants of

management accounting control practices (Granlund, 2001; Tsamenyi et al., 2006;

Abernethy and Chua, 1996; Hussain and Hoque, 2002; Collier, 2001; Covaleski and

Dirsmith, 1988b).

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Secondly, nowhere in this body of research, were human actors shown as being totally

immersed in the supposedly taken-for-granted nature of management accounting control

practices. In almost all the cases, the role of human agency in sustaining or changing

management accounting control change was ‘visible’. Human actors were reflected as

calculable agents who are actively trying to resist, implement or modify management

accounting control practices in accordance with their interests using the power available

at their disposal (Tsamenyi et al., 2006; Ezzamel et al., 2007; Granlund, 2001; Modell,

2002; Covaleski and Dirsmith, 1988b; Abernethy and Chua, 1996). A case in point is

Abernethy and Chua’s (1996) paper, which specifically used Oliver’s (1991) framework

that deals with ‘strategic response to institutional power’. The central issue here is that

the moment these researchers focused within the organization, it became quite apparent

to them that management accounting control procedures are not an outcome of mere

routines or habits of managers and employees of organization. These are partly calculably

selected set of techniques that change with the level of competition and are an outcome of

power struggle within the organization.

There are some theoretical issues that stem from the basic tenets of neo-institutionalism:

for example, when action and actors are determined by institutions, then there is

obviously no place in this social theory for human agency. The role of the actor

(individual or corporations) in this exposition was that of a passive recipient that will

adjust its posture to gain legitimacy. However, this particular theoretical scheme lacked

the answers to some fundamental questions. One such question was institutional change.

What brings change in age-old practices within organization practices that can well be

23
called institutionalised? Institutionalists had no answer here since individuals, who are

the only plausible change agents, are already immersed in a particular social action plan

(i.e. institution) to an extent that they take it for granted. “If institutions exert such a

powerful influence over the ways in which people can formulate their desires and work to

attain them, then how does the institutional change occur? (Dimaggio and Powell, 1991;

p 29).”

In order to explicate change, individual actors had to be given a place in NIE theory,

which has to be more than mere regurgitators of social scripts. Different researchers have

tried to overcome this issue by emphasizing the role of human agency. Oliver (1991)

suggested that firms (and managers within these firms) do not just passively adapt to

institutional pressures, but act strategically in response to these pressures. Greenwood

and Hinings (1996) combined concepts of old institutionalism such as power, politics and

vested interests within the firm with institutional theory to explain change in institutions.

All these efforts improved the ability of new Institutional theory to explicate the

functioning of institutions and changes therein.

To sum up, alternative management accounting control change research is divided into

various perspectives mainly in terms of ontological assumptions. The agential perspective

highlights the importance of individuals and their subjectivities, interpretations,

reflections and actions for bringing about management accounting control changes (Dent,

1990). On the other end of the spectrum is the structural perspective, which looks at

broader politico-economic structural conditions, changes within these and their

24
relationship with changes in management accounting control practices (Hopper and

Armstrong, 1991). While both these perspectives have something important to offer, the

neglect of the other side in each of these perspectives is very noticeable. The third ways

(other) perspectives, in their own ways, try to overcome the one sidedness inherent in

structural and agential perspectives. These perspectives also add to our understanding of

management accounting control change, especially with their focus on ideas or

rules/principles, which can, over the years, acquire taken-for-granted status and are

reflected in our day-to-day practices including management accounting control practices.

In order to make robust social explanations i.e. management accounting control change,

structural, ‘ideational’ and agential perspectives need to be incorporated in a theoretical

framework. There are some other ‘third ways’ theoretical frameworks, used in accounting

literature, which do incorporate all three within their basic ontological recipe. Two such

theoretical perspectives which have been used in accounting literature to explicate

management accounting control change in public sector entities in the West and in LDCs

are Habermasian theory (pioneered by Richard Laughlin and Jane Broadbent) and labour

process/cultural political economy respectively. The subsequent sections engage with the

literature that dealt with changes in management accounting control practices in the

public sector in general and in LDCs in particular.

3.0 Management Accounting Control Change in Public Sector Organizations

There has been a ‘movement’ since the late 1970s and early 1980s to bring about changes

in public sector governance model of organization, especially in the developed world

(Pollitt, 1995). In the management and accounting literature, the changed model of

25
governance in public sector organizations is termed New Public Management (NPM)

(ibid). It is unclear as to what exactly inspired these changes but several reasons are

quoted in the literature for the initiation of these ‘reforms’ in the public sector. These

include the change agenda of the right-wing parties of Thatcher and Reagan, a response

to fiscal stress and macroeconomic policies adopted by governments in that particular

time period, and the role of business schools, accounting and management consultant

firms in popularising managerial ideology and so on (Hood, 1995).

In any case, the main question is, what does NPM entail? It entails disintegration of

larger public sector organizations into smaller units focused on a particular product or

market, bringing in market (or quasi-market) competitiveness within these units, private

sector management style, cost control and audit culture, greater managerial discretion and

freedom, clearly laid out performance measures linked with output rather than processes

and evaluation of performance against these standards (Hood, 1991). The move is

intended to make public sector organizations more ‘business like’ i.e. ‘performance-,

cost-, efficiency- and audit-oriented’ (Diefenbach, 2007). Since NPM involves the

privileging of economic efficiency, cost control, related performance measurement and

audit, the increased importance of accounting, especially management accounting

control, was an inevitable feature of this movement. In fact, looking at the increased

importance of accounting in this new managerial regime within the public sector, NPM is

also described as ‘accountingnization’ of the public sector and services (Power and

Laughlin, 1992). Accounting researchers have thus spent a considerable time looking at

26
the NPM-related accounting changes within public sector entities, their reception, their

effects and their outcomes.

In order to look at management accounting control changes within public sector entities,

accounting researchers have again employed various theoretical perspectives ranging

from institutional theory (Abernethy and Chua, 1996; Brignall and Modell, 2000) to post-

modernist approaches (Jarvinen, 2009) to understand management accounting control

change5. We can apply the same classificatory scheme that we used earlier to split this

body of research into mainstream vs. alternative or agential vs. structural vs. third ways

perspectives. However, instead of re-introducing the theoretical perspectives discussed

earlier, this section focuses on one theoretical framework, which incorporates within its

ontological basis the structural, cultural and agential perspectives. This framework is

from critical theorist Jurgen Habermas, whose work has been extensively used to

understand changes in management accounting control practices of public sector

organizations, especially by Jane Broadbent and Richard Laughlin (B&L)(e.g. Laughlin

and Broadbent, 1993; Laughlin et al, 1994; Broadbent and Laughlin, 1998; Broadbent et

al, 2001). This research focuses on NPM-related changes in management accounting

controls of different public sector areas, especially health and education in the UK. The

Habermasian theoretical model, as used by B&L, comprises three main concepts:

i) Lifeworld: Lifeworld represents the basic beliefs of agents about themselves

and about social groups and their mutual relationships;

ii) System: System represents systems of actions driven by the Lifeworld of

members of society. Systems are, or are supposed to be, a tangible expression

27
 of some of the more intangible communicatively agreed Lifeworld elements.

Broadbent and Laughlin (B&L) have made an amendment to Habermas’s

concept of systems to include it in Organizational systems. So, for example,

humans’ belief about the importance of education and the nature of education

has given rise to an educational system consisting of educational

organizations;

iii) Steering Mechanisms: Systems or Organizational systems must be in

consonance with the Lifeworld of members of society. But the Lifeworld and

the Organization system are subject to continuous change. So, for example,

the Lifeworld of society may suggest that educational opportunities should be

equal to all members of society and hence should be affordable. However,

educational organizations may start charging higher tuition fees. This creates

disconnect between Lifeworld and organizational systems; therefore, there are

steering mechanisms that ensure that organizational systems remain in sync

with the Lifeworld of society. These steering mechanisms, according to B&L,

can themselves be in organizational forms such as the Ministry of Education,

Government etc.

According to B&L, system organizations and steering mechanisms organizations have a

similar system. So, every system organization, such as a university, will have within it a

Lifeworld, representing the beliefs of the (dominant) members of university, and a

steering mechanism in the form of management accounting control systems, including

accounting systems, to steer the organization in accordance with the Lifeworld of its

28
members. Similarly, a steering mechanism organization such as a Ministry of Education

will have within it steering mechanisms to guide the organization in accordance with the

Lifeworld of its members. Organizational change can have an external locus: for

example, when universities are asked to make more profit by the Ministry of Education

because of change in the Lifeworld of the Government such that ‘educational institutions

should stand on their own feet’ and government funding should be spent on other

avenues. This change will be implemented by changing steering mechanisms, including,

for example, changing reporting requirements to emphasize Break-even, Profits etc. This

change, when it reaches the concerned organization, will be received by the members of

this organization in accordance with their Lifeworld. If this change is in accordance with

the Lifeworld of members of the organization, in our example the university, its internal

steering mechanisms will be changed to reflect the changed Lifeworld of the members.

Changed steering mechanisms will include, for example, changes in the performance

measurement system whereby, say, the performance of deans of schools will be judged

by the university according to the Contribution Margin made rather than research

excellence. This change in the Lifeworld of organizational members, in line with changes

in the Lifeworld of the external steering organization, is described as ‘evolution’-

permanent and welcome change in organizational interpretive schemes (Laughlin, 1991).

If, on the contrary, the change suggested by the external steering organization is not in

accordance with the Lifeworld of the members of the university, they will try to resist it.

This resistance, if it fails, will lead to what Habermas terms ‘colonization’, i.e. the system

organization does not represent the Lifeworld of actors (ibid). So, for example, if

university members still believe that teaching and research excellence are the raison

29
d'être of the university but it has been forced by the Ministry of Education to implement a

performance evaluation system that emphasizes financial performance, this will result in

the colonization of the Lifeworld of members. Members of the university whose

Lifeworld is subject to colonization risk (after failed resistance) will have two options:

either to leave the organization or to accept the new imposed Lifeworld. In either case,

the Lifeworld of the organization will be colonized.

Presented in this theoretical light, B&L explain state-led management accounting control

changes within public sector entities, reaction to these changes, including resistance

strategies by members of the profession, and the outcome of these changes. B&L (with

some of their colleagues) in their various papers have examined various changes in the

education sector, such as the introduction of ‘local management of schools’ (Laughlin et

al., 1994), and changes in the health sector, such as GPs’ contracts and changed fund

holding arrangements for GPs (Broadbent and Laughlin, 1998). These changes, in

general, were not in accordance with the Lifeworld of members of the concerned

professional organizations and were being driven by the government’s material concerns

(Laughlin and Broadbent, 1993). This resulted in various resistance strategies by

members of professional public sector organizations, depending upon the level of

perceived threat stemming from these changes (Broadbent and Laughlin, 1998). If the

level of threat was weak, this was coped with by ‘absorbing’ the strategies of

organizational members, whereby organizational members continued to work ‘as before’

while accommodating the demands of the State (Laughlin et al., 1994). On the contrary,

30
if the level of threat was greater, a more open resistance strategy was followed

(Broadbent et al., 2001).

What is noteworthy about Habermasian theory is that Habermas, while recognizing the

importance of actors’ understandings, also emphasizes that this interpretive

understanding needs to be complemented with analysis of contextual conditions

(Danermark et al, 2002, p.202). Concepts like ‘Lifeworld’ emphasize the agential aspect

of the social world, while ‘systems’ reflect the independent existence of ‘collectivities’

within Habermasian theory. Broadbent and Laughlin (2005), while describing the basic

tenets of their approach, contend that; “We do see that organizations exist which have

their own accumulated histories – so, for instance, King’s College, London and Royal

Holloway are tangible organizations distinct from current stakeholders – whilst

maintaining that they are not independent of these human stakeholders – who have the

power to mould and change these organizational histories to be taken forward for future

generations to similarly mould these histories” (p.8). Apart from recognizing the

importance of structures and agency within this framework, the role of ‘ideas’ or ‘ideals’

is also inbuilt in the concept of ‘Lifeworld’. Medical practitioners and educationists

believe in certain ‘ideas’ about how their respective practices should be conducted and

how these practices should be free from the ‘material concerns’ suggested in government

reforms. The Habermesian inspired accounting research by Broadbent and Laughlin

includes all three concepts of ‘structure’, ‘agency’ and ‘ideas’ and is thus a very useful

framework for understanding management accounting control changes.

31
4.0 Management Accounting Control Change Research in LDCs

In contrast to the developed world, LDCs have unique macro-economic, political and

cultural traits, all of which, as discussed in the chapter so far, have an important bearing

on the development and use of management accounting control systems. Over the last

twenty years or so, researchers have looked at various implications of this nexus between

accounting and politico-economic and cultural conditions of LDCs. LDCs (normally

regions) are spread all around the world (e.g. Africa, Asia, South America etc.) and have

their own idiosyncratic political and cultural conditions. However, extant accounting

literature can help us make a few generalisations about the political, economic and

cultural conditions that tend to be prevalent in LDCs.

To begin with, most LDCs, apart from obviously being in poor shape economically, also

have serious governance issues, including corruption and political malpractices serving

the vested interests of the powerful few (Hopper et al, 2009). The short-term history of

most LDCs also has a similar pattern, with freedom during the middle of twentieth

century, state-led industrialisation cum central planning during the 1950s and

privatisation and NPM related reforms during the 1980s and 1990s (Alawattage et al.,

2007). Most of these swings in policies are a function of international politics and the

economic dependence of these countries on economically stronger nations (ibid). The end

of the Cold War, with what seem like a decisive win of the Capitalist West over the

32
socialist block, has given impetus to privatisation and NPM-related reforms via the

involvement of international and multilateral financial and donor agencies (ibid).

This general historical trend for LDCs means a few general traits of organizations

captured in accounting research. First of all, a predominant majority of organizations on

which management accounting control research has been done either still are, or were in

the recent past, public sector organizations (courtesy of the 1950s era) (Hopper et al,

2009). Secondly, in the majority of these public sector organizations, while formal

management accounting control practices were in place to enable the State to make

rational decisions about resource allocations etc., these were in practice often ignored due

to the interference of state politicians in the affairs of these entities (Alawattage et al,

2009). While the majority of these public sector entities had ‘independent’ Boards, these

were, in essence, subject to controls by their respective ministries and hence interference

of ministers. Most of these public sector organizations suffered heavy losses due to this

political interference and added to the economic burdens of LDCs. Changes in

management accounting controls within these organizations are generally linked with

poor financial performance followed by some kind of ‘reform’ program associated with

the intervention of international aid/loan agencies (Hopper et al., 2009). These reforms

take the shape of either partial or full privatisation or other changes in management

accounting control practices (Uddin and Hopper, 2001; Wickramasinghe and Hopper,

2005, Uddin and Tsamenyi, 2005; Xu and Uddin, 2008; Uddin, 2009).

33
However, in most of these cases, ‘reforms’ did not materialise because of a host of

factors normally linked with local politics and bad governance. In privatised firms,

management accounting controls took a more exploitative shape whereby labour and the

State were both ultimate losers, while the new owners benefited (Uddin and Hopper,

2001). In those organizations, where organizations were not privatised, not much was

changed in terms of management accounting control practices (Uddin and Tsamenyi,

2005). In most of these cases, bad governance, national and international politics and

local culture were recurring themes. Since most LDCs have undergone a similar

historical trend in terms of independence to state-led industrialisation to privatisation,

Hopper et al. (2009), while reviewing this literature, summarised this research in three

historical epochs, i.e. colonial despotism, state capitalism and market capitalism. Each

epoch characterises a different mode of production and associated culture, with remnants

of previous cultures lagging onto new modes of production, thus creating its own set of

complications (Uddin and Hopper, 2003).

In terms of theoretical approaches adopted to explain management accounting control

changes, researchers have again adopted various theories. These theoretical approaches

include what this chapter previously described as ‘mainstream’ contingency-based

positivist research (e.g. O’Connar et al., 2004) and a number of ‘alternative’ research

approaches. However, in the case of management accounting control change research on

LDCs, it is the ‘alternative’ research which dominates the research landscape (Hopper et

al., 2009). Hence, one can easily invert the nomenclature of ‘mainstream’ and

‘alternative’ for accounting research within LDCs. Within alternative research (going

34
with the original nomenclature), again, theoretical approaches that were classified earlier

as ‘third ways’ perspectives are more prevalent although different shades of

agential/interpretive research can also be seen (e.g. Ansari and Bell, 1991, Rahman and

Lawrence, 2001). These third ways perspectives include explaining management

accounting control change using institutional theory (Kholeif et al., 2007), a combination

of contingency and institutional theory (Hoque and Hopper, 1997) and post-modernist

theoretical approaches such as the work of Giddens (Uddin and Tsamenyi, 2005) and

Foucault (Jones and Sefiane, 1992) etc. All these theoretical approaches, with their

respective problems, have been discussed before. One ‘third way’ theoretical approach,

which is particularly noteworthy in terms of incorporating the structure, ‘ideal’ and

agential perspective within its theoretical ambit and which has been extensively used

within management accounting control change in LDCs, is research employing labour

process/ (cultural) political economy theory (Uddin et al., forthcoming; Uddin and

Hopper, 2001; Wickramasinghe and Hopper, 2005; Alam et al., 2004; Wickramasinghe et

al., 2004; Alawattage and Wickramasinghe, 2008). All these papers are set within a

historical materialist context whereby management accounting control practices are seen

in the context of the relationship between ‘management’ and ‘labour’, which are

themselves conditioned by the relationship between the state, the political system and the

economy.

Inspired by Burawoy (1979, 1983), Uddin and Hopper (2001) traced changes within the

management accounting control practices of a Bangladeshi Soap factory by examining

changed ‘production politics’ in the context of a changed ‘production regime’. So, during

35
state capitalism, due to the influence of local political conditions and the power of trade

unions, management accounting controls were not geared towards commercial ends.

Accounting, budgeting and other controls were made toothless and ceremonial to

accommodate the demands of labour and politicians. Dismal financial performance of

state enterprises and the pressures of international donor and lender agencies led to

privatisation efforts by the State. A privatisation program by the State resulted in the

creation of a different ‘production regime’, which had an influence on shop floor

‘production politics’. Management accounting controls became more coercive, with

redundancies, internal subcontracting and top-down budgeting with strict physical

targets. The changed ‘production regime’ reduced workers’ powers to resist management

advances for work intensification. While workers were involved in ‘gaming’, these

resistance efforts, according to the authors, were counterproductive in the sense that they

took the steam out of the resistance boiler. These studies, which clearly have materialist

historical analysis tones within them, also incorporated ‘cultural’ elements within their

analysis. For example, Alam et al. (2004) discuss indigenous communal culture and how

this culture contradicts capitalist concerns with profitability and the implications of these

contradictions for management accounting controls of a Fijian development bank.

Adopting a ‘cultural political economy’ approach, Wickramasinghe and Hopper (2005)

explore changes in management accounting control practices of a textile mill operating

within a Sinhalese village in Sri Lanka. According to the authors, traditional management

accounting control practices were resisted by factory workers because these did not gel

with local culture. After a dismal financial performance, the mill was privatised and this

led to changed management accounting control practices. However, changed

36
management accounting control practices did not suit the interests of middle managers

and workers and also collided with their cultural values. This led to resistance efforts by

workers, supported by middle managers, against these changed practices. The private

owners eventually fled after the discovery of financial irregularities in the affairs of the

mill, and the mill was again nationalised, bringing back the old management accounting

control practices.

Wickramasinghe et al (2004) also reported similar circumstances with a Sri Lankan

telecom firm, which was partially privatised by the State. Part of the stake in the firm was

purchased by a Japanese firm and as a part of the arrangement, a Japanese employee of

the foreign firm was sent in as the new chief executive. The new chief executive brought

a number of changes within the management accounting control system of the firm,

including changes in the organizational structure, the performance measurement system

and reporting system linking, operations and performance measurement. These changed

management accounting control practices resulted in extracting further work from labour

and stopping illegal payments (as bribes for connections) to them. But at the same time,

the system also included higher compensations, especially to those employees who would

meet company ‘targets’. Changed management accounting control practices resulted in

improving financial performance of the firm. However, they also resulted in creating

division within the employees of the firm. For example, engineers were given more

importance in the new control regime, whereas non-engineers felt ignored. Old, unskilled

and unwilling employees felt offended by the changes, whereas those who were young,

skilled and willing to embrace change were happy them. Labour compensations went up

37
and there was also a guarantee of ‘no redundancies’. However, the majority of workers

were unwilling to put in further labour efforts and their community links with supervisors

and managers meant a more forgiving attitude of superiors towards them. Change efforts

also made the chairman and members of the board of directors unhappy, as they thought

the new chief executive was getting a lot of credit for the company’s performance and

control of the company had been totally reverted to him. The efforts of government

bureaucrats and members of boards resulted in the Japanese firm replacing the old chief

executive with a new person. This change also marked the beginning of a reversal of the

change initiatives of the old CEO, thus bringing back the old public sector bureaucratic

rules and regulations. The paper thus traces changes in management accounting controls

and their linkage with material structural conditions, culture and actions and the

perceptions of individuals.

In most of these papers, the actions of individuals were seen as being influenced by

unchanged cultural values and changed material structural conditions (e.g. change from

politicised state capitalism to politicised market capitalism). Papers written in this

theoretical hue also highlighted how actions of labour resulted in changing larger material

structural conditions. For example, Alawattage and Wickramasinghe (2008), using the

work of Scott (1985, 1990), explained how ‘hidden’ and ‘open’ resistance by tea plant

workers, which was supported by local politicians, resulted in changed material structural

conditions whereby large capitalist plantations were slowly replaced by smaller worker-

owned plantations. These changed material structural conditions obviously resulted in

38
changed management accounting control practices whereby old coercive controls of

capitalists and their appointed managers were no longer required.

Research using a political economy approach thus highlights a number of important

features of management accounting control change in LDCs. First of all, this research

locates management accounting control practices within a firm as managers-managed

relationships, with these relationships themselves operating within ‘larger relationships’

involving national and international political and economic conditions. ‘Managers’ and

‘managed’ have vested interests and resource availability, which ‘push’ them to act in

one way or the other, depending upon the nature of the ‘larger relationships’ within

which firms are operating. So, change in larger relationships, e.g. state capitalism to

market capitalism, induces changes in management accounting control practices, as was

the case, for example, with Uddin and Hopper (2001). This research brings to light the

structured differences in vested interests of managers and managed: thus, all research

reports resistance efforts on the part of labour and lower level employees to stop the

advances of managers (Uddin and Hopper, 2001; Alawattage and Wickramasinghe,

2008). These resistance efforts were of different forms and shapes (e.g. open defiance or

hidden resistance) and at times were supported by their supervisors (Wickramasinghe and

Hopper, 2005). This research has also shown that changed management accounting

control practices can also entail antagonistic relationships between different managerial

groups (Wickramasinghe et al., 2005). Additionally, the research highlighted the

importance of ‘culture’ in affecting the behaviour of concerned individuals in the case

studies. A prominent theme in this research is that cultural values of non-capitalist

39
societies are at odds with capitalist modes of production and hence the resistance to

modern day management accounting controls (Wickramasinghe and Hopper, 2004). In

terms of cultural values, this research also highlights how ethnic affinity between

supervisors and labour stop the former from extracting surplus labour from the latter in

LDCs (ibid). It was not just structural conditions and changes therein which were given

importance in this research. Individuals, their unique styles of acting and strategies also

featured prominently in it (e.g. Wickramasinghe et al., 2004). The research thus gives a

fairly comprehensive account of management accounting control change, tracing its links

to larger economic and political conditions (and changes therein), cultural values and

individuals’ actions and strategies.

40
5.0 Evaluation and Concluding Remarks

This chapter critically evaluated ‘Management accounting control change research’ in

general, with special emphasis on the public sector and LDCs in particular. Recent trends

clearly show some momentum in researching the public sector in LDCs, focusing on

management accounting control change. New researchers are coming and several

frameworks are being formulated in a number of theoretical avenues. Issues are being

further reshaped with increasing interest, as LDCs are still a ‘laboratory’ for both

researchers and investors. The authors believe that it is important to understand the

complex issues surrounding management accounting control change in the public sector,

especially in the context of LDCs. The following summarises some of the key theoretical

and empirical issues discussed in the previous sections.

First, in terms of theory, earlier management accounting control change research in the

public sector in LDCs is mainly driven by mainstream accounting research. These studies

have assumed that organizational functions are independent of the countries in which

they operate and that organizational variables can be tested without referring to the

aspects of societies. These studies are mainly impressed by contingency theory and

attempts to establish positive or negative relationships between them. In contrast, some of

our recent studies on management accounting control change in LDCs have given us

much confidence in adopting more varied perspectives (See Uddin et al., forthcoming;

Uddin and Hopper, 2001; Wickramasinghe and Hopper, 2005). Recent work in this area

suggests that issues in this area are complex, interrelated and chronic (Hoque and

Hopper, 1997; Uddin and Hopper, 2001; Wickramasinghe and Hopper, 2005). Politics,

41
culture, state imperatives, bureaucracy and traditional modes of production are all

connected to management accounting control practices. Mainstream management

accounting control research in LDCs does not stand with these issues, as they are

somewhat influenced by predominant thought developed around neo-classical economic

frameworks and systemic thinking. Their world-views have been formed by the dominant

thought and are inclined to address issues such as budgetary participation (Frucot and

Shearon, 1991), information characteristics (Chia, 1995) and decentralisation (Gul et al,

1995). Alternative research frameworks used in LDCs have found that management

accounting control change is more of a function of various socio-economic phases, from

imperialism to neo-colonialism (Uddin and Hopper, 1999, 2001; Wickramasinghe and

Hopper, 2005). They argue that difficulties in changing traditional cultures and mores,

eradicating political patronage, bureaucratic corruption, ethnic and gender discrimination,

informal contractual arrangements, familial and community relations are all products of a

social system, especially in a LDC, and these are produced and reproduced as a result of

their interactions and replacements. Management accounting control is a part of this

social arrangement and solutions cannot be found quickly by studying the surface. The

largest portion of an ‘ice-berg’ is not to be seen from the surface of the sea of social and

organizational reality.

Second, in terms of theoretical choices to study management accounting control change

in the public sector, especially in the context of LDCs, we have argued that the

positivistic tradition tends to provide superficial explanations of complex phenomena in

LDCs. Contrary to the ‘mainstream’, which flourished in the US and is still considered as

42
the only credible research methodology (Zimmerman, 2001), alternative accounting

research has found its place in management accounting control change research in the

public sector both in less developed and developed countries. Alternative accounting

research, very diverse in terms of theoretical perspectives and approaches, deals with the

three aspects of social and organizational life (i.e. structure, culture and agency), which

are indeed all intertwined. However, the majority of theoretical approaches adopted in

explaining management accounting control change focus on one aspect for in-depth

research. For example, the structural approach focuses on the importance of larger

politico-economic circumstances in shaping management accounting control practices in

the firms. In this tradition, accounting researchers have tried to explain the emergence,

changes, and use of specific management accounting controls (e.g. standard costing,

overhead accounting, Activity Based Costing etc.) in relation to changes in macro

structures prevalent in society. The main criticism attributed to the structuralists is that

they tend to overemphasise the role of macro structures while ignoring the role of

culture/ideas and agency.

The Agential approach gives importance to agents and their subjectivities but somewhat

ignores structural and cultural conditions. Management accounting control change

research in this tradition raised the important issues of conflict and politics in the change

processes (Boland and Pondy, 1983; Covaleski and Dirsmith, 1986). On the contrary,

‘Third Ways’ perspectives privilege ideas or ‘culture’ in order to address the century old

sociological debate on structure vs. agency. Theories in this tradition have been very

influential in management accounting control change research. Old Institutional Theory

43
has been a major source of ideas in explaining management accounting control changes,

inspired by Burns and Scapens’ (2000) paper. Similarly, Macintosh and Scapens (1990)

introduced the Structuration Theory in management accounting control change research

and this became the most cited paper in this area. New Institutional Theory has also

significantly influenced management accounting control change research. Although the

Third Ways perspectives limit themselves predominantly to the role of culture/ideas and

rules/principles in explaining management accounting control changes, these perspectives

do add to our understanding of management accounting control change.

Nevertheless, we would argue, in order to make robust explanations of management

accounting control change, structural, ‘ideational’ and agential perspectives need to be

incorporated in a theoretical framework. Habermasian theory (pioneered by Richard

Laughlin and Jane Broadbent) and labour process/cultural political economy do seem to

provide some acknowledgements of all three aspects of our social and organizational life.

Without denying the contributions from other perspectives, we argue, research produced

by applying the above two theories seems to have provided a fuller picture of

management accounting control change.

Finally, in addition to theoretical choices promoted by the review, the paper points out

some avenues of further research. In LDCs in particular, management accounting control

change research is predominantly about public sector entities with strong labour unions

with intense political interference and serious financial problems (Hopper et al., 2009).

Convergence of interests between strong politicians and local unions, combined with

weak law enforcement mechanisms, mean that in most of these public sector entities

44
documented in the accounting literature, commercially effective management accounting

controls are absent or incapacitated (ibid). As a result, most of the cases reported in

accounting literature in LDCs are about organizations that are in serious financial trouble

(ibid). The nexus between politicians and local labour unions would not allow the

management accounting control change programs to take off (Wickramasinghe et al.,

2004). On the other hand, changes in larger politico-economic structural conditions (from

state capitalism to market capitalism) have, in some places, led to the complete

privatisation of these loss-making organizations with weakened labour union power

(Uddin and Hopper, 2001). This has created exploitative labour conditions within these

privatised firms (ibid). Nevertheless, our understanding of the state of affairs of

management accounting controls within ‘commercially successful’ public sector

organizations in LDCs is weak at the moment (Hopper et al., 2009). Thus, this is an area

on which researchers could focus to understand the nature of management accounting

controls in a ‘profitable’ public sector entity and to understand the impact of adoption of

‘commercially effective’ management accounting controls on management-labour

relationships within such organizations.

Furthermore, management accounting control change research in the public sector is

dominated by recent reforms such as NPM in both developed and LDCs. Some research

in LDCs, not surprisingly, takes the view that NPM are equally applicable in LDCs.

Future research could be devoted to interrogate two key assumptions in relation to NPM

in LDCs. First, the key assumption in relation to NPM is that LDCs are a homogeneous

group and accounting problems are common to all LDCs, so that international consensus

45
could be appropriate in resolving these problems. However, this is unrealistic. Most

LDCs are post-colonies and others are traditional societies with less exposure to the

Western world, e.g. China. Even within one country, there are regional discriminations,

leading to different control problems (Wickramasinghe and Hopper, 2005). Indeed,

geography is an important determinant in realising the different and distinctive

characteristics of people’s behaviour that form different social, political and cultural

peculiarities. Second, the NPM and other reform advocates for the public sector have also

assumed that LDCs are in need of accounting technology whatever their form (Uddin et

al., forthcoming). This denies the possibilities that LDCs may be able to solve their own

problems in due course or the market may decide which way they would be resolved

(Peasnell, 1993). It was noted elsewhere that transferring accounting technology may be

expensive for LDCs as well (Peasnell, 1993). Nevertheless, there have been other studies

that have doubted the fact that transfer of accounting knowledge may be dysfunctional

considering the different socio-political and cultural factors operating in LDCs (Hove,

1986; Peasnell, 1993; Uddin et al., forthcoming). We have shown that there are a number

of diverse ways researcher could study the above issues in relations to NPM and Public

Sector in LDCs. This review, in particular, argues for a robust theoretical framework

which captures structural, ‘ideational’ and agential perspectives in order to document,

understand and theorise the complex changes happening in management accounting

control in public sector in LDCs and around the world.

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 Examples
‘Mainstream’

MA ‘Agential’ Interpretive Research in MC Change e.g. Dent,

Change 1990; Mouritsen, 1999
Research
‘Alternative’
‘Structural’ Structuralist Research in MC change e.g.
Armstrong, 1987; Hopper and Armstrong, 1991;
Toms, 2005; Bryer, 2005

3rd Ways Foucauldian Research e.g. Miller and O’Leary

1987; 1991
Structuration Theory e.g. Macintosh and
Scapens, 1990
Old Institutional Theory e.g. Burns and Scapens,
2000
Figure One New Institutional Sociology e.g. Covaleski and
Dirsmith, 1988
Literature Review Classificatory Scheme

1
For the purpose of this review, the public sector may include a ranges of institutions/organizations
controlled, managed, or owned by the state. This broader definition includes organizations such as local
government, central government, ministries, state-owned commercial enterprises etc
2
Less developed countries may include, at one extreme, countries with hardly any development attributes
lacking the rule of law, and at the other extreme, countries with more advanced attributes but lacking some
developed country attributes.
3
While third way perspective is commonly associated with work of Giddens (1984), this is not the sense in
which the term is used here. These are a variety of perspectives (which is why the term ‘ways’ rather than
‘way’ is used) which in their own ways, have tried to resolve or sidestep the structure-agency debate. For
details, please refer to the section on Third Ways Perspectives.
4
The first paper suggesting the use of structuration theory in management accounting was Roberts and
Scapens (1985)
5
For details of various theoretical perspectives employed to explicate management accounting control
change, please refer to Abernethy et al., 2007.

56