Contemporary Issues in Management Accounting This page intentionally left blank Contemporary Issues in Management Accounting Edited by ALNOOR BHIMANI Great Clarendon Street, Oxford ox2 6dp Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With oYces in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York ß Oxford University Press 2006 The moral rights of the author have been asserted Database right Oxford University Press (maker) First published 2006 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose the same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloguing in Publication Data Data available Typeset by SPI Publisher Services, Pondicherry, India Printed in Great Britain on acid-free paper by Antony Rowe Ltd., Chippenham, Wiltshire ISBN 0–19–928335–4 978–0–19–928335–4 ISBN 0–19–928336–2 (Pbk.) 978–0–19–928336–1 (Pbk.) 10 ‘ FOREWORD Michael Bromwich is an exemplar of all that is good about the British tradition of academic accounting Serious in intent, he has striven both to illuminate practice and to provide ways of improving it Although always appealing to his economic understandings, he has been open to a wide variety of other ideas, recognizing their intellectual strengths and capabilities rather than making artificial distinctions between what is acceptable and what is not He also has contributed widely to the accounting literature, taking forward the British tradition of economic theorizing in financial accounting as well as being a constant source of creative thinking in the management accounting field Michael has also contributed in a number of different institutional arenas: the academic, of course, but also those of the profession and the wider public sphere Ever helpful to regulators, the senior civil service, and international agencies, Michael Bromwich is respected for the ways in which he can combine conceptual understandings with pragmatic insights He has been sought out to provide that extra element of conceptual clarity for the most complex of practical accounting endeavours No doubt such abilities reflect Michael’s early grounding in both the practice of accounting and its economic theorization, the former at Ford and the latter initially at the London School of Economics and thereafter as a lifetime endeavour But personal though his achievements may be, they are also reflective of a wider tradition of significant involvement in the practical sphere by senior British accounting academics For we must remember that it was Professor Edward Stamp who was one of the first to call the British audit profession to account with his questioning of ‘who shall audit the auditors?’ The subsequent institutional response has most likely gained as much from the likes of Professors Harold Edey, Bryan Carsberg, Ken Peasnell, Geoffrey Whittington, and David Tweedie as it has from the e´minence grise of the profession itself And even in auditing, significant roles have been played by Professors Peter Bird, David Flint, and Peter Moizer amongst others Indeed it is possible to argue that the British academic accounting professoriate has played an extremely important role in mediating between the profession and the state, both bringing knowledge to bear on policy issues and providing a cadre of people who can operate effectively in this policy sphere Michael Bromwich has certainly contributed in this way, advising accounting and competition regulators on complex issues and providing his own intellectual authority to the office of President of the Chartered Institute of Management Accountants One senses, however, that the British academic accounting community may be less able to fulfil these roles in the coming years In part this reflects a more general decline in the academic world as falling relative salaries and status have reduced the intake of talented academic entrepreneurs But I also think it reflects the cumulative impact of regulatory and careerist pressures in the academic world itself With government agencies pressing for ever more standardized and conventional research and with increasingly instrumental careerist vi FOREWORD behaviour by academics, there are fewer incentives to bridge the academic and practical spheres No doubt this is also exaggerated by an increasingly less curious professional world The intellectually curious Technical Partners of the past have been replaced by more market orientated purveyors of accounting solutions Accountancy consultancies are much more interested in simple marketable solutions than more sophisticated insights into the complexity of the issues at stake Although there is more and more talk of the need for relevance and application, the pressures at play are more likely to push in the opposite direction Rather than building on a strong tradition of really useful relationships between the practical and academic spheres in accounting, I sense that the two worlds have less and less to with one another It is therefore ever more important to reflect on the contributions which Michael Bromwich has made He played an important role in the diffusion of modern practices of capital investment appraisal in the United Kingdom He has been constantly open to the insights which advances in economic theory can provide into the accounting art, in many areas pushing at the frontiers of international knowledge in his own quiet way In the area of costing, Michael has undoubtedly deepened our understandings of both conceptual and practical issues, in recent years providing a voice of reason amidst all the consultancy excitement of seemingly new ways of costing the business world He has played a similar role in the area of accounting standard setting, both taking forward the British tradition of the economic analysis of financial accounting and, of possibly greater significance, providing some very original analyses of the possibilities for meaningful accounting standardization With an agenda as rich as this, it is all the more praiseworthy that Michael maintained his dialogues with both the academic and the practitioner communities But that he did Those who know Michael Bromwich are not surprised by his many involvements, however Constantly striving, always curious and ever personable, he has developed a pattern of interests, involvements, and friendships that have sustained his very effective interventions in many institutional and intellectual spheres It is indeed fitting that so many of his friends and colleagues contribute to this volume to recognize Michael’s contributions to academic accounting I am honoured to join them Anthony G Hopwood University of Oxford December 2005 ‘ PREFACE A multitude of forces shape management accounting From an organizational perspective, decision-makers and other users of accounting information often perceive changes in their information needs Consequently, providers of accounting information within organizations respond to many of these desired changes by redesigning management accounting systems and restructuring their output The impetus for change may also originate from outside the organization Many scholars, consultants, and commentators on management accounting are purveyors of ideas about what accounting should be In response, users of accounting information, management accounting professionals, and system designers may seek to alter the information provided within their organizations to align with such ideals In this sense, internal accounting changes may be driven by demand-level needs as well as supply-side inXuences Moreover, forces reXecting broader changes both in structures and processes in businesses, organizations, and society and in contemporary ideas and discourses may originate from within as well as from outside the organization and reshape the nature of management accounting In the recent past, management accounting has not only seen changes within existing domains of the Weld but has also witnessed extensions outside its established realms of activity Wider systemic transformations including changes in political regimes, novel conceptions of management controls, the impact of globalizing forces on commercial aVairs, shifts in notions of eVective knowledge management, governance, and ethics, and technological advances, including the rise of broadband, have all impacted management accounting endeavours The Weld is today, as fast-changing as it has ever been This book captures key facets of current thoughts, concerns, and issues in management accounting The book consists of eighteen chapters written by distinguished scholars in the Weld The topic areas covered in some chapters reXect established management accounting topics such as budgeting and responsibility accounting, contract theory analysis, contingency frameworks, performance measurement systems, and strategic cost management, which are considered from the perspective of changing concerns facing modern organizations and present-day management thought as well as in the light of some of their historical dimensions Other chapters deal with newly emerging concerns in management accounting, including network relations, digitization, integrated cost management systems, knowledge management pursuits, and environmental management accounting Each chapter encompasses discussions of basic premises complemented by insights from modern-day practice, research, and thought This approach makes the book particularly suitable for students in academic as well as executive-oriented courses in management accounting It also provides viii PREFACE an extensive corpus of discussions that will inform those in practice Readers interested in gaining direct insights into specialized management accounting areas will Wnd this book to be an especially valuable reference source Established Welds cannot grow in the absence of committed Wgureheads who tirelessly contribute to their development One individual who has contributed immensely to management accounting thought and practice over the course of more than four decades is Michael Bromwich Bromwich, who is about to retire as CIMA Professor of Accounting and Financial Management at London School of Economics (LSE), has published over eighty papers and articles and some Wfteen books and monographs His primary contribution as a scholar has been his ability to apply economic theory to problems of accounting practice, thereby informing our understanding of the Weld He wrote The Economics of Capital Budgeting (Penguin, 1976), one of the earliest theoretically rigorous textbooks in Wnancial management His co-authored books, Management Accounting: Evolution not Revolution (CIMA, 1989) and Management Accounting: Pathways to Progress (CIMA, 1994), were published during a time of dramatic change in UK management accounting practice These textbooks contributed to the UK management accounting transformation from the costing clerk credo to strategic management proper In 1999, he was voted the British Accounting Association Distinguished Academic His contributions extend outside academe Bromwich is a past president of the Chartered Institute of Management Accountants (CIMA) and has advised many commercial and public sector organizations He is an outstanding scholar, conference sponsor, and adviser of the academy and accounting practitioners This book is dedicated to Michael Bromwich who it is hoped will continue to provide leadership to the global management accounting community Alnoor Bhimani London School of Economics December 2005 ‘ CONTENTS FOREWORD Anthony Hopwood v PREFACE Alnoor Bhimani vii CONTRIBUTORS xi New measures in performance management Thomas Ahrens and Christopher S Chapman Contract theory analysis of managerial accounting issues Stanley Baiman 20 Reframing management accounting practice: a diversity of perspectives Jane Baxter and Wai Fong Chua 42 Management accounting and digitization Alnoor Bhimani 69 The contingent design of performance measures Robert H Chenhall 92 Integrated cost management Robin Cooper and Regine Slagmulder 117 Capital bugeting and informational impediments: a management accounting perspective Lawrence A Gordon, Martin P Loeb, and Chih-Yang Tseng 146 Accounting and strategy: towards understanding the historical genesis of modern business and military strategy Keith Hoskin, Richard Macve, and John Stone 166 Modernizing government: the calculating self, hybridization, and performance measurement Liisa Kurunma¨ki and Peter Miller 198 10 Analytics of costing system design Eva Labro 217 11 Understanding management control systems and strategy Kim Langfield-Smith 243 INDEX Friesen, P H 95 full costing, and costing system design 218 functional group management 121–2 functionality-price-quality trade-oVs 131–2 Gabbay, S 321 Gabriel, A E 232 gain-sharing 319 Galbraith, J 95 Gap 83 Garnsey, E 278 genealogy, and Foucauldian frame 57 General Motors 51 Gerdin, J 93 Ghosh, D 106 Ghoshal, S 316, 321 Giddens, A 49, 54, 255 Gietzmann, M B 137, 278 Gilmore, J 83 Glendinning, C 205 Global Corporate Citizenship Initiative 383 Global Reporting Initiative 401–2 global transparency, and enabling control systems 10 globalization 71 Glover, J 155, 158 goals: and non-Wnancial performance measures 102 and performance management 302 Goldman, William 409 Gong, J 409 Goodnight, J 319 Gordon, L A 149, 150, 152, 155, 156, 157, 159 Gosselin, M 13, 81 governance structure: and buyer-supplier relationships 137–8 incentive mechanisms 137–8 protection mechanisms 138–9 and management accounting research 345 government, programmes of 199–200 Govindarajan, V 42, 95, 103, 245, 246, 247, 273, 358 Graham, Colonel J J 176 grammatocentrism: and nature of disciplinary power 169 433 and strategy 172 and West Point 171 Grandori, A 311 Granlund, M 54, 55 Granovetter, M 138 Grant, Ulysses S 178 Greenpeace 381–2 and Brent Spar oil rig 382 Greeve, J 93 Grigoriadis, V 414 Groves, R 46–7, 48 Groves, T 153 Gulati, R 321 Gulf Oil 361 Gupta, A K 95, 103, 245, 246 Gupta, M 103, 223, 224, 225, 226, 228, 230, 232 Gupta, P 52 Guthrie, James 348 Gutschelhofer, A 319 H J Heinz 362 Habermas, J 49 Hacking, I 200 Hagstro¨m, P 309 Haji-Ioannou, Stelios 89 Haka, S 43, 150, 160 Ha˚kansson, H 278, 280 Halleck, Henry 178, 179 Hallowell, R 79 Hansen, A 12, 16 Hansen, M T 313, 321 Hansen, S C 293, 294 Harreld, Bruce 83 Harris, M 154, 155, 158 Hart, O 39 Hartmann, F 95 Hartmann, G H 298 Harvard Business Review (journal) 43, 76, 300 Harvard Business School 244 Hatherly, D J 276 Haupt, Herman 171, 177, 178, 179, 184 Hax, A C 244, 356 Hayes, D 416, 419 Hayya, J C 330 HBO 420 434 INDEX Health Act (1999) 212–13 and Xexibilities 199 aims of 202 requirements for success of 202–3 and governance systems 199 and integrated provision 202 and lead commissioning 202 and modernizing government programme 199, 200 and partnership working 202 and performance measurement 199 diYculties with 204 functional focus of 208 as obstacle to innovation 208–9 organizational boundaries 208–9 outcomes vs formal commitments 204–7 and pooled funds 202 and provisions of 202 health action zones (HAZs) 201 health care 200 and criticism of provision of 209–10 see also Health Act (1999) Health Care Commission 207 health improvement programmes (HImPs) 201 Hedberg, B 44–5 Heide, J B 136 Hemmer, T 102 Henri, J F 252 Hewlett-Packard (HP) 74, 361 and use of internal markets Hiromoto, T 76 Hirst, M 102, 298 Hoag, A 410 HoVman, L R 106 Hofstede, G 305 Holliday, Chad 380 Holmstrom, B 38, 109, 153, 155, 158, 231 Homburg, C 228, 232 Home Box OYce (HBO) 420 Homer 173, 174 Hope, J 42, 294, 296, 336 Hope, Jeremy 360 Hopper, T 50, 51, 253, 275–6, 334, 343 Hopwood, A G 57, 203, 298, 304, 331, 355 Hoque, Z 107, 108, 253, 273 Horngren, C 42, 272, 355, 358, 360, 386 Hoskin, K 167, 168, 169, 170, 171, 177, 178, 184 Hout, T M 274 Howard, M 175, 177 Howell, R 43 Hudson, B 204, 213 human capital, and intellectual capital 316 Hurd, Mark 74 Hwang, Y 228 ‘hybrid accountants’ 337–9 hybridization: and modernizing government programme 198, 199 and prevalence of 213 IBM 83 Ilgren, N B 102 Imagine Entertainment 410 incentive conXict, and contract theory: basic hidden action model 21–6 basic hidden information model 26–8 incentive mechanisms, and buyer-supplier relationships 137–8 Independence Day (Wlm) 417 India, and Wlm production 409 InWnity Broadcasting 410 information and communication technology (ICT): and challenge of 308 and globalization 71 and impact of 309 and informational mode of development 71 and performance measurement information economics 153 and Wneness 229–30 information processing, and competitive advantage 7–8 information space, and knowledge management 86 information transfer, and knowledge management 86 innovation: and discovery of 13–15 and naturalistic frame 47–8 Inside Edition (tv show) 414 INDEX Insider, The (tv show) 414 Institute of Business Ethics 383 Institute of Chartered Accountants in England and Wales (ICAEW) 59, 400 Institute of Cost and Works Accountants (ICWA) 59 Institute of Management Accountants (IMA) 358, 360, 400 Institution of Social and Ethical AccountAbility 383 institutional frame, and management accounting research 51–3 institutional theory, and strategy-MCS relationship 256–7 integrated cost management programmes 117, 142–3 see also external integrated cost management programmes; internal integrated cost management programmes integrated measures, and performance measurement: and context/eVectiveness of 108–10 as innovation 107–8 Intel 72 and technology and strategy 75–6 and use of internal markets 6–7 intellectual capital 86, 315–18 and categories of 315 dynamic relationships between 317 and human capital 316 and management accounting 318, 322 as misleading term 316–17 and organizational learning 317–18 and relational capital 316, 319–20 and structural capital 316 interactive systems: and management control systems and strategy 252–3 internal integrated cost management programmes 117 and beneWts of internal integration 128 characteristics of: ad hoc vs systematic application 124–5 cost reduction vs cost containment 123–4 435 product design vs process improvement 124–5 product life cycle stages 123 and implications for practice 128–9 techniques of: functional group management 121–2 general Kaizen costing 121 integration of 126–8 product-speciWc Kaizen costing 119–21 standard costing 122–3 target costing 118–19 internal markets 6–7 internal transparency, and enabling control systems 10 International Accounting Standards Board (IASB) 384, 397 International Alliance of Theatrical Stage Employees 414 International Federation of Accountants (IFAC) 339, 345 and environmental management accounting 386, 387 International Organization for Standardization (ISO) 382 and environmental management 395 International Paper 361 Internet shopping, and customer loyalty 78–9 interorganizational cost management (IOCM) and eVectiveness of 140 individual interventions 140 techniques 140–1 and implications for practice 141–2 techniques of 131 clusters of 133–4 concurrent cost management 132–3 eVectiveness of 140–1 functionality-price-quality trade-oVs 131–2 interorganizational cost investigations 132 relational context 139–40 see also external integrated cost management programmes interorganizational relations: and network enterprises 280–81 and supply chains 278–80 436 INDEX inventory Wgures, and manipulation of Irish Association of Accounting and Finance Professors 359–60 isomorphism, and institutional frame 53 Isuzu 130, 135, 137, 142 Italian Job (Wlm, remake) 416 Ittner, C 5, 15, 16, 7, 100, 101, 103, 104, 106, 107, 108, 110, 205, 207, 247, 250, 251–2, 273 Jablonsky, F S 339 Jack, L 56 Jacobs, R A 104 Jacobsson, B 48, 49 James, P 381, 386, 390, 395 James, W 107, 108, 253 Jasch, C 386 Jaworski, B J 74, 79–80 Jazayeri, M 275–6 Jensen, M 153 Jidosha Kiki Company (JKC) 130, 135, 137, 142 John, G 136 John Deere Component Works (JDCW), and costing system design 221–3 Johnson, H 2, 42, 87, 218, 329, 332, 333–5, 357, 384 Johnson, L T 398 Johnson, Miles 366, 369 Johnson & Johnson 298 joint costs 224 joint investment plans (JIPs) 201 joint ventures 85 Jomini, Baron de 175, 176 Jones, C 408 Jones, D T 118, 272, 277 Jones, G 61 Jones, T C 341 Jo¨nsson, S 44–5, 49, 276, 321 Journal of Accountancy 360 Journal of Management Accounting Research 356, 360 just in time (JIT) 97, 104, 273 Justice, Department of (USA) 421 Kaizen costing, and internal integrated cost management: general 121 product-speciWc 119–21 Kalagnanam, S S 97 Kamakura Iron Works 130, 132 Kaplan, R 5, 42, 48, 87, 94, 124, 127, 220, 231, 232, 308, 330, 355, 384, 402 and activity-based costing (ABC) 221 and balanced scorecard (BSC) 11, 14, 16, 107, 252, 294, 300, 301, 302, 383, 392–93 and best practice 13 and costing system design 226, 228, 229 and development of cost accounting 387, 388 and impact of computers and Relevance Lost 329, 332, 333–5, 357 and traditional costing 218 Karlsson, C 267 Kay, J 167 Keat, R 49 Kelly, K 70 key performance indicators (KPIs) 337 Khandwalla, P 95, 118, 123 Killough, L N 105 King, G 418 King, R 230, 232 Kirkpatrick, D 83, 89 Klammer, T 149 Kleingold, A 252 Knight, D 256 Knights, D 59–60, 184 knowledge: and codiWcation of 312–13 costs of 313 collective 311–12 and connectivity 319–21 and creation of 71–2 and management accounting 318–22 and management of 85–7, 308 collective learning 314 coordination 309, 313–14 governance challenges 314 resource-based theory (RBT) 310–11 routines 311–12, 314 and nature of 319 and transfer of 86, 311, 320 digital technology 69 INDEX discovery of new practices 13–15 see also intellectual capital knowledge-based Wrms: and emergence of 309 and management accounting 325–6 Kogut, B 311 Kohl, L 409 Komatsu 130, 133, 134, 135, 136, 137, 139, 141, 142 Konar, S 396 Korean War 182 Krishnan, R 43 Kurunma¨ki, L 200 Labro, E 226, 232 Lamming, R 135, 278 LangWeld-Smith, K 95, 106, 107, 108, 109, 111, 247, 248, 250, 251, 253, 254, 258, 273, 278 Lapre´, A 86 Lapsley, I 207 Larcker, D 5, 7, 15, 100, 101, 103, 104, 105, 106, 107, 108, 110, 159, 205, 207, 247, 250, 251–2, 273 Larsen, H T 315 Larsen, J G 137 Latour, Bruno 60–1, 254, 255 Latourian frame, and management accounting research 60–3 Laughlin, R C 50 Lave, J 312 Lawrence, P 95, 245, 248 lean manufacturing 267–70 and accounting in 275–7 role of 282–3 and cost control 270–71 and executional cost drivers 273–5 and extended Wrm 277–8 and Wnancial accounting information 273 and lateral dimension 282 and layout and control 284–5 and management accounting 270, 271, 281–2, 285–7 and non-Wnancial information 272–3, 283–4 and operations management 267 and performance 272 and principles of 272 and structural cost drivers 273–5 LeanTech 255 Lebas, M 107 Lee, Robert E 178 Leenders, R 321 Lehmann, D R 412 Leipzig, A 413 Lev, B 315 levers of control 3, 8, 252, 258, 294, 303 Levi Strauss 359 Lewis, J 204 life cycle costing 74 and environmental management accounting 389–91 ‘lights out’ production 285 Lillis, A M 104, 247, 250, 257–8, 258–9, 273 Lin, N 321 Lind, J 268, 275, 277, 278, 280 Lindsay, R M 97 Lion’s Gate 410 Lipe, M 108 Litman, B 409, 410 Livesay, H C 179 Llewellyn, S 49, 53 Loasby, B J 309 Loblaws 81 Lobo, M G 319 Locke, E A 102 Loeb, M 153 Loft, A 58, 59 London Graduate School of Business 331 Lorsch, J 95, 245, 248 Lucent Technologies 359, 361 Lucking-Reily, D 85 Luft, J 15–16, 93 Lukka, K 322 Lynch, R L 107 Lyne, S R 334 McCallum, Daniel 178 McCaw Cellular 378 Macintosh, N J 95, 256 McKinnon, S M 102 McKinsey 356 437 438 INDEX McNair, C J 358 McNamara, Robert 182 McNichols, M F 398 McPherson, J M 178 McTaggart, J 358 Macve, R 167, 168, 169, 170, 171, 177, 178, 184 Magat, W 153 Magee, R P 330 Magnan, M 398 Mahama, H 278 Mahan, Alfred 168, 179–80, 182, 185 Mahnke, V 309 Maisel, Larry 362 Maljuf, N 244, 356 Mak, Y T 250 Malina, M 16, 107, 110, 258, 259 Malone, T W, and internal markets 6, 7, management accounting, and (re)framing of 63–4 Foucauldian frame 57–60 institutional frame 51–3 Latourian frame 60–3 naturalistic frame 46–9 non-rational frame 43–6 radical frame 49–51 structurationist frame 54–7 Management Accounting Change (ICMA study) 335, 337 Management Accounting Conferences (LSE) 359 Management Accounting: Evolution, not Revolution (Bromwich and Bhimani) 333 Management Accounting: Pathways to Progress (Bromwich and Bhimani) 333 management accounting research 329–30 Management Accounting Research (journal) 339–40, 341, 343, 347, 349 management accounting research: and changing nature of UK practices 334–9 ‘hybrid accountants’ 337–9 and current issues in 344–7 governance 345 management accounting chang 344 organizational forms 346–7 performance management 345 and future of 349–50 and history of 330–2 and Johnson and Kaplan’s Relevance Lost 332–4 and methodological diversity 331–2 and perspectives on: Foucauldian frame 57–60 institutional frame 51–3 Latourian frame 60–3 naturalistic frame 46–9 non-rational frame 43–6 radical frame 49–51 structurationist frame 54–7 and trends in 339–44 broadening scope of 340–41 innovation 342 management accounting practice 340 methodological diversity 342–3 suspicion of new techniques 341–42 in United States 341, 343 use of theory 343–4 in United Kingdom: deWnition problems 348 overseas PhD students 348 and practitioners 348–9 shortage of researchers 347–8 management control systems (MCS): and deWnition 243 and enabling control systems 9–10, 11 and interactive control systems 8–9 and practice perspective on 11–13 and strategy 243–4 actor-network theory 254–5 business strategy 245–7 contingency approach to relationship 248–53 corporate strategy 244–5 institutional theory 256–7 naturalistic approach to relationship 253–4 positivist approach to relationship 257–9 research into relationship between 247–8, 259–60 structuration theory 255–6 and types of INDEX Management Information Systems (MIS) 361 managerialism: and ‘action at a distance’ 171 and space-time relations 172 and strategy 172 and West Point 170 Manchester Business School 331 MansWeld, R 98 manufacturing, and non-Wnancial performance measures 104–5 see also lean manufacturing March, A 221 March, J G 245 marginal costing, and costing system design 218 Marginson, D 9, 258 Marikon 358 market transaction costs, and outsourcing 84–5 marketing, and motion picture industry 417–18 Marketing Science Institute 356 Marks and Spencer 81 Marschak, J 153 Martin, S 209 Marx, Karl 49 Mayer, M 185 Means, D 85 measurement, and problems with Meckling, W 153 Meer-Kooistra, J 278, 346 Megill, A 183 Merchant, K 105, 106, 111, 244, 245, 259, 299 Meyer, J 52, 256 Meyer, R 244 Mia, L 149, 273 Miguel, Joseph San 361 Miles, R W 81, 95, 246, 247, 251 Milgrom, P 38, 94, 109, 250, 274 Miller, D 95, 149, 251 Miller, J G 321 Miller, P 59, 61, 62–3, 198, 199, 200, 201, 204, 276, 277, 282, 284–5 Mintzberg, H 109, 167, 184, 186, 244 Mirvis, P H 382 Mitchell, F 207 Mitchell-Madison 358 Model, S 205, 207 439 modern business enterprise, and disciplinary genesis of 170–72 Modern Public Services for Britain: Investing in Reform (White Paper) 201 see also modernizing government programme Modernising Social Services (White Paper) 201 see also modernizing government programme modernizing government programme 201, 212–13 and calculating self 199 and centralizing dimension of 207 and hybridization 198, 199 and partnerships 201 and performance measurement 199, 207–8 diYculties with 203–4, 209–12 organizational boundaries 208–9 and public service reform 199 and public-private partnerships 201–2 see also Health Act (1999) Modernizing Government (White Paper) 201 see also modernizing government programme Moers, F 110 Monden, Y 127 Moore, Gordon 75–6 Moore, J 39 moral hazard: and agency theory 153, 154 and contract theory 22 Morgan, G 47, 184 Morgan Stanley, Discover Card Division 364, 378–9 Morgenstern, O 174 Morris, D 149, 358 Morrison, C 396 Motion Picture Association of America (MPAA) 421 motion picture industry 407, 421–22 and branding/franchising 412 and contracting issues 420–21 and guilds and unions 414 and industry organizations 421 and marketing 417–18 and nature of celebrity 414–15 and nature of creative industries 407–8 and organization of 409–11 440 INDEX motion picture industry: (cont ) conglomerates 410 impact of media concentration 410–11 major studios 409–10 specialty studios 410 and pre-production: Wnanciers 416 intermediaries 415 producers 415–16 property acquisition 413 talent 413–15 and production 416–17 and project-based organization 408 and revenue generation 411–12 and signiWcance of 408 and television market 420 and theatrical release 418–19 and value chain 411–12 and video sales and rental 419 Motorola 361 Mouritsen, J 12, 16, 47–8, 247, 254–5, 274, 278, 279, 281, 282, 284, 285, 315 MTV 410 Muller, K 383, 391, 402 Munro, R J B 276 Murphy, D 381 Myers, M 159–60 Myers, S 151 Nager, V 109 Nahapiet, J E 44, 45, 316 Napoleon 175, 176 National Audit OYce 201 National Coal Board 48, 49, 51 National Health Service, and NHS Plan (2000) 203 see also Care Trusts; Health Act (1999) National Security Strategy of the United States of America 182 naturalistic frame, and management accounting research 46–9 Neale, B 417 Needham, J E 250 Neely, A 107, 292 Neimark, M 50–1 Nelson, R R 312 net present value (NPV): and capital budgeting 149–51 and strategic management accounting (SMA) case study 372–74 network eVects, and technological change 69 network enterprises, and role of accounting 280–81 network relationships, and connectivity 320–21 Neumann, J von 174 ‘New Commercial Agenda’ 276 new economy: and ‘boundaryless’ enterprises 72 and characteristics of 71 and degree of ‘newness’ 72 and economics of change 70–3 and globalization 71 and impact of 308 and information exchange 72 and knowledge creation 71–2 and technological change 69–70 see also digital technology New NHS: Modern, Dependable (White Paper) 201 see also modernizing government programme Newman, J 209 News Corporation 420 NewTech 255 Ng, J 135 Nike 83 Nonaka, I 86 non-Wnancial information: and budgetary control 291 and lean manufacturing 272–3, 283–4, 286 and management accounting practices 335, 337 and performance measurement 204–5 context/eVectiveness of 103–6 as innovation 102–3 non-governmental organizations (NGOs), and environmental issues 381–2 non-rational frame, and management accounting research 43–6 Nooteboom, B 137 INDEX Noreen, E 223, 224, 225 Northcott, D 53 Northcut, D W 398 Norton, D P 5, 11, 14, 16, 94, 107, 252, 294, 300, 301, 302, 335, 383, 392–93, 402 NOVA Chemicals 364 Ogden, S O’Leary, T 59, 276, 277, 282, 284–5 Olympus Optical Company 117–18, 142–3 see also internal integrated cost management programmes open-book accounting, and supply chains 278, 279 Operating and Financial Reviews (OFR) 167 operating expenditures 146 and time period for beneWts from 146–7 operational control systems, and performance measurement 3–4 operations management: and challenges of 267 and executional cost drivers 273–5 and lateral dimension 282 and lean manufacturing 267–10 accounting in 275–7, 282–3 cost control 270–71 extended Wrm 277–8 Wnancial accounting information 273 layout and control 284–5 non-Wnancial information 272–3, 283–4 and management accounting 266–7, 270, 271, 281–2, 285–7 and structural cost drivers 273–5 and total quality management (TQM) 271, 273 organization size, and performance measurement 98 economic value measures 102 integrated measures 110 organizational control systems 304 organizational forms: and communities of practice 322 and contingency theory 80, 81, 93 and diVerentiation of 83 and Wrm alliances 85 441 and impact of digital technology 80–2, 83–4, 309 and legitimization of 88 and management accounting research 346–7 and value-added communities 85 organizational structure, and performance measurement 97–8 economic value measures 101–2 integrated measures 110 non-Wnancial measures 105–6 Oster, S 356 O’Sullivan, K 363 Otley, D 80, 250, 252–3, 298, 299, 302, 303, 304 Ouchi, W 95, 96, 243 outsourcing: and market-transaction costs 84–5 and strategy-MCS relationship 254–5 see also external integrated cost management programmes Paramount Pictures 410 Parker, A 321 Parker, Lee 348 Parkhe, A 138 Pearce, D 146 Penno, M 155, 157 Pennsylvania Railroad (PRR) 171, 185 and origins of modern business practice 177 Penrose, E T 309 Perera, S 104, 105, 247, 273 performance hierarchies 107 performance measurement: and annual performance trap 294–5 and budgetary control 302–3 beyond budgeting (BB) 294–7 and calculating self 198 and causal modelling 5–6 and centrality of 92 and competitive advantage 10 and context of 93–4, 110–11 congruence perspective 94 external environment 95 organization size 98 organizational structure 97–8 selection studies 93–4 442 INDEX performance measurement: (cont ) strategy 95–6 technology 96–7 and contract theory: use of stock prices 31–3 use of subjective information 33–7 and debates over 1–2, 92 and discovery of new measures 13–15 and distributed information processing 6–7 and eVectiveness of: economic value measures 100–102 integrated measures 108–10 non-Wnancial measures 103–6 and enabling control systems 9–10, 11 and evasion of and health and social care: diYculties with 204, 210–12 functional focus of 208 as obstacle to innovation 208–9 organizational boundaries 208–9 outcomes vs formal commitments 204–7 and information technology and innovations in 99, 110–11 appropriateness of 92–3 economic value measures 99–10 eVectiveness of 110–11 integrated measures 107–8 non-Wnancial measures 102–3, 204–5 as integrating framework 304 and interactive control systems 8–9 and limitations of information processing 7–8 and limits of and management accounting practices 336 and management accounting research 345 and management control systems and operational control systems 3–4 as organizational capability and practice perspective on control systems 11–13 and role of calculation and traditional basis of 92, 99 and web-based companies 89 performance prism 107 performance targets Perrow, C 95, 96, 101, 245, 248 Peters, Tom 76 Pettigrew, A 184 Phillips, T 397, 398 Pike, R 150, 160 Pinch, T 61, 62 Pinches, G 152, 159 Pindyck, R 151 Pine, J 83 Pinsky, D 414 Pirates of the Caribbean (Wlm) 417–18 Pirsig, R M 284 Planck, Max 364 planning, and deWnition 42 Polanyi, M 319 Pollanen, R 299 Pollitt, C 207 Pondy, L R 49 Porter, Michael 76, 81, 82, 167, 184, 186, 246, 251, 356, 407, 410 positivism 47 post-auditing, and capital investments 159–61 Potter, G 228 Powell, P 52 Powell, W W 256 Power, M 207 practice: and communities of 322 and management control systems 11–13 and naturalistic frame 46–9 Prendegast, C 110 Preston, A 48, 49, 58, 59, 61, 62 price-based costing 76 pricing, and digital technology 76–8 Private Finance Initiative 202 process improvement, and internal integrated cost management 124–7 process ways of working (PWW), and ‘hybrid accountants’ 337–9 Producers Guild of America 414 product design: and consumers’ role 77 and internal integrated cost management 125–7 INDEX product diVerentiation, and diYculties with 82–3 product life cycle: and internal integrated cost management 123 and life cycle costing (LCC) 74 productivity, and naturalistic frame 47–8 project management 324 protection mechanisms, and buyer-supplier relationships 138–9 public services, see modernizing government programme public-private partnerships 201–2 quality: and digital technology 78–80 and strategy 251–2 quality costing 78 Quinn, J B 109 radical frame, and management accounting research 49–51 Radner, R 153 Rajan, M 155, 156 Ranganathan, J 393–4 Rappaport, A 99 rational planning, and strategic management accounting (SMA) 167 Ravid, S A 408, 409, 412 Raviv, A 155, 158 Rayport, J F 74, 79–80 real options, and capital budgeting 150–51 Reich, M C 390–11, 402 Reichelstein, S 155, 156 Reijnders, L 396, 397 Reitsberger, W D 247, 250, 273 relational capital: and intellectual capital 316, 319–20 and social network analysis 321 Relevance Lost: The Rise and Fall of Management Accounting (Kaplan and Johnson) 357 and responses to 332–4 Relevance Regained (Johnson) 357 reliance on accounting performance measures (RAPM) 298–9 repair, and enabling control systems 9–10 443 research, see management accounting research Research Assessment Exercises (RAEs) 350 resource sharing: and asset speciWcity 135 and strategic information sharing 135 resource-based theory (RBT): and contrast with transaction-cost economics (TCE) 310 and coordination 311 and core competences 311 and knowledge management 310–11 and knowledge production 309 and management accounting 322 and routines 311–12 responsibility accounting 291 Revelation Principle, and contract theory 27 revenue-sharing 319 Riccaboni, A 256–7 Richardson, B 167 Ridgway, V Roberts, D J 167 Roberts, H 86, 317, 319, 320, 321 Roberts, J 10, 54, 55, 94, 250, 255–6, 274 Rogers, P G 395 Rose, N 199, 200, 201 Ross, S 153 Rotch, Bill 358 routines: and collective learning 314 and construction of competences 311–12 Rowan, B 52, 256 Salterio, S 108 Sami, H 398 Sandt, J 107 Sarbanes-Oxley Act (USA) 53, 152, 361, 363 scalable operations 88 Scapens, R 54, 255, 256, 321, 330, 333, 336, 337, 340, 344, 346, 348 Schall, L 149 Schaltegger, S 383, 386, 390, 391–392, 400, 402 SchiV, A D 106 Schlender, B 76 Schneider, D 85 Schneiderman, Arthur 14 444 INDEX Schoenberger, R J 270–71, 278 Schrader Bellows 221 Scott, T W 106 Scott, Thomas 178, 179 Screen Actors Guild 414 Screen Gems 410 Seal, W 278 Securities and Exchange Commission (SEC) 397, 399 Sedatole, K L 85 selection studies, and context of performance measures 93–4 Selto, F 104, 107, 110, 258, 259 and balanced scorecard (BSC) 16 Semel, Terry 80 Senge, P M 308 Shank, J 42, 273, 356, 358, 359 Shapiro, C 70, 308 shareholder value 99 Shell, and Brent Spar oil rig 380, 382 Shields, M 93, 232, 341 and management accounting research 15–16 Shillinglaw, Gordon 355 Showtime 410, 420 Silk, S 108 Sim, K L 105 Simmonds, Kenneth 355 Simon & Schuster 410 Simons, R 3, 8, 38, 103, 110, 243, 247, 250–51, 252, 253, 257, 258, 259, 294, 299 Singh, H 135 Siti-Nabiha, A K 348 Sivaramakrishnan, K 218 Skandia navigator 107 SKG 410 Slagmulder, R 258, 278 Slywotzky, A J 77 Smith, C 172 Smith, D 254, 278 Smith, K 160 Smith, S P 409 Smith, V K 409 Snow, C C 81, 95, 246, 247, 251 Snyder, A V 99 Sochay, S 409 social care 200 and criticism of provision of 209–10 see also Health Act (1999) social network analysis (SNA) 320–21 and management accounting 321 Social Science Research Council (SSRC) 330–11 Socrates 174 Solomons, David 348 Sony Corporation of America 410 Sony Pictures Classics 410 Soonawalla, K 399, 402 Spulber, D F 85 stability, and bilateral commitment 136–7 Stalk, G 274 Stalker, G 95, 248 standard costing: and Foucauldian frame 59 and internal integrated cost management 123 and price-setting 76 Starz 420 Stern, J M 101 Stern Stewart & Co 99, 303, 358 Stewart, G B 99, 100 Stewart, T A 315 stock prices, and performance measures and compensation systems 31–3 Stone, J 181 Strack, R 316 strategic business units (SBUs): and business strategy 245–6 and corporate strategy 245 Strategic Cost Management (Shank and Govindarajan) 358 strategic cost management (SCM) 365–6 and activity-based costing (ABC) 357 and Comprehensive Home Communications (CHC) case study 366–79 and development of: failure of 362 future of 362–65 ‘glory decade’ (1990–2000) 357–9 origins 355–7 ‘unravelling of the pieces’ (2000–2005) 359–12 INDEX Strategic Finance (journal) 360 strategic information sharing, and resource sharing 135 strategic management accounting (SMA) 304 and deWnition 166 and environmental management 383 and management accounting practices 336 and need for external focus 166–7 and rational planning 167 strategic partnerships 85 strategic positioning 247 strategy: and balanced scorecard (BSC) 107, 252–3, 259, 294, 301 and budgetary control 294 and conventional analysis of 167 and deWnition 244 and digital technology 74–6 and emergence as subject area 356 and history of 167 American Civil War 177–9 ancient Greece 173–4 Carnegie (Andrew) 179 the decisive battle 175–6 implications of 183–6 importance of 168–9 Jomini 176 logistics 180, 181, 182 Mahan’s inXuence 179–10, 181–2 Napoleonic wars 175 post-Second World War 174, 181–3 von Clausewitz 175–6 and management control systems (MCS) 243–4 actor-network theory 254–5 business strategy 245–7 contingency approach to relationship 248–53 corporate strategy 244–5 institutional theory 256–7 naturalistic approach to relationship 253–4 positivist approach to relationship 257–9 research into relationship between 247–8, 259–10 445 structuration theory 255–6 and managerialism 172 and nature of 172–3 and necessity for 173 and organizational forms 82–3 and paradoxes of 186–7 and performance measurement 95–6 integrated measures 109 non-Wnancial measures 103 and real options 151 and structure 245 and typology of 246–7 structural capital, and intellectual capital 316 structural cost drivers 273–5 structuration theory, and strategy-MCS relationship 255–6 structurationist frame, and management accounting research 54–7 structure, and strategy 245 Sundance Film Festival 413 Superfund, and environmental regulation 396 supplier participation, and relational contexts 135–6 supply chains, and role of accounting 278–10 SustainAbility 383 sustainability management, and impact of NGOs 381–12 sustainable development 382–83 Symons, R T 104 ‘tableau de bord’ 107 Takeuchi, H 86 Tapscott, D 70–1, 82 target cost management 74, 77 and external integrated cost management programmes 130 functionality-price-quality trade-oVs 131 interorganizational cost investigations 132 and internal integrated cost management 118–19 Tayles, M E 218 Taylorism 74 team-based structures, and performance measurement 106 446 INDEX technological change: and impact of 69 and network eVects 69 technology: and challenges of 308 and lean manufacturing 285 and performance measurement 95–6 economic value measures 101 integrated measures 109 non-Wnancial measures 104 and programmes of government 200 television, and motion picture industry 420 Terminator 3: Rise of the Machines (Wlm) 416 terror, war against 182–3, 185 Terry, J C 396, 397 Thayer, Sylvanius 170–71, 181 Thompson, G L 232 Thompson, J D 96, 167, 245, 248 Thrane, S 255, 281 Tiessen, P 106 Till, G 180 Time Warner 410 Tinker, A M 49 Tinker, T 50–1 Todd, R 383, 388–9, 391 Tokyo Motors 131, 142–3 Tomkins, C 46–7, 48, 278 Topel, R 110 Torok, R 294 total quality management (TQM) 92, 97, 104, 105, 271, 273 Touchstone Pictures 410 Toxic Release Inventory (USA) 396 Toyo Radiator 130, 132, 136, 138, 139, 141–2 transaction-cost economics (TCE), and the Wrm 310 transfer pricing translation, and Latourian frame 61 transparency, and digital technology 87–9 TriStar Pictures 410 Truman, Harry S 182 Tsai, W 321 Tuomela, T S 252 Tyco Industries 361 Tyler, Daniel 170, 178 United Nations Expert Working Group on Environmental Management Accounting 386–7 United States General Accounting OYce 52 United States Military Academy (USMA), see West Point Urry, J 49 Uzzi, B 321 Vaivio, J 49, 284 value chain: and motion picture industry 411–12 and value chain management 291 and value of concept 407 value engineering 119 value-added accounting, and Foucauldian frame 58 value-added communities 85 van Creveld, M 169 van der Meer-Kooistra, J 254 van der Stede, W A 244, 245 Van Wassenhove, N L 86 Vanhoucke, M 232 variable costing 77 variable pricing 77–8 Varian, H R 70, 308 variance investigation, and contract theory 28–31 Verrecchia, R 232 Verschoor, A H 396, 397 vertical disintegration 85 vertical integration 84–5 Viacom, Inc 410 Vickrey-Clarke-Groves (VCG) mechanism 153 video industry, and motion picture industry 419 Vietnam War 182 Vives, X 228 Vollmann, T E 321 von Clausewitz, Carl 175–6 Vosselman, E 254, 278 Vulcan Management Company 378 Wallace, J S 100 Walls, W D 409 INDEX Wal-Mart 81 Ward, J 171, 177, 178, 179 Waste Management 361 Waterhouse, J H 111 Weigley, R F 176, 177–8 Weil, Sandy 361 Weinberg, C B 412 Weinstein, M 421 Welch, T E 395, 397 welfare state, and performance measurement 200 Wenger, E 312, 322 West Point 168, 181 and ‘calculability’ 171 as ‘disciplinary’ institution 170–71 and emergence of disciplinary power 169–10 as grammatocentric organization 171 and origins of managerialism 171 Westin, O 321 Whistler, George W 170, 171 Whitley, R 185 Whitman, Meg 89 Whittington, R 167, 185 Wildavsky, A 7, 292 Wilkinson, A 284 William Morris Agency 415 Williams, G 397, 398 Williamson, O E 135, 138, 184 Willmott, H 256, 275, 277, 284 Winter, S 312 Wolf, B 317 Womack, J P 118, 272, 277, 278 Woodward, J 96 World Business Council for Sustainable Development 383 World Com 361 World Economic Forum 383 world-class manufacturing, see lean manufacturing Wouters, M 278 Wyatt, J 409 Xie, J 102, 105 Yahoo 80 Yamey, B S 186 Yandle, B 396, 397 Yazdifar, H 335–6 Yokohama Corporation 130, 138, 142–3 Young, S M 104, 414 Zara 83 Zarowin, P 315 Zimmerman, J 218, 342, 360 447 .. .Contemporary Issues in Management Accounting This page intentionally left blank Contemporary Issues in Management Accounting Edited by ALNOOR BHIMANI Great Clarendon Street,... published in Behavioral Research in Accounting; Journal of Management Accounting Research; Pacific Accounting Review; Australian Accounting Review; Accounting, Organizations and Society; and Management. .. literature, taking forward the British tradition of economic theorizing in financial accounting as well as being a constant source of creative thinking in the management accounting field Michael