Management Accounting Research in Practice

Lessons Learned from an Interventionist Approach

Petri Suomala, Jouni Lyly-Yrjänäinen

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136496424
• Edition: 1
• Topic: Business
• Subtopic: Managerial Accounting
• Index: Business

Many scholars have claimed that management accounting research has lost its pragmatic relevancy and interventionist research has been proposed as one way to produce theories with increased practical implications. In interventionist research, active participation in the field is regarded as an asset rather than a liability. Despite the methodological debate on interventionist research, there is lack of empirical studies on how interventionist research actually helps to produce theories with such pragmatic relevance. The lack of empirical studies has, perhaps, resulted in a too narrow connotation to the research approach.

This book attempts to shed light on the various nuances of interventionist research and the positions a researcher can occupy when trying to produce contributions associated with both theoretical and pragmatic relevance. This book is based on various research projects focusing on different aspects of management accounting during the past ten years. To spice up the academic debate, the book also provides managerial perspectives on interventionist management accounting research with interesting new insights. In addition to management accounting, the ideas of interventionist research can also be applied in other management fields.

Part I

Ten Years of Interventionist Research

1 Relevance Still Lost?

It has been claimed that management accounting research has failed to produce theories with pragmatic implications (see e.g. Hopwood 1983; Kaplan 1984; Kaplan 1986; Johnson and Kaplan 1987; Inanga and Schneider 2005). However, management accounting is an applied science (Kasanen et al. 1993), the idea of which is to produce theoretically grounded solutions for practical purposes (Mattessich 1995; see also Labro and Tuomela 2003).

Attempts have been made to overcome the problems of the pragmatic relevance of management accounting research by stressing the potential of in-depth empirical inquiries. Thus, case studies and field research have been seen as solutions to the problem (Kaplan 1984; Kaplan 1986). Yin (1994, p. 54) defines ‘case study’ as an empirical inquiry that investigates a contemporary phenomenon within its real-life context, addresses a situation in which the boundaries between the phenomenon and context are not clearly evident, and uses multiple sources of evidence. Case studies are considered useful when the phenomenon is complex, the theoretical base is thin, the phenomenon is difficult to study outside its natural environment (Bonoma 1985), or the different variables related to the phenomenon are not well-known (Meridith and Roth 1998). Furthermore, the case study approach is considered useful for discovering and describing new territories in the early phases of the theory-building process (Handfield and Melnyk 1998).

Although field research gained popularity among management accounting researchers in the 1980s (Ferreira and Merchant 1992), management accounting research has still suffered from its lack of connection to the practitioners’ world. There remains an ongoing academic debate about what management accounting research is or should be (Zimmerman 2001; Hopwood 2002; Ittner and Larcker 2002; Luft and Shields 2002; Lukka and Mouritsen 2002). Some discussion on how to increase the relevance of management accounting can be found in the literature (see e.g. Kaplan 1984; Kaplan 1986; Zimmerman 2001; Inanga and Schneider 2005; Malmi and Granlund 2009). However, the general opinion among management accounting researchers still seems to be that management accounting research has failed to produce theories with such pragmatic implications. Thus, despite vivid academic debate on the issue, many scholars believe that the situation has not changed.

Interventionist Management Accounting Research

In addition to case studies, interventionist research (Jönsson and Lukka 2007) has been suggested as one possible way to produce practically relevant management accounting research (Malmi and Granlund 2009). Interventionist research should be viewed as one form of case study, in which the researcher is deeply and actively involved with the object of study (Jönsson and Lukka 2007). In interventionist research, active participation in the field is regarded an asset rather than a liability. In other words, a good access to an empirical setting trough active participation is seen as more valuable than the risk of compromising objectivity.

However, despite the potential to produce a practically relevant contribution, the number of published interventionist studies in the area of management accounting is rather limited (Labro and Tuomela 2003). The small number of published interventionist studies (Seal et al. 1999; Tuomela 2005) has left researchers without guidance on how to conduct this type of research (Labro and Tuomela 2003). Thus, some additional examples of interventionist studies will enable researchers to better recognise how they have actually produced their theoretical contribution and what their pragmatic value has been. Furthermore, discussion is also needed on what actually can and should be seen as research intervention in interventionist management accounting research.

Professors Jönsson and Lukka (2007) have been important spokespeople for interventionist research and lately many other well-established scholars have also started to see it as an interesting opportunity to provide scientific contributions. Interestingly, even though many scholars have started to promote this research approach, it is rather unclear how common such research actually is. Most likely many research projects contain some interventionist characteristics in them but they are not reported as interventionist management accounting studies. As a result, instead of ex-post analyses of real-life interventionist studies, the potential advantages and disadvantages of the research approach are discussed more at the conceptual level. Therefore, there is a need for studies based on real-life interventionist research projects to provide empirical grounds for the academic discussions on the potential advantages and disadvantages of this research approach. In particular, more discussion is needed on the potential scope and intensity of research interventions.

Interventionist Research—Why Study it in Finland?

As was stated above, there is need for empirically based discussion on the nature and characteristics of interventionist management accounting research. In addition, is there perhaps a reason why the important spokespersons both come from Scandinavia (Professor Lukka from Finland and Professor Jönsson from Sweden). When looking deeper into the research environment, the principles of research funding in Finland constitute an interesting contextual variable in relation to the interventionist research approach

Overall, Finland is a very research-intensive country, with research expenditures of approximately 3.5 percent of GDP. During the last ten years, Finland has been among the most active OECD countries with respect to research and development. There are a number of governmentally funded national organisations which provide support for universities and other research institutes. These include Tekes (the Finnish Funding Agency for Technology and Innovation), the Academy of Finland, and Sitra (the Finnish Innovation Fund). Each of these bodies not only provides funding for basic research and technology development but also supports more business-oriented research activities. During recent years, all three organisations have also funded research projects that touch the applications of management accounting. Especially, in the case of Tekes, industrial partners are considered essential; according to the policy of Tekes (Tekes 2009, www.tekes.fi):

The key to success is a long-term commitment and co-operation between companies, researchers and funding organisations such as Tekes.

In operational terms this means that Tekes requires company participation in the research projects it provides funding for.

Companies that participate in research activities funded by Tekes do not only invest their time in the project but also cover a portion of the expenses arising from the research. Thus when companies engage in such research projects, they experience direct and negative cash flows and, as a result, they typically expect a fair payback from their investment. In other words, research has to be translated into something that is seen as valuable by them. While some companies might value collaboration with universities in itself, it is also possible that some of the expectations attached to joint research ventures are more direct and measurable in their nature. In our experience, it is far more feasible to attract companies into research participation when they can recognise, in addition to the public utility of investing in research, a more short-term utility connected with the research project. This is especially the case with small- and mediumsized companies which have limited investment capacity.

In all, this means that the Finnish innovation funding structure is, in our view, well in line with the idea of interventionist research. Companies are typically expecting active interventions by the researchers and, at the same time, are willing to make a serious commitment to the aims of the research. Thus the funding structure has facilitated both access to companies and collaboration with managers—even for management accounting researchers. However, there is also a downside to active management collaboration. Because companies provide partial funding and managers are involved day-to-day in the research projects, they have a tendency to actively steer the focus of these projects. Quite naturally, it is a crucial responsibility of the researchers to select and co-ordinate the participating companies in a manner that secures the scientific aims of these inquiries.

Cost Management Center—History and Objectives

Cost Management Center (CMC) is a research team at Tampere University of Technology (Finland) focusing on cost management and management accounting research. During the past ten years, CMC has completed over thirty long-term research projects with clear interventionist elements in them. All these research projects have been conducted with industrial partners, and researchers have been actively involved in the development of cost management and/or management reporting practices. The deep involvement of researchers in these development processes has provided a ‘ringside seat’ to observe them and contribute to the scientific community. Based on these research projects, over twenty refereed articles and more than 150 research papers have been published.

As was already pointed out, the funding structure of universities in Finland has some unique characteristics. In addition, especially in the case of universities of technology, the funding structure is very much driven by the National Funding Agency for Technology and Innovation (Tekes). Thus, engineering fields have a strong tradition of close industry–university collaboration and, since the beginning of CMC, one core idea has been to introduce engineering-style research to the management accounting world as well. As is typical of engineering research projects, all the projects conducted by CMC have included at least some interventionist elements in them. However, in addition to the interventionist elements, these projects have also included interview studies and even survey studies.

The funding structure has made CMC very industry-focused, especially compared with management accounting scholars in many other countries. Thus CMC seeks to improve the competitiveness of companies using the means of management accounting. This, naturally, means strong emphasis on field study with selected industrial partners. Because CMC seeks to help companies increase their competitiveness with the means and tools of management accounting, one aim is to study various contemporary trends and to connect them with management accounting. Thus the research work in CMC is not so much about accounting per se but rather how to apply accounting tools and principles in the changing business environment. Some topics under investigation include the following:

• Changes in the earnings models
• Supporting R&D decisions with cost and profitability information
• Cost management in global business (supply) networks
• Life cycle costing
• Cost implications of mass customisation and standardisation
• Ensuring cost efficiency in open innovations

To illustrate the approach, when looking at inter-organisational cost management, many of the existing cost management tools have simply been applied to a new accounting context. In other words, the cost management tools are by and large the same (target costing, ABC … ), but instead of one company, two or more companies are involved. However, when carefully studied, the context itself might not be that unique either. In their research project, Laine et al. (2006), for example, have identified some conceptual similarities between manufacturing networks and consolidated companies which have provided an interesting analogy for analysing costs and profits in manufacturing networks. Such a project is a nice example of how appropriate analogies and metaphors developed by management accounting researchers are able to help managers and fellow researchers to cope with phenomena that might appear to be something unique, especially at first glance.

Objective of the Book

Our intention is to contribute to the discussion of the potential of the interventionist approach when trying to produce contributions associated with both theoretical and pragmatic relevance. The idea is to use the ten years of CMC’s practical experience in doing interventionist research as a source of data. A selection of past research processes is elaborated in order to address the advantages as well as the potential risks and disadvantages of the approach.

The intended audience for this book can be divided in two. On the one hand, this book will contribute to academic discussion of the potential of the interventionist research approach and, thus, a key audience will be fellow researchers. On the other hand, the book will provide new aspects and perspectives to the practitioners who are planning to become engaged in interventionist research projects with academics. Despite the importance of practitioners in interventionist research, their needs and perspectives have not been extensively discussed in the existing literature on interventionist research.

This book largely builds on the work by Jönsson and Lukka (2007) and tries to continue a dialogue on different approaches to interventionist management accounting research. The main objective is to discuss the scope and intensity of possible research interventions in management accounting research. However, instead of just conceptual discussion, this book (1) provides an ex-post analysis of a number of research projects conducted by CMC, illustrating the potential variety of research interventions in management accounting research, both in terms of scope and intensity. In addition, the book also (2) aims at classifying the different types of research intervention thus far experienced in the research projects of CMC. Hence it forms a basis for a more structured and eventually normative approach to research interventions in the management accounting domain. In addition to the ex-post analysis of conducted research projects, this book also (3) provides empirical evidence on managers’ perspectives on interventionist research and its potential in ensuring pragmatic relevance of the research results. The most important industry participants of the research projects analysed in this book are interviewed in order to reflect the process of interventionist research from the practitioners’ point of view.

The book consists of three parts and is organised as follows. Part I will briefly introduce the idea of interventionist research based on the extant literature. In addition, Part I also discusses the framework developed for analysing the scope and intensity of research interventions. Part II will provide—for those that are more interested in hands-on evidence—numerous empirical examples of interventionist research projects together with analysis of their theoretical and pragmatic implications within the domain of management accounting. In Part III, conclusions and lessons learned are presented—addressing not only the potential of interventionist research but also its evident risks. As there is always at least two groups of stakeholders involved in interventionist research, both the researchers’ and the practitioners’ perspectives on potential and risks are discussed. In all, the book seeks to communicate that management accounting research should not be something disconnected from the problems of real-life managers and management accountants. On the contrary, professional accountants and other practitioners—for us this refers to people that run businesses— should be aware of the potential that interventionist research projects can offer them.

2 Interventionist Research in Brief

Researchers [in accounting] need to ask practitioners and users questions about issues of importance to them. (Inaga and Schneider 2005, p. 246)

In the pursuit of sound management accounting theory and theory contribution—which can be seen as inherent qualities of any management accounting research agenda—the key concept of theory has recently evoked an important debate. Malmi and Granlund (2009) are concerned with the ability of the extant theories in MA to provide support for practitioners. In all, Malmi and Granlund subscribe to the applied nature of the discipline and argue that management accounting theory, in its different forms, should be usable for creating valuable MA practices (s...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of Tables
• List of Figures
• List of Abbreviations
• Preface
• Introduction
• Part I: Ten Years of Interventionist Research
• Part II: Selected Research Projects
• Part III: Lessons Learned
• Notes
• Bibliography
• Index