Disclosing smaller business success and failure

Abstract

The article argues that smaller businesses are mostly sidelined from the current debate about corporate governance. As a result they are less scrutinized than their larger corporate counterparts. They are afforded exceptionalist ‘special case’ status and are specially promoted through state policy, yet genuine grassroots evidence would appear lacking. The state therefore currently proceeds with its ‘British enterprise revolution’ and ‘new’ enterprise culture with targets and measures that would underline smaller business ‘success’ while reconstructing ‘failure’ at the same time. Thus, as long as accounting disclosures are taken as definitive evidence of such businesses’ success and failure, the critical study of actual accounting within them might produce more grassroots evidence regarding their exceptionalist ‘special case’ claims. The case study, MIS Limited, used here for this purpose, reveals other sides to the personalism associated with managing smaller businesses, which question these claims. As a ‘real-time’ accounting-practitioner investigation of the actual processes of smaller business success and failure, both the case study and research process are relatively unusual, but they could point to new directions for further research.

Introduction

Accounting researchers and practitioners must well appreciate how corporate governance now attracts such lively debate. One such debate indeed casts a particular shadow over accounting itself. That debate focuses upon allegedly scandalous malpractice among certain larger corporations in particular. Other such corporations, then drawn into this debate, find themselves more critically scrutinized accordingly. So far smaller businesses have rarely been included in such debate and few parties therefore extend equivalent critical scrutiny towards these businesses. It is thus corporate accounting and auditing (Lee, 2002) scandals which particularly provoke any quasi-legal ‘shaming of corporations’ at large (Skeel, 2001).

Not only are smaller businesses thereby sidelined from this debate, but they also emerge doubly privileged. So, on the one hand, they escape the more critical scrutiny other businesses might find themselves subjected to, leaving their own downsides and darker sides—frequent fraud included (Robertson, 2002)—relatively under-exposed. On the other hand, smaller businesses' continuing ‘small is beautiful’ idealization (Schumacher, 1974) sustains their further claim to be a ‘special case’ for exemption from whatever additional regulatory and/or disclosure requirements other businesses might face (Pierce, 1998). With government itself now claiming a ‘British enterprise revolution’ and a ‘new’ enterprise culture (Brown, 2002, Brown, 2003), few really challenge the validity of these exceptionalist claims. A particular construction upon smaller business success and failure is therefore imparted into whatever state-driven, downwardly cascading policy process follows.

So long as accounting disclosures are taken as definitive evidence of smaller businesses' success and failure, the critical study of accounting itself might yield valuable insights into, and challenge the validity of, such exceptionalist claims. However, judging from its limited coverage in leading academic journals, accounting has not yet fully engaged this issue. Indeed, Otley's (2002) review of related matters in the Research Assessment Exercise suggested a dearth of both policy oriented and intensive longitudinal research of the type this might require. Other gaps between accounting research and practice could therefore emerge unless issues like this are addressed better in future.

With this in mind, the article therefore seeks to raise and inform this debate by investigating smaller business success and failure, via their accounting disclosure. It begins by exploring how such success and failure are first constituted by both this British enterprise revolution and new enterprise culture themselves. It then discusses the methodological issues posed by investigating such success and failure in the field. Such issues are made more apparent from the practitioner standpoint within the narrative study (Llewellyn, 1999) of how they occurred in the case of MIS Limited, which then follows. By seeking to raise and inform debate, rather then better evaluate related policy as others proposed (Curran, 2000, Curran and Storey, 2002), the article then questions how success and failure are being re-articulated through this new enterprise revolution and culture in particular. It nevertheless acknowledges that certain public policies might almost have been ‘doomed to succeed’ through what Storey, 2000, Storey, 2003 judged to be inadequate partial evaluation based on ‘cheap and cheerful research’ before. In raising and informing debate, the paper therefore first critically scrutinizes what smaller business success and failure are coming to mean in any new enterprise culture itself.