Management accounting innovations in a time of economic crisis
Introduction
The economic crisis, which emerged in 2008 has been a constant threat for the enterprises (Waymire & Basu, 2011). According to James, Wooten, and Dushek (2011), the economic crisis causes problems in cash flows, reduces available resources and demand, as well as causes political turmoil. Moreover, it raises uncertainty in the enterprises (Pearson & Clair, 1998) and makes the decision-making process and the exercise of management control more difficult (e.g. Mangena, Tauringa, & Chamisa, 2012).
In the literature, it is argued that the economic crisis has had an impact on the operation of Management Accounting and this is something that should be studied in more detail (Arnold, 2009; Van der Stede, 2011). Although there have been several callings (Hopwood, 2009; Abernethy & Mundy, 2014; Van der Stede, 2011), the relevant research in Management Accounting has given very few or even no guidelines as regards the way to handle the economic crisis on behalf of the enterprises. The new economic environment that has been now formed calls for new management tools, in order to achieve better crisis management (Arnold, 2009).
Zawawi and Hoque (2010) argue that the new economic environment forces the enterprises to adopt innovative Management Accounting techniques (Management Accounting Innovations- MAIs), which should be further investigated. Recently, Chenhall and Moers (2015) argued that Management Control Systems should incorporate Management Accounting Innovations, in order to be able to handle the uncertainty of the external environment and make management control more effective. There have been several works that study the adoption and the use of ΜΑΙs (e.g. Chiwamit et al., 2017; Al Sayed & Dugdale, 2015; Naranjo -Gil et al., 2009), but to the best of our knowledge none of them has linked them to the economic crisis.
Van der Stede (2011) introduces opportunities and threats in Management Accounting research in a crisis environment. This study attempts to give an answer to those challenges, by providing knowledge about the effect of the economic crisis and the adoption and the extent of use of ΜΑΙs. According to Van Der Stede, the economic crisis provides opportunities for research that are not present in a “normal change” period (Van der Stede, 2011).
Pavlatos and Kostakis (2015) report that there are differences between the level of importance and the extent of use of Management Accounting tools before and during the economic crisis. They found that the importance and the usage of Activity Based Costing, Planning, and Strategic Management Accounting tools increased during the crisis, while at the same period, the usage and the importance of traditional cost accounting practices were decreased. Most of the budgeting techniques are still considered important and are still widely used by firms.
The aim of this study is to cover the gap in the literature about the effect of the economic crisis on the adoption and level of use of ΜΑΙs, by formulating the following research question:
RQ1 How does the perception about the intensity of the economic crisis affects the adoption and the extent of use of MAIs?
One of the countries that has been most affected by the economic crisis is Greece. The country has been under recession for the last 7 years. In 2010, Greece requested and received financing from the IMF and the European council, with the condition to start a strict austerity program and fiscal discipline, in order to reduce its deficits. Under the threat of the economic crisis, the Eurozone countries introduced the European Stability Mechanism (EMS) to warrant the economic stability of the Eurozone. The country signed 2 memorandums of understanding (MoU), which are periodically evaluated by the troika (now the so-called Institutions) (European Commission, 2010, European Commission, 2011). Due to the changing environment in the political scene in Greece, the program was not implemented and, finally, the country applied capital controls’ scheme. The new government that was elected in the next elections signed a 3rd MoU for the years 2015–2018 (European Commission, 2015). It is widely known that the business activity in Greece has been shrunk since 2008, which makes the enterprises difficult to survive. The crisis has led to the reduction in demand, sales, production, as well as problems in cash flows and loan repays (Capital, 2016). Under those circumstances, Greece is the ideal environment to study the effect of the economic crisis in the adoption and use of MAIs.
This paper extends the previous research in many ways. Firstly, it examines for the first time, the impact of the economic crisis on the adoption and the extent of use of MAIs. Previous surveys examined the level of importance and the extent of use of traditional and innovative management accounting practices at different periods of time (i.e. before and during the economic crisis) and identified differences between them. This study measured the perceptions regarding the intensity of the economic crisis, as a new construct, and investigated the impact of crisis’ perception on the adoption and the extent of use of MAIs. Secondly, this research used more powerful statistical tests, such as multivariate data analysis techniques, compared to previous surveys, which mainly they used t tests. Thirdly, the choice of only one sector (the manufacturing sector) guarantees internal validity and allow to control for industry effects, as compared to previous studies, that were performed among different sectors (e.g. Becker, Mahlendorf, Schäffer, & Thaten, 2016; Janke, Mahlendorf, & Weber, 2014; Pavlatos & Kostakis, 2015).
Furthermore, it extends the limited knowledge about the effect of the economic crisis in Management Accounting, by providing insights about the adoption and the extent of use of MAIs in a period of economic crisis. This means that his paper gives relevant answers to Hopwood's challenges (2009) about how the economic crisis affects Management Accounting. Lastly, it gives insights about the use of Management Accounting techniques in Greece, which has not been extensively studied.
This work is divided into the following sections: The next section is about literature review and hypothesis development. In the third section, a description of the methodology is provided. The fourth section presents the findings of the study, while the last section discusses the findings and concludes.
Section snippets
Theory and hypothesis development
It is widely accepted that innovation is a prerequisite for a business to succeed (e.g. Naranjo -Gil et al., 2009). According to the relevant literature, innovation is the adoption of an idea or a behavior, which is linked to a product or a service, or a technical procedure, which is something new for the business that adopts it (Damanpour, 2014). Innovation in Management Accounting (Management Accounting Innovation- MAI) is the adoption of a practice in Management Accounting for the first time
Data collection
This work is about the effect of economic crisis in the adoption and the extent of use of management accounting innovations (MAIs). Data collection was performed with a web-based survey approach. This approach has many advantages as compared to traditional data collection techniques, i.e. questionnaires that are posted, such as reduction in data collection times, higher response rate, reduction in the total cost of the survey etc.
The questionnaire was divided into sections. After responding to
Adoption and extent of use of MAIs
Table 3 shows the results for adoption and extent of use of MAIs. Table 3 clearly shows that the adoption rate of MAIs is high. This is shown from all MAIs individually, if we compare the adopters versus non-adopters. The results confirm the findings from the research performed by Pavlatos and Kostakis (2015), which explained that MAIs are, indeed, used in the Greek business environment. BSC has the higher adoption rate and use, followed by Target Costing.
Table 4 shows that there is a positive
Discussion
The purpose of this study has been to investigate the effect of the economic crisis in the level of adoption and the extent of use of MAIs. Our incentive has been the callings of Hopwood (2009), to investigate the effect of the economic crisis in Management Accounting operations and of Chenhall and Moers (2015) to incorporate MAIs in Management Control systems. For this purpose, a survey was conducted in 111 enterprises, which operate in the Greek territory. In this research, five innovative
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