Critical perspective

The critical perspective mainly focuses on the interaction between the organization and the external environment and the conflict that could arise from this interaction. From the critical perspective, management accounting and the specific role it plays in SOEs are analyzed as a consequence of the conflicts arising at the macrolevel. These are caused by the pressure that the external environment places on organizations. The critical perspective highlights how capitalist systems have crisis tendencies. Studies with a critical perspective have extensively focused on political interference, the act of privatization, and the cultural context in developing countries, as reviewed below.

Political impact

The critical perspective discusses societal and political impacts on management accounting development. Studies analyzing political interference and management accounting in developing countries have shown how politics and power inform the complexity of institutionalization in these unique politicoeconomic environments. Critical studies have analyzed how organizations are controlled by political interventions. Hoque and Hopper (1997) investigated how environmental factors affect budgeting characteristics in an SOE and argued that political volatility makes budgeting and controls ineffective for management despite their good intentions. Uddin and Tsamenyi (2005) examined World Bank sponsored public sector reforms and showed how this leads to negative implications and that budgeting remains politicized and ineffective. They established that initiative led by the government and the World Bank to improve development had a negative impact and outcome. Wickramasinghe et al. (2004) examined how new management structures reduced bureaucratic controls in the context of partial privatization. Their study examined how internal Japanese management and a new accounting regime replaced bureaucratic management controls, yielding positive economic effects. They established how employees did not approve of these internal changes and allied with politicians. Employees were frustrated with the change process and wanted the foreign managers removed, resulting in the return of the old bureaucracy.

These studies establish how, both on a political and a regulative level, there is interference, and this has a significant impact on organizations. Political interference reveals that the speed and direction of organizational development is affected by each country’s history. The analysis in these studies illustrates how political interference, over-bureaucracy, and government intervention affect the development of SOEs.

Privatization initiatives

The critical perspective tends to argue that privatization initiatives have a less positive impact on development. Studies analyzing SOEs operating in developing countries illustrate how privatization can have negative effects despite their worthy intentions. Uddin and Hopper (2001) analyzed the effect of full privatization on accounting systems and showed how transnational institutions (i.e., World Bank and International Monetary Fund) promoted global capitalism by forcing developing countries into market-based policies and practices. These practices had a negative impact on the development of SOEs. In a later study, Uddin (2009) examined private

management practices in less-developed countries, such as a “familial and direct control system.” The findings were similar to those of Uddin and Hopper (2001) in that full privatization was not necessarily found to be fruitful. Uddin and Hopper (2003) examined how privatization initiatives are led by the World Bank and argued that the privatization of SOEs did not benefit society and had negative implications for SOEs. Tsamenyi et al. (2010) studied political interference and reforms in developing countries and analyzed the performance of two privatized SOEs in Ghana. They aimed to use the balanced scorecard framework, thereby adding a fifth dimension focusing on community. They found that their performance under state ownership was poor, although post-privatization processes could improve performance for former SOEs.

These studies analyzing the privatization of SOEs tended to argue that privatization has been ineffective. Individual studies have shown how privatization must, in several ways, be seen differently from the type that exists in developed countries. Given the special settings in late developed countries, development through privatization has to be understood as a more complex and more controlled process. Studies show how development has, in many cases, led to the transfer of power to large private shareholders, thereby giving them the dominant position. This illustrates that this form of development through privatization has not always improved these organizations. Uddin and Hopper (2001, p. 652) stated that “…markets will ensure that inefficient enterprises will either fail or be taken over. However, neo-classical economists do not study in detail whether the controls within enterprises that are integral to their prescriptive models actually materialize and operate as they predict.” Considering these strong external forces, there should be more focus on change and how this can also result from individual actors and internal processes.

Cultural context

Critical research in management accounting emphasizes the importance of understanding management accounting from a wider perspective, because culture is conceptualized as having a big influence on management accounting. Wickramasinghe and Hopper (2005) analyzed cultural and political factors in developing countries and how they affected the practices of an SOE.

They found that management accounting and control are not separate from the culture, arguing that “…management accounting is not independent of culture, but rather an expression of a modern and industrialized culture and capitalist modes of production (MOP)” (Wickramasinghe

and Hopper, 2005, p. 500). Modernization is affected by traditional cultures that are in these MOPs. Efferin and Hopper (2007) focused on the sociocultural aspect and analyzed how contextual factors affect management control. They examined what they called “ethnic tensions and commercial effectiveness,” how this affects management control, and how the owner gains control in accordance with cultural preferences.

These studies establish that cultural and political influence impacts management accounting practices. The implication of this in organizations is that processes and practices are affected, further suggesting that organizational elements such as actors, structures, systems, and culture are continuously and simultaneously affected; this has consequences for organizational development. These studies, to a lesser extent, focus on the specific micro practices and power of individual actors and how this creates change that can shape overall development.

2.2.1 Summary of critical perspectives

The critical perspective offers a critical stance and reveals how organizations change depending on larger regulative structures and market initiatives. The critical perspective argues that the state, market, and society have a significant impact on the formation of management accounting, thereby emphasizing how structural change coming from the macrolevel affects the organization or how structural changes are affected by culture, which leaves individual actors powerless in the face of these changes. The critical perspective thus predominantly takes a structural perspective and focuses less on human agency and microlevel practices. Most critical studies on management accounting consider organizational development from an “outside-in” perspective, i.e., environmental impact on organizations (Uddin & Hopper, 2001; Wickramasinghe &

Hopper, 2005; Uddin, 2007).

Organizational development could be understood in more detail by analyzing change from within the organization. An inside-out perspective (Frances & Garnsey, 1996; Thrane & Hald, 2006; Mouritsen & Thrane, 2006) can be established by analyzing the social structures and microlevel practices of individual actors in their usual processes. This can illustrate how development can occur through a process that is initiated as both a consequence and a result of the external environment as well as a result of individual actors. Below, literature with an institutional perspective of change and development is reviewed, and the approach of this thesis, which has both exogenous and endogenous views of change, is developed further.