Literature review: Accounting, networks, and information technology

Currently, there is a lack of literature that applies a longitudinal perspective in network accounting and information technology; existing longitudinal studies only span a few years, and they examine only a single information system and its implementation.

The case study analysis focuses on information technology in the interorganizational field, and it establishes three findings. First, the central and dominant role that information technology plays in the interorganizational field and its ability to take relationships far beyond organizational boundaries show how information technology does not simply play a passive role. Second, the change in management accounting practices owing to shifts in information technology extends existing literature through its emphasis on the active role of technology in the management accounting field. Third, the longitudinal perspective establishes how the change in information systems results in unintended consequences and how this has a profound positive and negative impact on management accounting practices. The empirical study can clarify these findings, because the analysis is based on multiple system implementations and a longitudinal perspective. This approach can illustrate in more detail how these management technologies can control the interorganizational field and affect organizational practices such as management accounting.

The remainder of this paper is structured as follows. First, literature on information technology and management accounting is examined. Second, literature on accounting in interfirm networks is discussed. Third, institutional theory is presented, and the role it plays in accounting research is explained. Finally, the longitudinal case study is analyzed through three individual information systems that are used to manage and control organizational and interorganizational settings.

7.2 Literature review: Accounting, networks, and information technology

practically always an important role” (Granlund, 2010, p. 14), thereby indicating that information technology does have a considerable effect on accounting and control practices.

Numerous other studies have also pointed out that information technology has an impact on organizational performance and management accounting practices.

Several studies have analyzed enterprise resource planning systems (ERPSs), a type of information system, through three main perspectives: management control and actor-network theory (Dechow & Mouritsen, 2005; Quattrone & Hopper, 2005, 2006), management accounting and new institutional sociology (Granlund & Malmi, 2002; Hyvönen, 2003; Scapens & Jazayeri, 2003), and modeling (Baiman & Rajan, 2002; Nicolaou, 2008). However, these studies were contradictory; they found that EPRS has various impacts on an organization, ranging from modest to significant.

Studies reporting that ERPS has a moderate impact (e.g., Granlund & Malmi, 2002; Scapens &

Jazayeri, 2003; Dechow & Mouritsen, 2005) reveal how information systems facilitate some kind of change in managerial control, rather than as a result of actual implementation. These studies state that, rather than the impact that information systems have on management accounting, identifying the opportunities that are created post-implementation is more important. Studies reporting that ERPS has some kind of impact on management control (e.g., Quattrone & Hopper, 2005; Quattrone & Hopper, 2006) note that information systems create different forms of distance and relations between organizations. Studies reporting that ERPS has a significant impact (e.g., Granlund & Mouritsen, 2003; Nicolaou, 2008) indicate that management control is dependent on information technology, and that “…information technology cannot present its own case” (Dechow et al., 2007, p. 625). This illustrates that there are strong links between these two systems, and it calls into question whether information technology is a driver of development or an attachment.

Many studies that have analyzed information systems and management accounting have focused on one specific information system and one single implementation. Analyzing several systems and implementations over a longer duration gives a better foundation for a more comprehensive analysis of the effect of information technology on organizational practices and network settings. Moving the analysis beyond a single implementation such as ERPS and deeper into multiple implementations of different information systems leads to a more detailed analysis of

the different impacts that technology has on organizational practices. The next section investigates the field of information technology and accounting in the interorganizational field, also referred to as network accounting, to understand the effect of information technology in this field.

7.2.2 Network accounting and information technology

In the interorganizational field, few studies have focused on how information technology mobilizes relationships and effect boundaries (Frances & Garnsey, 1996; Cuganesan & Lee, 2006; Dechow et al., 2007). The effect of information technology on the orchestration of complex interorganizational settings over time has not yet been fully explored. Considering this continuous development in organizational relationships and the evolution within information technology, this paper analyzes how technology has an impact on organizational practices and relationships and emphasizes the need for more research. To illustrate the implications of technology in the interorganizational field, this study focuses on relationships and establishes boundaries as things that are created as a part of fast-changing relationships.

Few studies have focused on information technology in the interorganizational environment and the way in which it affects management accounting. Frances and Garnsey (1996) showed that accounting techniques, when supported by information technology, strengthen interorganizational linkages and reduce costs across the supply chain system. They also showed that information technology creates a “closely coupled interaction” (p.606) among retailers, suppliers, and customers. Cuganesan and Lee (2006) examined information technology and its effects and argued “…that inter-organizational collaboration is increasingly mediated and influenced by information technology, fostering control within a single network” (p. 165).

Dechow et al. (2007) showed that, in many ways, management control is dependent on information technology and that, more importantly, “…information technology is unable to stand on its own, resulting in a strong link between the two” (p. 635).

A small body of research argued that accounting exists prior to the given context, thereby defining the boundaries and relationships, which is why it is such a critical influence when defining the context (Frances & Garnsey, 1996; Mouritsen et al., 2001; Mouritsen & Thrane, 2006). These findings raise the question of the role and impact of technology in network accounting (Granlund, 2010). Studies on information technology implementation show how

information systems work in everyday situations and how there are links among control, accounting, and information technology. Only a few studies in the management accounting field have focused on how information technology actively participates in setting the interorganizational field. Even less attention has been devoted to the significance of information technology in the orchestration of multiple-type relationships, and how this affects boundaries.

7.2.3 Relationships and boundaries

To analyze in more detail the way in which complex relationships are established and boundaries change, this paper uses the outline of Caglio and Detillo’s (2008) as well as Lind and Thrane’s (2010) mapping of advanced networks in the interorganizational field. Lind and Thrane (2010) concluded that many studies have investigated interfirm networks as a relationship between two independent organizations or as a chain of organizations. They established that research into network accounting could benefit from investigating the dynamics of complex systems, including several actors and multiple relationships. Following their recommendations and in conjunction with the literature analyzing interorganizational relationships, this paper suggests that more focus should be placed on the complexity of technology and relationships. Information technology allows for more complex relationships because the supplier, customers, owners, partners, and competitors are connected simultaneously, and all play an active part in the interorganizational sphere.

Numerous studies in the interorganizational field and management accounting have analyzed the construction of boundaries. Coad and Cullen (2006), Mouritsen (1999), and Mouritsen et al.

(2009) analyzed the role of accounting by taking multiple relationships into consideration.

Håkansson and Lind (2004) analyzed the dimensions of the horizontal relationship between different organizations and showed that three basic coordination forms and accounting methods can be used in various ways to enhance the development of organizational relationships and to establish organizational boundaries. These studies illustrate how management accounting is used to mobilize interorganizational boundaries, thereby giving valuable insights into the functions of different interorganizational relationships and how they are managed within existing boundaries.

This paper goes beyond existing boundaries in analyzing how organizational relationships are becoming more interorganizational, thereby creating what are defined in this paper as “network boundaries.”

In the interorganizational field, different studies have also examined the construction of boundaries to establish control elements. Mouritsen and Thrane (2006) established that management control technologies in the interorganizational field are involved in creating boundaries. Thrane and Hald (2006) focused on network boundaries and interorganizational transactions and stated that “…this fluid conceptualization of the supply field has the consequence that we do not distinguish sharply between intra- and inter-organizational controls.” (p. 295). Their study raises questions about control as a primary challenge and about how organizational relations and structures respond. This, in turn, emphasizes the question of boundary setting and how this is part of the development of interorganizational relations. Thrane (2007) discussed the role and practice of accounting as dynamic and complex business networks within these systems and relationships and concluded that “…change in the inter-organizational field is not linear or an evolutionary process.” (p. 269). Van der Meer-Kooistra and Scapens (2008) understood the advancement in relationships and analyzed the “governance package”

behind ever-developing lateral relationships that go beyond the boundaries of the organization and management control systems. They established that these new relationships span the traditional boundaries of the organization and create the need for a new form of control.

These studies on relationships and boundaries show that the intercorrelation between information technology and accounting creates the potential for much more complex settings because relationships can go beyond organizational relationships and expand existing boundaries. However, it remains unclear how multiple relationships are controlled, how they are able to move boundaries beyond the organization, and how to manage the complexity that these relationships create. Further conceptualization is needed to fully understand control in these complex relationships and multiple networks. Even though several studies have analyzed information technology, it remains uncertain how technology, over time, orchestrates interorganizational relationships and affects organizational practices. This paper establishes the inherent connection between accounting, relationships, and boundaries and how this is extensively controlled and facilitated through information technology. The next section examines the theoretical perspective and how it is applied to understand change and development in the interorganizational field.