China Science

There have been many approaches that have sought to identify the principles of best practice organizational management. The Horizontal Organization (HO) has been proposed as a method that draws on ideas from marketing, production, organizational behaviour and human resource management. It identifies specific value propositions with a customer-oriented focus and then develops process efficiency and continuous improvements, flattened structures with a team-based focus, human resource policies concerned with empowerment and a supportive and committed culture to help institutionalize change. The key distinguishing feature is to move away from traditional vertical, functional structures to lateral structures, processes and information to support the HO. This essay reviews three approaches, which when taken together, distil the key elements of the HO. These are Ostroff (1999). The horizontal organization, New York, Oxford University Press; Schonberger (1996). World class manufacturing: The Next decade, New York, The Free Press; and Galbraith (2005).Designing the customer-centric organization, a guide to strategy, structure, and process, San Francisco, Jossey-Bass. Of particular interest is how these authors envisage a role for management accounting in the design and application of the HO. The essay will review the essence of HO and critically examine the extent to which there have been complementary developments in management accounting, and how effective practice and research have been in developing a horizontal dimension to management accounting. It is concluded that innovations in management accounting, such as activity-based accounting and holistic performance measurement like balanced scorecards, have not had any significant affects on those developing ideas related to HO. Reasons why this is so are canvassed and areas where accounting innovations may provide valuable input to implementing the HO are discussed. Recent developments in management practices that elaborate on HO and implications for a horizontal dimension to accounting are examined.

Robert H. ChenhallaEmail:robert.chenhall@buseco.monash.edu.au
[a]Department of Accounting; Finance, Monash University, Clayon, Victoria, Australia

The social implications of accounting are explored through an historical study of spoiled identities in state welfare systems. The processing, recording, classification and communication inherent in the accounting practices deployed in such systems have the potential to (re)construct identities, inform perceptions of self and impact on the social relationships of the welfare claimant. The paper examines these potentialities through an investigation of the accounting regime attending the system of poor relief in Victorian England and Wales. Informed primarily by the work of Goffman it is suggested that accounting processes comprised degradation ceremonies which compounded the stigmatisation of the recipient of relief, accounting classifications served to inscribe existing and create additional spoiled identities of the pauper, and individualized forms of accounting disclosure compromised the management of stigma by the poor.

Stephen P. Walker aEmail:WalkerS2@cardiff.ac.uk
[a]Cardiff Business School, Aberconway Building, Colum Drive, Cardiff CF10 3EU, United Kingdom

We investigate how the budget levels embedded in budget-based contracts affect individual effort and risk-taking. We show that, from a wealth maximization perspective, a tradeoff exists between motivating effort and encouraging risk-taking. We illustrate an inverted-U relation between budget levels and effort. Budget levels and effort are positively correlated until budgets become very difficult, at which point individuals “give up.” We illustrate an opposing, U-shaped, relation between budget levels and risk-taking. Low budgets provide the flexibility to take greater risks, whereas high budgets induce individuals to “play it safe” to ensure budget attainment. Risky projects provide the greatest probability of reaching very high (stretch) budgets. We conduct a laboratory experiment to empirically test this economic proposition vis-à-vis extant psychology research. Consistent with security-potential/aspiration theory, we find that individuals are willing to sacrifice expected wealth to either meet the budget or increase their potential payoffs. Our results suggest that the effort-risk tradeoff is mitigated at low budget levels, thereby increasing firm welfare, but is exacerbated at high budget levels, reducing firm welfare. Collectively, our results highlight the importance of understanding how managerial accounting practices such as budgets affect the various determinants of performance and not just performance per se. Our results also help reconcile conflicting evidence regarding where budget difficulty levels should be set.

Geoffrey B. Sprinklea Email:sprinkle@indiana.edu?Michael G. Williamsonb?David R. Uptonc
[a]Indiana University, Kelley School of Business, 1309 East Tenth Street, Bloomington, IN 47405, United States;[b]The University of Texas at Austin, McCombs School of Business, 1 University Station B6400, Austin, TX 78712-0211, United States;[c]University of North Carolina at Greensboro, Bryan School of Business; Economics, Greensboro, NC 27402-6165, United States

This paper seeks to contribute to a longstanding tradition in accounting research which attempts to understand accounting within its social and historical context. The topic of this historical narrative is the creation and role of accounting in the formation of the electricity industry in the US between 1882 until 1944. The paper is divided into three parts. In the first part we examine how early electrical engineers struggled to understand the nature and behavior of the costs of generating and distributing electricity at the turn of the 19th Century. In doing so, these engineers established a relationship between costs and the engineering concepts of load factor and diversity and developed pricing structures which would recover both standing (fixed) and running (variable) costs. In the second phase, we examine how this accounting knowledge was deployed by early “inventor entrepreneurs” and businessmen in their attempts to dominate the early electric markets in the US and how investor owned regulated utilities emerged out of these strategies as a uniquely North American institution. In the final phase, we examine how accounting became the center of intense conflict between regulatory commissions and investor owned utilities in the US court system – including the Supreme Court – as representatives of these entities vied with each other over the chart of accounts, allowable expenses, the valuation of assets and depreciation. Here we contend that utility accounting did not simply grow to reflect a regulatory process but rather worked to shape utility regulation in the US. In 1944 a legal ruling displaced the primacy of accounting in the regulatory process and shifted its focus from asset valuation to rate of return determination. The space once dominated by accountants was ceded to regulatory economists. After that, accounting became taken-for-granted and matter-of-fact.

Alistair M. Prestona Email:alistair@unm.edu?Andrew M. VeseybEmail:andrew.vesey@aes.com
[a]University of New Mexico, Department of Accounting, Albuquerque, NM 87131-1221, United States;[b]AES Latin America, DR-CAFTA Region, Arlington, VA 22203, United States

This paper analyses the use and circulation of international auditing standards within a large post-Soviet Russian audit firm, as it faces up to the challenges of international harmonisation. It describes this process as one of “connecting worlds” and translation. In a detailed field study based investigation, it traces various attempts to articulate and link Soviet and post-Soviet worlds, old and new imagined audit worlds. The paper underscores the fragile and precarious nature of international standardisation projects. It shows how ideals of audit universalism and international comparability become enmeshed in, and challenged by, global divisions of audit labour, problems and practices of power and exclusion, and struggles for intra-professional distinction, which in turn undermine as well as promote the connecting of worlds through standards.

Andrea Mennicken aEmail:a.m.mennicken@lse.ac.uk
[a]London School of Economics; Political Science, Department of Accounting; Centre for Analysis of Risk; Regulation, Houghton Street, London WC2A 2AE, UK

In this paper, I highlight how popular understandings of neoinstitutionalism as a theory of isomorphism need to be revised as institutionalists have shifted attention towards the study of organizational heterogeneity. As part of this shift, old emphases on arational mimicry and stability have been replaced with new emphases on institutional rationality and ongoing struggle and change. I discuss these new directions and the implications for the study of accounting practice. I argue that given recent efforts by institutionalists to account for actors and practice diversity, there is an important opportunity for dialogue with practice theorists, such as those drawing on Actor Network Theory, and the creation of a more comprehensive approach to the study of practice that attends to both institutional and micro-processual dynamics.

Michael Lounsbury aEmail:ml37@ualberta.ca
[a]University of Alberta School of Business; National Institute for Nanotechnology, 4-30E Business Building, Edmonton, Alberta, Canada T6G 2E7

This paper examines the relationship between the body and the self for women accounting professionals. It explores how they come to embody the identity of accountant and what happens when forms of organizational and professional embodiment coincide with other forms of gendered embodied self, such as that experienced during pregnancy and in early motherhood. These forms of embodiment can be seen simultaneously both as a mechanism of social control, and as a form of self-expression and empowerment for women.

Kathryn Haynes aEmail:kh20@york.ac.uk
[a]The York Management School, Sally Baldwin Building, University of York, Heslington, York YO10 5DD, United Kingdom

Previous empirical evidence provides mixed results on the relationship between corporate environmental performance and the level of environmental disclosures. We revisit this relation by testing competing predictions from economics based and socio-political theories of voluntary disclosure using a more rigorous research design. In particular, we improve on the prior literature by focusing on purely discretionary environmental disclosures and by developing a content analysis index based on the Global Reporting Initiative sustainability reporting guidelines to assess the extent of discretionary disclosures in environmental and social responsibility reports. This index better captures firm disclosures related to its commitment to protect the environment than the indices employed by prior studies. Using a sample of 191 firms from the five most polluting industries in the US, we find a positive association between environmental performance and the level of discretionary environmental disclosures. The result is consistent with the predictions of the economics disclosure theory but inconsistent with the negative association predicted by socio-political theories. Nevertheless, we show that socio-political theories explain patterns in the data (“legitimization”) that cannot be explained by economics disclosure theories.

Peter M. ClarksonaEmail:p.clarkson@business.uq.edu.au?Yue LicEmail:yueli@rotman.utoronto.ca?Gordon D. Richardsonc Email:gordon.richardson@rotman.utoronto.ca?Florin P. VasvaridEmail:fvasvari@london.edu
[a]UQ Business School, The University of Queensland, Australia;[b]Faculty of Business Administration, Simon Fraser University, Canada;[c]Joseph Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, Ontario, Canada M5S 3E6;[d]London Business School, University of London, London, United Kingdom