Deinstitutionalization of Activity Based Costing: Analysis From the New Institutional Sociology Perspective

Abstract

This study aimed at investigating, under the perspective of New Institutional Sociology, what factors led to the weakening and abandonment of Activity Based Costing in two companies. The study was based on a qualitative research method through case studies and evaluated the stages of ABC’ adoption, institutionalization stages and variables of deinstitutionalization. As a result, Beta reached the third stage and Gamma reached the second ABC adoption stage. The normative isomorphism encouraged by the recommendation of consulting firms presented a lot of importance in both companies, while the remaining isomorphism, mimetic, coercive and competitive, had smaller relevance. Neither company reached the stage of full institutionalization, reaching only the pre-institutional one. Evaluating the factors of abandonment and deinstitutionalization of ABC, the assumption with highest expression was social pressure, for not bringing informational innovation, not being a requirement of the head quarter, besides the lack of fiscal incentives. In the categorization of the critical points, ten factors were mapped to the abandonment of ABC: six factors of which are not covered by and four that reinforced the current literature. The conclusion highlights the number of findings that allowed the development of a basic structure for academics and practitioners to analyse it before incurring investments and allocation of employees who will not bring the expected financial results due to the discontinuity of the system adopted by the company.

Institutional Isomorphism and Adoption of Activity-Based Costing in Tanzanian Manufacturing Sector

“…The researchers deduced evidence from previous studies that the forces played little role in influencing companies to adopt the ABC system. Based on institutional isomorphism theory and content analysis, Aillon et al (2018) likewise supported the findings that mimetic pressures did not influence companies to adopt the ABC system. On the other hand, Alcouffe et al (2019) reported different results about ABC adoption where the effect of mimetic pressures was found to be statistically significant in their case.…”

“…The odds of contributions by mimetic and coercive pressures to level 3 ABC adoption were greater by 11% and 6.7%, respectively than the odds of contributions to level 1 ABC adoption while holding other levels (2,4,5) constant. At this level, in particular, the findings were consistent with the report by Alcouffe et al (2019) but disagreed with Aillon et al (2018). In an actual sense, copying the accounting practices of competitors and employing the strategies to meet the customers' and suppliers' demands explained the companies' move to level 3 of ABC implementation.…”