Management control systems effect on the micro-level processes of product innovation

Abstract

Purpose Using institutional theory, this study aims to understand how the management control systems (MCSs) designed by top managers influence the micro-level process practices of organization members during product innovation. Design/methodology/approach This paper reports on a case study carried out at NZMed to examine the design and use of MCSs and their product innovation practices. Simons’ levers of control was used to understand the ways in which MCSs were designed and used in a product innovation setting. Findings The findings indicate that the everyday micro-level processes of organization members encoded MCS when their espoused values aligned with those of top managers. However, when the perspectives within the organization differed, variations to the micro-level processes of organization members emerged. The authors show how this resulted in an increase in innovation capabilities necessary to meet organizational goals. Practical implications The misalignment between espoused values and enacted values had a positive effect as it helped the organization maintain their innovation culture, and build long-term trusting relationships with suppliers which enabled the achievement of organizational goals. Originality/value By focusing on the relationship between MCS and the micro-level processes of organization members in product innovation, the paper shows how the lack of alignment between the espoused values of top management and the enacted values of project managers explained the variations between the MCS used by top managers and the practices of project teams at our case study company.

How managerial capabilities of cognitive and behavioural complexity enable dynamic tension between management controls

“…Conversely, a less cognitively complex person will fail to connect distant elements and typically develop uni-dimensional MCs that (often) fail to account for the subtleties needed in controls. It is also important to note that not every manager needs the cognitive and behavioural complexity to recognise the need for countervailing MCs (Gurd and Helliar, 2017; Sundin et al , 2010; Toldbod and Van der Kolk, 2022), as usually only some of a company’s managers are involved in making major decisions about its control approaches (Biswas et al , 2023; Malmi and Brown, 2008).…”

“…Instead, they design mutually reinforcing MCs that create a biased organisational focus, which can crowd out specific organisational aspirations (Barros and Ferreira, 2022; Bedford, 2015; Henri, 2006). Ultimately, managers are the ones that design and implement MCs (Bertz and Quinn, 2022; Biswas et al , 2023; Biswas and Akroyd, 2022). Managers are the actors central to creating dynamic tension.…”

The relationship between management control systems and innovativeness in start-ups: evidence for product, business model, and ambidextrous innovation

“…PI is defined as the “introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses” (OECD and Eurostat, 2005, p. 48), and it consists of “improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics” (OECD and Eurostat, 2005, p. 48). Thus, start-ups pursuing PI have to focus their innovation efforts on research and development (R&D), such as new product development projects (Biswas et al , 2022; Munck, 2020). Traditionally managed as a “black box” (Davila et al , 2009b, p. 286), such projects are currently based on established methods – such as the stage-gate model – that follow a logical sequence of predefined steps (Bucherer et al , 2012; Davila et al , 2009a; Davila, 2000).…”

“…Given that many innovations and entrepreneurial projects fail (Åstebro et al , 2014; Davila et al , 2015), practitioners might benefit from guidance on how innovation can be effectively supported via professional management practices such as MCSs. Second, the multifaceted nature of innovation has been largely neglected in the existing MCS literature, as most empirical studies focus unilaterally on PI (Biswas et al , 2022; Henri and Wouters, 2020; Munck et al , 2020). Distinguishing between start-ups focusing on PI, BMI and ambidextrous innovation, we contribute to a more overarching understanding of innovation in the control context.…”

“…Third, it is widely recognized that control levers are interdependent (Bedford, 2015; Ferreira and Otley, 2009; Simons, 1995; Widener, 2007). However, the existing literature mostly focuses unilaterally on examining the effects of the interactive and diagnostic use of MCSs on innovation (Bisbe and Malagueño, 2009; Lopez-Valeiras et al , 2016), and only a few studies have examined the impact of the combined use of MCSs on innovation (Barros and Ferreira, 2021; Biswas et al , 2022; Bedford, 2015). Accordingly, we investigate the effects of not only individual control levers but also their combined use on innovativeness.…”