Top managers’ formal and informal control practices in product innovation processes

Abstract

Purpose This study aims to understand the formal and informal practices of top managers as they seek to control product innovation processes and how the style of control used differs during development stages and gates. Design/methodology/approach A qualitative in-depth case study was conducted at a multinational corporation (pseudonym: MEC). The authors examined 12 product innovation projects and carried out semi-structured interviews to understand the experiences, perceptions and challenges of the people involved in product development projects with a focus on the interactions between top managers and the project teams. Findings The authors found that MEC uses formal control mechanisms such as a stage-gate model and a project management and reporting system to keep track of the progress of innovation projects. In addition, top managers use informal controls through involvement in innovation activities and interaction with the team members during the stages and gates of the development process. To carry out their control practices top managers use four distinct styles of control as follows: participative, facilitative, empowering and authoritative. Practical implications Suggestions are provided for managers on how formal and informal management control tools can be used in innovation processes. The authors show how top managers can broaden their range of interventions by involving themselves in product innovation projects in different ways. Originality/value This paper shows how the combination of formal and informal controls can generate a more holistic view of management control in innovation. It also adds to previous conceptualizations of control use by suggesting four distinct styles, which top managers can use to involve themselves in product innovation processes.

Management control systems and the strategic management of innovation

“…We contribute to the literature by examining the relationship between MCS and the operational activities during the strategic change process in an innovation [3] setting. We know that many MCS are commonly used in innovation settings to accomplish organizational goals (Akroyd and Maguire, 2011; Akroyd et al , 2016; Barros and Ferreira, 2019, 2021; Davila, 2000; Feeney and Pierce, 2018; Frare et al , 2021; Henri and Wouters, 2020; Müller-Stewens et al , 2020; Pan Fagerlin and Lövstål, 2020). The management accounting literature has also shown that MCS can facilitate the implementation of strategy (Kober et al , 2007; Otley, 2016), which are necessary to support changes to innovation activities (Bisbe and Malagueño, 2009).…”

The influence of formal and informal control on market and financial results

“…This relationship is based on the ability on the part of management to identify and communicate clear and concise objectives and persuade employees to take ownership of organizational objectives, allowing employees to become involved in realizing these objectives. Thus, informal control allows management to connect employees with the established strategic plan, promoting an appropriate work environment (Pan Fagerlin and Lövstål, 2020). In addition, we were able to demonstrate an indirect relationship between formal control and financial results through informal control, which can have important repercussions, because it can lead marketing departments to implement flexible management systems, which include controls focusing, not only on operating results but also on long-term business results that promote sustained growth over time.…”

Exploring the Role of Levers of Control in a Work Environment That Supports Innovative Behavior (An Empirical Study at PT. SEMB)

“…Innovation does not appear out of nowhere, but is a result of a continuous process well managed by organization (Bisbe and Malaguenõ, 2015;Bollinger, 2019;Pan Fagerlin and Lövstål, 2020). Innovatios can happen in two phases; innitiation and implementation (Axtell et al, 2000).…”

“…Thus far, most literatures defines the factors which builds the constructive behavior from organization's perspective by using leadership types as variable. Leadership types is a form of control by informal mechanism which is characterized by being not objective, unofficial, and not planned explicitly (Pan Fagerlin and Lövstål, 2020). This shows that informal mechanism (leadership types) is hard to measured, predicted, and planned.…”