Role Involvement and Innovativeness in Management Accounting - Literature review Example

Role Involvement and Innovativeness in Management Accounting Name Institution Role Involvement and Innovativeness in Management Accounting Introduction Emsley (2005, p.158) suggests that management accountants have been criticized for their inability to innovate. The author reports that researchers have also examined the changing roles of management accountants. This is because the increase in competition, advancement in technology and changes in the organizational structure has brought in new challenges to management accountants (Hasniza et al. 2013, p.102). Operating in a business environment is difficult, especially with old ways of doing things. Management accountants’ traditional roles such as attention directing, scorekeeping and problem solving roles are no longer relevant. According to Paulsson (2012, p.379), the recent decades have seen calls for re-assessment of management accounting, based on innovation and creating new systems and techniques, and changing roles of the management accountants so as to sustain competition. In particular, there has been increased advise for the management accountants to reduce the times spend on accounting and increase the duration working in the business units with the people using accounting information. Therefore, this paper analyzes the literature review and explains why Emsley (2005, p.160) is emphasizing on Theory Development in the framework for management accounting innovation. It will also argue for the acceptance of innovations by business unit managers and incentives to innovate as the key features of role involvement’s effect on innovativeness as suggested by Emsley. Analysis of the literature review The literature review presents a broad analysis of innovation in the management accounting. The innovation in this field is evaluated based on two perspectives, the supply and demand perspectives (Emsley, 2005), p.159). However, in most cases, it demand perspective which companies regard as important because it highly influences operations, performance and customer relations. The demand perspective presumes that innovations take place due to the demand of an organization (Emsley, 2005, p.159). Looking at it closely, it can be argued demand perspective has become a core requirement or an organization to sustain change and register good performance. The truth is that competition in the business environment has led to calls for in for innovation. Therefore, innovation is a demand requirement for an organization. According to Strumsky, Lobo & Tainter (2010, p.496), innovation involves strategies and systems which organizations use to compete and survive in the industry. For management, the calls for innovation have been based on the roles of the accountants. Emsley (2005, p.158) argues that the environment demands that they minimize time spent of the traditional accounting functions and spend much more time with business unit managers and people who use management information. The traditional functions talked about include attention directing roles, control-type issues and scorekeeping. These functions majorly involve compliance reporting and presenting business unit executive reliable information for making decisions (Emsley, 2005, p.158). The innovation will ensure that business unit executives and consumer are involved in making of the reports and understand what the process entails. The situation is a way of enhancing transparency and understanding of the consumers and to know the financial and performance positions of the company. From this perspective, the business unit executives and consumer of the information can make informed decisions about the future. Basadur & Gelade (2006, p.46) contend that innovation helps the accounting department to discover that opportunities which exist, or will probably surface in future. Successful organizations not just react to their current organizational and consumer needs, but also predict future trends and patterns, and create products and services which enable them to fulfill the prospective demands rapidly (Emsley, 2005, p.159). The demand perspective is often divided into two comprising of content and process studies. The content studies usually assess different factors and the innovation factors through surveys. According to Emsley (2005, p.158), content studies hold that the innovation is a generally rational procedure in which organizations on purpose tries to improve their innovation level so as to increase their performance and competition. Content studies are divided further into two researchers called organizational innovativeness and diffusion of innovation researches (Emsley, 2005, p.159). Diffusion of innovation looks at the position of a company based on innovation among many other companies. Since the business is always a competition, the innovation is looked at the lens of international competition. The organization innovativeness emphasizes on the exploratory which are linked to innovations such as stage of the organization which can either be at early or late stage (Chenhall, 2003, p.131). On the other hand, the literature review has analyzed the content study of the demand perspective. Emsley (2005, p.159) opined that the process research normally involves assessment of “why” and “how” innovation improves and also the extent to which the innovation can be considered a rational practice; that is the advantages which make management accounting to be adopted by the organizations. The other perspective that has been assessed is the supply. The supply perspective offers an alternative description for the considerable adoption level of the innovation in the field of management accounting (Emsley, 2005, p.158). Some of the innovations that have been made in this perspective are balanced scorecard and activity-based costing. The literature also reviewed different theories that describe the developments of the innovations. Some of the theories explained are the actor-network theory and institutional theory. The actor-network theory focuses on the relationship between actors in innovation and the boundary objects of innovations. Why Emsley (2005) is emphasizing on Theory Development The theory development has become very important in the management accounting innovations. This is because it analyzes the need to innovate and how role involvement fulfills the organizational demand of innovation in the management accounting field. These are the reasons why Emsley (2005) majorly focuses on theory development. According to Emsley (2005, p.160), theory development is explained in three major parts including difference between innovation research and the innovativeness research, role involvement and role involvement’s influence of the on innovativeness. Emsley (2005) insist on the Theory Development because it widely covers innovation, not just in the management accounting management field but generally in the operation of an organization. According to Emsley (2005, p.160) innovation is defined as a practice, idea or just an object which is regarded by individual as new. On one hand, the definition can encompass new products and services, new structures, new administration systems, technologies and new plans of an organization. On the other, when used in the management accounting field, innovation does not just include management accounting methods, but also work practices changes (Emsley, 2005, p.161). The difference between innovation and innovativeness is that innovation is the idea while innovativeness is the extent to which an organization embraces innovation. The employees may have ideas but they are not implemented because of lack of communication to express such ideas (Loo, Verstegen,B & Swagerman, 2011, p.289). The Theory Development maintains that ideas must be express to make the organization moving. The success is measured by innovativeness which will in return fulfill the ever changing demands of customers. Theory development also holds that innovation goes through various stages. This makes innovation an exploratory variable in the organization but is must be implemented. Emsley (2005) also insist of the importance of theory development because it helps an organization evaluate the importance of role involvement. Indjejikian & Matejka (2006, p.850) argue that management accountants who spend more in the business unit with the unit managers have their roles orientated towards these managers, hence, will have a strong relationship and mutual understanding. These interaction and role involvement influences the management accountant’s innovativeness through acquisition of knowledge, understanding the need to innovate and acceptance of innovation as a strategy to survival (Emsley, 2005, p.261). Incentives to innovate and acceptance of innovations by the business unit managers as the key attributes of role involvement’s influence on the innovativeness Based on Emsley (2005, p.160) arguments this paper is in agreement that incentives to innovate and acceptance of innovations by the business unit managers are some of the major attributes of role involvement’s influence on the innovativeness. According to Emsley (2005, p.164) incentives involve rewards for the future prospects and management accountant and also increased work satisfaction which comes from the improvement of a good job. They are greatly decided by the bosses of the management accountant who would probably be the manager of a business unit. In such circumstances, incentives are mostly equipped to the success of the goals of a business unit in that the management accountant will aspire to give information that will help towards accomplishing their goals, but, since such will not be controlled much by the principles of useful accounting (Mistry, Sharm & Low, 2014, p.112). Compared to the present practice innovations are probably going to be radical. For efficiently oriented management accountants, their bosses who would generally support the management accountants’ incentives for attaining useful goals like compliance reporting and managing cash flows than the goals of a business unit. Arroyo (2012, p. 289) argues that in such conditions, there is less motivation and incentive for them to practice innovations so as to attain the goals of the managers. The introduction of innovations by the management accountants and an oriented business unit are likely to be acknowledged because they are able to change the mind of the bosses’ of a business unit into accepting new innovations and their benefits (Emsley, 2005, p.163). The recognized uncertainty found from the innovations of the management accounting benefits has mostly risen up due to the fact that innovations from administrative whose benefits are not easy to observe and show based on the prediction. Emsley (2005) claims that, therefore, to be assured that the management accounting benefits will come to be, the manager of the business unit should use most of the time to be familiar with the information found from the innovation so as to value its importance. Adequateness of the methods based on strengths and weaknesses and how it can be made better Emsley (2005, p.164) divided his method section into two consisting of data collection and data analysis. The data collection was carried using sampling through the application of questionnaires and face-to-face or telephone interviews. Emsley used 50 firms in Dublin, Ireland as his sample population to carry out the research on innovation in management accounting (Emsley, 2005, p.165). Random sampling was done, but only restricted in large firms. The sample population was restricted to 400 employees to control the study. In the research, Emsley (2005, p.165) used questionnaires to gauge the variables of the role of involvement and the variables of innovativeness including classifying innovation as non-radical or radical. In the study, 38 management accountants from fifty firms took part in the exercise and an average of 33 questionnaires were representing 66 percent rate of response. From the response, the research is able to deduce the strengths and weaknesses of the research. The adequateness of the research was that random sampling was used to collect data. The strength of sampling is that is reduces human bias within the sample population. Chambers & Skinner (2003) stated that unbiased random sampling is critical for researchers in making decisions from the outcome of the research. For instance, Emsley (2005, p.165) claims that following the returning of questionnaires from companies, the research set an interview with the respondents. To protect him of bias interpretation, the research set aside responses to the roles involvement questionnaires devoid of the knowledge of participants’ role involvement reports (Emsley, 2005, p.166). Another adequateness of the method is that there is an ease in creating the sample. The researcher decided the sample would be the 50 large firms in Dublin, Ireland. From the sample, biasness is avoided because everyone is given equal chances of being selected as respondent (Chambers & Skinner, 2003). Another adequate method is that the sampling is followed by a face-to-face interview to verify whether what someone has written in the questionnaire is actually true stand of innovation and role involvement. However, the research also has its weakness based on the methods used. Sampling always takes a sample of a population, meaning not everybody is included in the research (Creswell, 2008). The fact that some employees of other companies were left out in the research could mean that the outcome does not represent the general thought of everyone. Another weakness is that not everyone will return the questionnaire as shown by this research. In fact, out of 38 participants, only 33 returned representing only 66 percent of responses. Such circumstances could mean the sampling is not correct (Emsley, 2005, p.165). Also, face-to-face interview or telephone interviews are often subject to moods and a respondent may not provide the correct feedback depending on their moods. However, Mohammad & Edward (2014, p.248) argue that to make the method better, a large sample should be covered to give almost the true representation of the whole population’s view. Also, the company must try to avoid telephone and embrace face-to-face interview because phones can off or answers may be subject to poor listening (Mohammad & Edward, 2014, p.245). Conclusion From the study, different literatures reviewed by Emsley (2005) present important topics to the modern management accountants. Innovation and role involvements are topics that are not just covered about accounting department but the general organization. While innovation is significant in competition, survival and effective performance, role involvement creates a report between management accountants and business unit executive. The combination of the two factors is highly needed for success of the modern companies. Even though there is some consistency in the research, the methods used has both strengths and weaknesses, therefore, the paper concludes that future research should be considered. References Arroyo, P. (2012). Management accounting change and sustainability: an institutional Approach. Journal of Accounting & Organizational Change, 8(3), 286-309. Basadur, M & Gelade, G.A. (2006). The Role of Knowledge Management in the Innovation      Process, Creativity & Innovation Management 15 (1), 45-62. Chambers, R L., & Skinner, C J. (2003). Analysis of Survey Data. Wiley. Chenhall, R. (2003). Management control systems design within its organizational context: findings from contingency-based research and directions for the future. Acc. Organ. Soc. 28, 127–168. Creswell, J. W. (2008). Educational Research: Planning, conducting, and evaluating quantitative and qualitative research (3rd ed.). 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