Background and scope of the special issue on innovations in accounting, performance measurement and management: international trends

Background and scope of the special issue on innovations in accounting, performance measurement and management: international trends

Article Type: Guest editorial From: Baltic Journal of Management, Volume 7, Issue 4

This special issue of the Baltic Journal of Management is motivated by the need to advance our theoretical and empirical knowledge on accounting, performance measurement and management innovations both in private and public sector contexts, and to shed light on international developments in these fields.

An innovation is typically understood as a successful introduction of something new and useful, for example introducing new methods, techniques, practices, or new or altered products and services (Dasgupta and Gupta, 2009). Accounting scholars have used terms such as “(management) accounting innovations”, “new and innovative accounting practices”, “contemporary developments”, “horizontal accounting” and “new techniques innovated” referring to the perceived novelty of the accounting ideas (Kihn and Näsi, 2010). Budgeting is an old technique and practice both in public and private sector contexts but abandoning or replacing it with something else is a more contemporary development or a discussion theme (BBRT – Beyond Budgeting Roundtable; Bjørnenak, 2010; Libby and Murray Lindsay, 2010). One of the papers in this issue investigates the topic of abandoning of the traditional annual budget among the largest Danish companies.

Performance measurement is not a new idea or topic either – not at least in the business sector context. In the public sector performance measurement systems have been introduced more recently, and ideas in this field still need a lot of development work. Do you measure what you get – or you get what you measure? The tasks and objectives of public sector organizations are often too complicated to be measured with some quantitative indicators in a comprehensive and balanced way. In all sectors the performance measurement and evaluation issue still needs clarification from a conceptual as well as empirical point of views. Three of the five papers in this issue shed light on the performance measurement from different angles and in different contexts contributing to the extant literature in this field. Performance measurement and evaluation has been a popular issue among scholars and practitioners since the early 1990s when Kaplan and Norton presented their Balanced Scorecard (BSC) framework for combining financial and non-financial performance measures with explicit links to strategy and organizational objectives (Kaplan and Norton, 1992, 1996).

Transfering business sector accounting models, such as accrual accounting, to the public sector is a paradoxical issue. A lot has been written about differences between the business and public sectors as well as about different functions of accounting in these two sectors. With the trend of new public management (NPM) these two sectors have become more similar but there still are several problems when trying to transfer business accounting models to the public sector contexts. One of those problems concerns recognition and measurement of public sector capital assets. Still new ideas are needed to better understand and solve the accounting problems in the public sector.

The five papers in this special issue provide interesting debates that will further our understanding of financial and management accounting in various organisational and conceptual arrangements. The papers have adopted different methodological approaches – three papers are based on surveys (Tomislav Hernaus, Mirjana Pejić Bach and Vesna Bosilj Vukšić; Niels Sandalgaard; and Vicente Pina, Lourdes Torres and Caridad Marti) and two based on general conceptual review (Minna Saunila and Juhani Ukko; and, Johan Christiaens, Jan Rommel, Allan Barton and Patricia Everaert).

The first paper, written by Minna Saunila and Juhani Ukko, presents a conceptual model for the measurement of innovation capabilities and its effects. The paper also clarifies how measures of innovation capability should be linked to measures of performance of the organisation. Based on the matching of earlier literature, innovation capability has been divided into three elements: innovation potential, innovation processes, and the results of innovation activities. This study suggests that organisations which exploit these aspects effectively in their innovation processes are expected to have successful results of innovation activities, which will affect positively the organisational performance in the long term.

The second paper (Tomislav Hernaus, Mirjana Pejić Bach and Vesna Bosilj Vukšić) focuses on the impact of strategic approach to business process management (BPM) on process performance measurement (PPM), and on how the latter influences both financial and non-financial performance tools of organisational performance. In order to test their research hypotheses, a survey method was used by the authors to collect the responses of 194 Croatian medium-sized manufacturing and service firms (which represents a response rate of 10.8 per cent). The authors used a structural equation model. The results suggest that PPM practise is positively associated with strategic approach to BPM. The study has shown that PPM has an indirect impact on financial measures through non-financial measures. Moreover, the findings of this article indicate that non-financial measures demonstrate performance improvement over a short term period, and instead financial measures have long-term effects.

In the third paper Niels Sandalgaard explores the relationship between perceived environmental uncertainty and the abandonment of traditional annual budgets. The paper contributes by showing that the growing research on budgeting topics is still of great relevance for scholars and practitioners. The article is based on the data from a survey sent to a sample of the largest Danish companies (with more than 200 employees). The findings in this paper indicate that the annual budgets are still used, as 83 per cent of the companies indicated that they had no plans of abandoning the traditional annual budget or had decided not to. The results show no evidence of higher perceived environmental uncertainty being associated with companies with this extreme form of non-budget focus. Instead the article finds indications of a positive relationship between the adoption of rolling forecasts and competition in the environment.

The paper by Vicente Pina, Lourdes Torres and Caridad Marti provides a review of how Spanish local governments implement non-mandatory performance measures (PM) and the types of PM produced, to what extent they are useful for decision-making purposes and accountability purposes, and finally the impacts of their usage. The study contributes to the existing international literature on public management changes and innovations by using non-financial, non-mandatory system of PM in a continental country. The authors described the characteristics of the Spanish context of the public sector. The study was conducted through a survey sent to expert managers responsible for the development of PM in Spanish local governments with more than 50,000 inhabitants. The implementation of PM reforms in the Spanish local governments is mainly based on a top-down approach in which each local government is autonomous to decide whether to implement PM or not, how to implement and what can kind of information to disclose. The primary use of PM in Spanish local governments is for planning and taking long-term decisions in strategic and budgetary areas rather than for the day-to-day activities and routines or decisions on performance related payments. The Spanish case is quite similar to other European continental countries in which central and local governments have leeway to implement their own PM systems.

The last paper by Johan Christiaens, Jan Rommel, Allan Barton and Patricia Everaert focuses on previous literature and accounting standards on capital assets in government accounting. The review of previous literature and the most important government accounting standards shows that the scientific debate around recognition and accounting treatment of a number of specific governmental capital goods is still going on. The authors provide an interesting comparative overview of the international accounting standards (GASB, FASB, and IPSAS) and approach capital assets. The American government standards (FASAB and GASB) present some similarities, but differ to a large extent with the IPSAS, which consider all governmental capital goods as businesslike assets, as they are strongly inspired by IFRS for listed companies.

The findings of the papers in this special issue provide new insights into the role of accounting, performance measurement and management in business and public sector management. They have explored various types of performance measurement and management practices and their influence on the views on organizational performance. Overall, the studies have raised important issues that warrant future research.

Toomas Haldma, Salme Näsi, Giuseppe GrossiGuest Editors