Management control and controllership in new economy firms - A life cycle perspective

  • Granlund M
  • Taipaleenmäki J
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Abstract

The purpose of this study is to describe and explain current management control practices in new economy firms (NEFs). According to our definition, NEFs include businesses targeting at fast growth or already fast-growing firms that operate in the information and communications technology business and biotech (life sciences) industry, and are characterized by their R&D and knowledge intensity as well as venture capital finance. There seems to exist a true lack of empirical evidence of what the management control practices, their trends of development, as well as the challenges facing them in NEFs actually are. In order to fill this gap in the existing knowledge, we conducted an explorative multi-organization study of nine NEFs. Our theoretical basis is grounded on corporate life cycle models. Our observations indicate that there exist, in addition to certain similarities, notable differences between management accounting and control practices in NEFs and firms operating in traditional operating environments. The most notable findings relate in this regard to differences in temporal orientation (time pressure), leading many times to prioritizing planning over control. Also, the pressures to meet expectations placed by certain external parties (venture capitalists and later on by stock market players), to develop management control systems is characteristic of the new economy environment. We elaborate these findings further through a corporate life cycle analysis, and by linking them to issues of strategic management and corporate culture. © 2004 Elsevier Ltd. All rights reserved.

Author-supplied keywords

  • Corporate life cycle
  • Management control
  • New economy firms

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