Management control systems and entrepreneurial processes

Estimated reading time: 4-5 minutes. How do successful entrepreneurial companies use management control systems and entrepreneurial processes?

The main objective of this study is to contribute to our understanding of how the board of directors (BoD) in entrepreneurial firms uses management control systems (MCS), specifically related to entrepreneurial processes. The study conceptualizes MCS’s in terms of configurations. Configurations are seen as multidimensional constructs consisting of five MCS elements: tool, object, measure, time and focus. Interviews with 30 board members in seven successful entrepreneurial firms form the empirical basis of the study.

 

Management control systems and entrepreneurial processes

Research shows that use of management control systems (MCS) is dynamic related to the entrepreneurial process. The use of MCS changes with respect to specific control components. For example, in the early phases of the entrepreneurial process the use markedly project-, future- and market-oriented, while in later phases monitoring of decisions regarding both specific projects as well as the whole company is a significant activity. Another dynamic feature is the variation in the use of control components. Particularly prominent is it in respect of instruments, measurements and objects. Furthermore, the use of MCS has varied focus. It focuses both on specific entrepreneurial process but also more generally on the company as a whole (many entrepreneurial processes/projects). Regarding the specific process (project) research indicates that the use is focused on both the development of the project and that which “evolve” in this project.

 

 management control systems and entrepreneurial processes

 

The vast majority of existing research on MCS focuses on established, large firms operating in stable environments, viewing MCS as a means to achieve objectives set out in the strategy process, i.e. as a means of strategy implementation. This study broadens this perspective. The study provides knowledge about the role of MCS in innovation and value creation of business opportunities. The study contributes to the literature on the use of MCS in an entrepreneurial context. Also, the study emphasizes one overlooked actor in MCS research, namely the BoD.

The lesson to be learned here is to be flexible in management control. Match the use of controls based on the entrepreneurial process in its various stages.

Joakim Wahlberg

 

References

Wahlberg, J., 2013. Styrelsens Användning av Ekonomistyrning i Entreprenöriella Processer (The Use of Management Control Systems by the Board of Directors in Entrepreneurial Processes). Licentiate thesis (in Swedish). School of Business, Economics and Law at University of Gothenburg, Gothenburg.

Available at: https://gupea.ub.gu.se/handle/2077/32903

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