The Role of Management Controls in Transforming Firm Boundaries and Sustaining Hybrid Organizational Forms

S.W. Anderson, H.C. Dekker

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Coase [1937] first explained the existence of firms and the boundaries between them as an emergent solution to minimizing the costs of accessing markets - what Williamson [1975] later termed 'transaction costs.' Over time, innovations in management control and changes to legal structures have reduced the costs of monitoring, raised the costs of behaving opportunistically, and created ways for partners to commit credibly to future actions. At the same time, entrepreneurial firms have developed inimitable resources that are a basis for collaborating with partners who have complementary resources [Penrose, 1959]. Together these forces have transformed the dichotomous choice of 'make' versus 'buy' into a selection among a more nuanced set of hybrid modes of organization (e.g., strategic alliances, joint ventures, and supply chain partnerships). The hybrid structures blend characteristics of arms-length market transactions with modes of governance and control that are more common to large decentralized firms. The thesis of this monograph is that innovation in management control has been central to the emergence, diversity and stability of hybrid organizational forms. Extending the arguments of Coase, Williamson, and Penrose, a review of the accounting literature highlights the important role that management controls have played in transforming the question from explaining firm boundaries to explaining how transactions that appear to be fraught with transactions hazards are rendered profitable and sustainable to transaction partners. We review empirical research in management accounting to support our thesis and identify areas for further inquiry.
Original languageEnglish
Pages (from-to)75-141
JournalFoundations and Trends® in Accounting
Volume8
Issue number2
DOIs
Publication statusPublished - 2014

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Management control
Firm boundaries
Organizational form
Costs
Coase
Innovation
Penrose
Joint ventures
Complementary resources
Supply chain
Strategic alliances
Monitoring
Resources
Hazard
Entrepreneurial firms
Dichotomous choice
Transaction costs
Governance
Blends
Empirical research

Cite this

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The Role of Management Controls in Transforming Firm Boundaries and Sustaining Hybrid Organizational Forms. / Anderson, S.W.; Dekker, H.C.

In: Foundations and Trends® in Accounting, Vol. 8, No. 2, 2014, p. 75-141.

Research output: Contribution to JournalArticleAcademicpeer-review

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