Management Accounting development in small companies - A study of four Swedish businesses

Abstract: Background and Problematization: Despite SMEs’ influence on economies worldwide, research regarding Management Accounting (MA) in Small and Medium-sized enterprises (SMEs) has only recently gained a growing interest (López & Hiebl, 2015). Several studies have shown that MA has a positive effect on the overall business performance of SMEs, motivating further research on the subject. The two main trends in research on MA in SMEs have been to either focus on evaluating the complexity of the MA processes or to examine the occurrence of specific MA techniques. The Contingency theory has served as the main explanation of the difference in MA usage in SMEs and how well MA matches a certain situation in a company. However, the theory has been criticized for describing companies from an outside perspective, neglecting the environment within the company. In response, Perren and Grant (2000) expanded the Social Constructionism theory describing how MA techniques and processes from a macro level influence the MA usage in the micro-world of a small company. By applying both the Contingency theory and the Social Constructionism theory to our empirical findings, we expect to better understand the underlying causes of MA development in SMEs. Purpose: The purpose of this study is to understand what causes MA in small companies to develop and emerge. By conducting a case study of four small companies, we seek to understand the underlying causes and motives behind the implementation and development of the identified MA processes. Problem Statement: How is Management Accounting developed in small companies? Methodology & Approach: The research strategy follows the suggested one formulated by Granlund and Lukka (2017), which advocates the combination of an emic perspective and an etic perspective. The research used a qualitative approach, with semi-structured interviews in four small companies in the segment of 10-49 employees. Findings & Conclusions: The empirical findings endorse the main concepts of the Social Constructionism theory and identify problem solving, derived from the reality of the individual micro-world, as the main cause of MA development in small companies. The perceived problems can be linked to contingencies in the Contingency theory related to the use of MA in SMEs. Both theories consider perceived problems solved by MA solutions to be the main cause of MA development, although the different research perspectives provide different analyses of the empirical findings. As the Social Constructionism theory identifies a specific MA solution to an individual problem, the Contingency theory advocates a certain development of MCS in response to a certain contingency.