Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
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The purpose of this paper is to discuss Zimmerman's (2001) perceptions related to empirical management accounting research. Luft and Shields disagree with Zimmerman's conjectures and prescriptions in three areas:
1. Developing and Testing Theory versus Describing practice,
2. Emphasis on Decision-making versus Control, and
3. Use of Economic theory versus other Social Science Theories.
Theory versus Describing Practice
To refute Zimmerman's view that management accounting research has not matured beyond describing practice (i.e., that it is atheoretical), Luft and Shields refer to their 2003 paper in which they identify 275 articles that use social science theories to explain management accounting practices and their effects. (Summary).
Emphasis on Decision-making Versus Control
To refute Zimmerman's conjecture that management accounting research emphasizes decision making and planning to the near exclusion of control, Luft and Shields argue that the literature reviewed by Ittner and Larker (2001), i.e., the basis for Zimmerman's comments, includes agency-theory based research and contingency-theory based research that either emphasizes or includes the concept of control. They also point out that it is not clear which role, decision-making versus control is the primary role of accounting and that deciding which role is primary is not as important as exploring how organizations manage the tensions between them.
Use of Economic theory versus other Social Science Theories
In response to Zimmerman's argument that accounting research should rely on economics-based theory, Luft and Shields point out that management accounting research uses a variety of theories from several social sciences and that even economic theory does not support the exclusive use of economic theory. In addition they argue that every social science has limitations and that economics-based research excludes important issues related to understanding management accounting and its effects. Insisting on the core concepts of economics-based research (i.e., rational maximization, efficiency and equilibrium), would exclude issues that are important to management accounting. For example, there is a question related to whether people think rationally. Forcing empirical management accounting research to assume rationality can prevent the observation and explanation of the relation between management accounting practices and human cognitive limitations. In addition, Luft and Shields point out the assumption related to equilibrium is not supported in the literature. Management accounting practices change slowly indicating the potential for prolonged non-equilibrium conditions. Understanding how people react to management accounting and organizational changes will most likely come from psychology and sociology, not economic theory.
Conclusion
Improvements in empirical management accounting research will come from more careful use of a variety of theories. Economic theory is valuable, but not superior to other theories and relying on the economic assumption of rational-maximizing equilibrium would exclude the change process from the domain of management accounting research.
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Articles related to this issue in the order that they were published.
Ittner, C. D. and D. F. Larcker. 2001. Assessing empirical research in managerial accounting: A value-based management perspective. Journal of Accounting and Economics (December): 349-410. (Summary).
Zimmerman, J. L. 2001. Conjectures regarding empirical managerial accounting research. Journal of Accounting and Economics (December): 411-427. (Summary).
Hopwood, A. G. 2002. If only there were simple solutions, but there aren't: Some reflections on Zimmerman's critique of empirical management accounting research. The European Accounting Review 11(4): 777-785. (Summary).
Ittner, C. D. and D. F. Larcker. 2002. Empirical managerial accounting research: Are we just describing management consulting practice? The European Accounting Review 11(4): 787-794. (Summary).
Luft, J. and M. D. Shields. 2002. Zimmerman's contentious conjectures: Describing the present and prescribing the future of empirical management accounting research. The European Accounting Review 11(4): 795-803.
Lukka, K. and J. Mouritsen. 2002. Homogeneity or heterogeneity of research in management accounting? The European Accounting Review 11(4): 805-811. (Summary).
Luft, J. and M. D. Shields. 2003. Mapping management accounting: Graphics and guidelines for theory-consistent empirical research. Accounting, Organizations and Society 28(2-3): 169-249. (Summary).