Making innovation happen using accounting controls

The aim of accounting controls has traditionally been to ensure conformity to plans and targets and this requires elimination of deviations, and protection from unexpected events or disturbances. Accounting controls do this job very well; they make the organization predictable by reducing uncertainty and by promoting clarity. They are associated with routine, conformance and the close monitoring of progress towards predefined goals and intents. Yet, organizations also need to innovate, to develop new products, services and processes in order to ensure long-term survival. Since innovation is not an orderly process that moves smoothly towards predefined intents, some researchers have questioned the suitability of accounting controls for innovation purposes (Ouchi, 1979; Amabile et al., 1996; Davila, 2005). When one takes a closer look at the literature on management accounting controls, it transpires that accounting controls can play a significant role in orienting firms to pursue innovation outcomes. Financial targets and budgets can, for example, help organizations to appreciate when innovation should be extended or reduced (Mouritsen et al., 2010).