Extending Institutional Analysis through Theoretical Triangulation: Regulation and Activity-Based Costing in Portuguese Telecommunications

Abstract

This paper examines why a Portuguese telecommunications company – Marconi – adopted activity-based costing (ABC). The focus lies in new institutional sociology (NIS), particularly the institutional change model of Dillard et al. (Accounting, Auditing and Accountability Journal, 17(4), pp. 506–542, 2004), supplemented by theoretical triangulation involving economic, labour process and actor network theories to enrich observations and extend theory. Why Marconi adopted ABC lay in a complex, interrelated chain of institutions, including the parent company, management consultants, national and European Union regulators, financial markets and consumer associations during market liberalization. ABC was a means and symbol of improved competitiveness and efficiency but its diffusion and adoption also involved mimetic, coercive and normative factors. In regulated environments external legitimacy and efficiency were intertwined and demonstrating efficiency using accounting symbols is problematic. The results confirm criticisms of early NIS research for dichotomizing economic and institutional pressures, assuming private organizations are exempt from institutional pressures and neglecting internal organizational dynamics. The Dillard et al. model accommodated many features of institutionalization but needed extension to incorporate the public interest, the role of boundary spanners across social levels and how intra-organizational factors and properties of the technology derived following translation and praxis play a part.

Acknowledgements

The authors wish to thank Bob Scapens, Clinton Free, Sven Modell, Salvador Carmona, Angelo Riccaboni, John Burns, Mahmoud Ezzamel, Caroline Lambert, Rui Vieira, Aldónio Ferreira, and participants at the EAA Congress 2002, IPA 2003 and the AAA Management Accounting Conference 2006, for comments on earlier versions of this paper, and Joao Ribeiro and Jodie Moll for insights on institutional theory. Also, the authors are grateful to Marconi, and Maria João Mendes and Mário Lima for their support. The second author is grateful to ‘Fundação Para a Ciência e Tecnologia’ for financial support.

Notes

¹There are many strands of institutional theory. That on transaction cost economics is not within our domain. New institutional sociology stems from Weberian sociology and sociologists such as Selznick (1949), Gouldner (1954a, 1954b) and Blau (1955). It has many variants. One stem derives from the old institutional economics (OIE) work of Commons (1924, 1934) and others, which has developed as a related but independent research approach from NIS, used in accounting by Burns and Scapens (2000) particularly. The focus of this paper lay in NIS and, to avoid the difficult task of combining all institutional work in one model, this research concentrates on the model of Dillard et al. (2004).

²The full name is ‘CPRM – Companhia Portuguesa Rádio Marconi’ but for simplification it is called ‘Marconi’.

³For simplification Marconi's parent company is called PT (from 1999 to 2002 it was PT Comunicações).

⁴In 2000 the Portuguese telecommunications regulator ICP, established in 1989, was the ‘ICP – Instituto de Comunicações de Portugal’ (Portuguese Communications Institute). Its name changed in January 2002 (Law No. 309/2001) to Anacom – an abbreviation of ‘Autoridade Nacional de Comunicações’.

⁵See plenaries by Cooper, D., Ittner, C. and Demski, J. at Global Management Accounting Research Conference, University of Michigan, June 2004.

⁶Our thanks to Martin Carlsson for bringing these to our attention.

⁷Regulatory impositions on telecommunications operators changed July 2003, following new EU Directives (2002/21/EC, 2002/20/EC, 2002/19/EC, 2002/22/EC, 2002/58/EC). This paper does not analyse these as they occurred after the MAS changes studied here. Laws are quoted only when directly connected to MAS changes in Marconi and PT.

⁸Section 12 of the American Securities Exchange Act of 1934 requires PT to annually submit a report (Form 20-F) that includes: a detailed description of the business, its property, legal proceedings, market conditions, exchange controls, other limitations affecting security holders, taxation, selected financial data, management's analysis of the financial situation and results; quantitative and qualitative disclosures of market risk; company directors and officers, their compensation, stock options and interests in certain transactions; and security defaults and changes.

⁹Marconi previously had a matrix structure that crossed its business areas.

¹⁰ Anecdotal evidence from discussions with Andersen consultants and practitioners during ABC seminars at the Institute for International Research (Portugal) in March, April, October 2000; and April, May 2001.