The illusion of managerial control

The design and implementation of organizational control systems based on a cybernetic model stand in need of revision. The revision is required by increasing numbers of reports of system ineffectiveness and, in some cases, failure. The paper suggests that a major reason for current difficulties resides in the “illusion of control” implied by theory and implemented in practice. An alternative definition of organizational control based in the concept of “multirationality” is proposed.     

Making rights from what’s left of Darwinism

The legal, political, and social meaning of the work of Charles Darwin has been claimed as resident to conservative and liberal homes alike. Peter Singer's unique admixture of personal liberal politics and what may look to be an extremely conservative philosophy of nature expose some over-simplicity in traditional ‘right’ and ‘left’ categories. In “Recovering the Left from Darwin in the 21st Century”, Steve Fuller provides us with insightful historical and sociological contexts for Singer's challenges. In this article, Kirk Junker takes one aspect of the trajectory ‘the notion of natural rights’ and examines their social construction, linguistic maintenance, and legal ramifications.     

When courts are overgrown with grass: the role of courts in the 21st Century

What will be the social role of courts over the future? This essay explores this question by examining the “five dimensions” of judiciary—the judiciary as a branch of government, subsystem of the legal system, as a forum for resolving dispute, as public agency, and an institution of a changing society. It considers the duty of courts to safeguard the interests of future generations; the place of courts during “the end of authority”; the increasing use of artificial intelligence in formal adjudication, and concludes with a time when “the courts of justice are overgrown with grass”.     

The average hospital

In 1998, the UK government introduced the National Reference Costing Exercise (NRCE) to benchmark hospital costs. Benchmarking is usually associated with “excellence”; the government emphasised the raising of standards in the 1997 White Paper “The New NHS: Modern, Dependable” that heralded the NRCE. This paper argues that the UK “New Labour” government's introduction of, and increasing reliance on, hospital cost benchmarking is promoting “averageness”. Average hospitals will be cheaper to run and easier to control than highly differentiated ones; they may also score more highly on certain measures of service improvement. The paper aims, through empirical investigation, both to demonstrate how the activities and processes of hospital life “become average” as they are transformed to comply with the cost accounting average and to indicate how the “average” is being promoted as the norm for hospitals to aspire to. To benchmark to average costs, comparisons are necessary. To compare hospital costs involves the creation of categories and classification systems for clinical activities. Empirical evidence shows that as doctors, patients and clinical practices are moulded into costed categories, they become more standardized, more commensurate and the average hospital is created.     

Modeling Drivers and Barriers of Artificial Intelligence Adoption: Insights from a Strategic Management Perspective

Artificial intelligence (AI) in business processes and academic research in AI has significantly increased. However, the adoption of AI in organizational strategy is yet to be explored in extant literature. This study proposes two conceptual frameworks showing hierarchical relationships among the various drivers and barriers to AI adoption in organizational strategy. In a two-step approach, the literature study is first done to identify eight drivers of and nine barriers to AI adoption and validated by academic and industry experts. In the second step, MICMAC (matrice d'impacts croises-multiplication appliqúe a un classment or cross-impact matrix multiplication applied to classification) analysis categorizes the drivers and barriers to AI adoption in organizational strategy. Total interpretive structural modeling (TISM) is developed to understand the complex and hierarchical associations among the drivers and barriers. This is the first attempt to model the drivers and barriers using a methodology like TISM, which provides a comprehensive conceptual framework with hierarchical relationships and relative importance of the drivers and barriers to AI adoption. AI solutions' decision-making ability and accuracy are the most influential drivers that influence other driving factors. Lack of an AI adoption strategy, lack of AI talent, and lack of leadership commitment are the most significant barriers that affect other barriers. Recommendations for senior leadership are discussed to focus on the leading drivers and barriers. Also, the limitations and future research scope are addressed.     

Information Uncertainty and Expected Returns

This study examines the role of information uncertainty (IU) in predicting cross-sectional stock returns. We define IU in terms of “value ambiguity,” or the precision with which firm value can be estimated by knowledgeable investors at reasonable cost. Using several different proxies for IU, we show that (1) on average, high-IU firms earn lower future returns (the “mean” effect), and (2) price and earnings momentum effects are much stronger among high-IU firms (the “interaction” effect). These findings are consistent with analytical models in which high IU exacerbates investor overconfidence and limits rational arbitrage.This revised version was published online in August 2005 with a corrected cover date.     

Ethical impact of artificial intelligence in managerial accounting

Recent advances in technology have accelerated digitalization and intelligence in modern business. Particularly, the increasing use of Artificial Intelligence (AI) in managerial accounting is expected to accurately measure corporate performance, provide intelligent analyses, and predict the future of a company. However, along with the benefits, ethical concerns of using AI also arise, such as deprofessionalization, data breach, and isolation among accountants. This paper explores the ethical impact of AI in managerial accounting at both pre- and post-adoption stages. Based on 47 interviews conducted with companies, an AI system vendor, and regulators, we found that data security, privacy, and misuse; accountability; accessibility; benefits and challenges; and transparency and trust of AI are among the most common ethical risks in the development and use of AI in managerial accounting. Unique ethical impacts on four types of stakeholders: developers, managers in charge of AI adoption, managerial accountants, and regulators, were also discovered.     

The two faces of organizational information

Organizational information, i.e. “facts” given and taken, and inferences drawn and established by participants within an organizational situation, may be examined in terms of its import to the relationship between an organization and its environment. A “locus” for organizational information is established in which information is classified as: (a) either inner- or other-directed: (b) either internally- or externally-based; and (c) either self- or other-referencing. Examples of organizational information in each of the eight possible categories are readily identified. Much, if not most, organizational information is probably best regarded as “two-faced”, i.e. as the product of inner- and other-directed needs taken together. For this reason, the basis, or justification of any item of organizational information is often obscure. This is seen to have consequences for organizational self-learning and self-delusion, and for the maintenance of organizational credibility and organizational secrets.     

Mediating instruments and making markets: Capital budgeting, science and the economy

We examine in this paper how certain instruments link science and the economy through acting on capital budgeting decisions, and in doing so how they contribute to the process of making markets. We use the term “mediating instruments” to refer to those practices that frame the capital spending decisions of individual firms and agencies, and that help to align them with investments made by other firms and agencies in the same or related industries. Our substantive focus is on the microprocessor industry, and the roles of “Moore’s Law” and “technology roadmaps”. We examine the ways in which these instruments envision a future, and how they link a multitude of actors and domains in such a way that the making of future markets for microprocessors and related devices can continue. The paper begins with a discussion of existing literatures on capital budgeting, science studies, and recent economic sociology, together with the reasoning behind the notion of “mediating instruments”. We then address the substantive issues in three stages. Firstly, we consider the role of “Moore’s Law” in shaping the fundamental expectations of an entire set of industries about rates of increase in the power and complexity of semiconductor devices, and the timing of those increases. Secondly, we examine the roles of “technology roadmaps” in translating the simplified imperatives of Moore’s Law into a framework that can guide and encourage the myriad of highly uncertain and confidential investment decisions of firms and other agencies. Thirdly, we explore one particular and recent example of major capital investment, that of post-optical lithography. The paper seeks to help remedy the empirical deficit in studies of capital budgeting practices, and to demonstrate that investment is much more than a matter of valuation techniques. We argue, through the case of the microprocessor industry, for greater attention to investment as an inter-firm and inter-agency process, thus lessening the fixation in studies of capital budgeting on the traditional hierarchical and bounded organization. In addition, we seek to extend and illustrate empirically the richness of the notion of “mediating instruments” for researchers in accounting, science studies, and economic sociology.     

Putting Humpty Dumpty back together again? The structures of knowledge and the future of the social sciences

Fifty years ago it was clear what the social sciences were, what they did and where they were going. This consensus was the product of the long-term construction of the structures of knowledge that resulted in the institutionalization of a set of disciplines that would function to guarantee ordered change in the social sphere in the name of “progress” through scientific control, exercised by “experts” and based on “hard facts”. After 1945, the scholarly legitimacy of the premises underlying the partitions separating the disciplines and the practical usefulness of the distinctions declined and from 1968 were overtly contested. It is contended that the structures of knowledge, including the social sciences, have entered into secular crisis and thus a period characterized by the heightened transformative capacity of agency typical of transitions. Since no outcome may be predetermined for the organization of future knowledge forms, this paper ends by considering modes of scholarly participation in the transformation of the social sciences.

“Don’t you think you’d be safer down on the ground?” Alice went on, not with any idea of making another riddle, but simply in her good-natured anxiety for the queer creature. “That wall is so very narrow!” Lewis Carroll, Through the Looking-Glass and What Alice Found There

Fifty years ago a serious discussion focused on the future of the “social sciences” collectively might have sounded at best like self-reflexive narcissism or simply a waste of time. At worst it might have seemed merely absurd. That is not to say that there were not significant disagreements within and across the social science disciplines. There was, however, a widely held consensus on the intellectual and institutional organization of knowledge that recognized boundaries among the humanities, the social sciences and the sciences, and the singular disciplines of which they were composed.The exposition that follows will begin with a sketch of the historical construction of this relational structure, both constitutive of and constituted by material reality, which left open the possibility for theoretical and methodological innovation and substantive development but at the same time disciplined the trajectory of such developments.This sketch will be followed by an overview of how the upheavals of the 1960’s dramatically foregrounded the premises of disciplinary autonomy (indeed, that had never been totally devoid of controversy). As the foundational principles of theoretical approaches, methodological practices, and proprietary subject-matters underwent radical change and race, gender, and class constraints on the make-up of faculties and student-bodies were opened up through a combination of critical reflection and direct action, questions concerning the future intellectual and institutional centers for the production of legitimate and authoritative knowledge of human reality emerged dramatically.Finally, the crisis in the long-term evolution of the internal contradictions of the “two cultures” structure of knowledge and thus also of the social sciences suggests imminent structural transformation. No outcome is predetermined for the organization of future knowledge forms and their institutional organization, but elective agency will be a vital ingredient in their construction and in imagining the possible alternative social structures of which they will be an inseparable part. The last question to be addressed, then, concerns the modes of scholarly participation in this transition.     

The future of western societies: multicultural identity or extreme nationalism?

The Y2K study assumed that ideas about the future among the young generation might tell something about the direction of that future, since it would be increasingly in charge. The respondents in 1967 tended to hope for more equality (classes, genders, nations, races) but were pessimistic in their predictions, though extreme nationalism and xenophobia were not really on the map yet. The article then reviews or presents recent studies on attitudes to various categories of immigrants and forms of integration. Differences relate to the country the study was made in (the Netherlands most positive) and the category of immigrants one asks about :‘asylum seekers’ seen negatively and ‘illegal immigrants’ even more so. The youngest respondents are generally most positive, or least negative; this may indicate that intolerance and racism is again on its way out after a period of growth. The future that may be foreseen on the basis of this lies somewhere between the multiculturalism some hope for and the integration by sheer assimilation that others demand.     

World on fire: two scenarios of the destruction of human civilization and possible extinction of the human race

This paper examines the foundation for two scenarios of the future depicting how human civilization might destroy itself and possibly bring about the extinction of the human race in the process. The scenarios are based upon the two human-generated “fires” deeply ingrained within industrial civilization: (1) the nuclear “fire” of tens of thousands of nuclear weapons and their automated “launch on warning” alert systems and (2) the slow burning “fire” of global warming and runaway climate change. This paper also examines obstacles that are currently preventing the necessary first steps towards solving these problems.     

Auditors’ decision-making under going-concern uncertainties in low litigation-risk environments: Evidence from Hong Kong

This study examines the audit opinions issued by auditors in a low litigation-risk environment at a time of high economic uncertainty – that of Hong Kong in the period immediately after the Asian financial crisis of 1997. Empirical research using United States data has shown that, contrary to professional guidance which restricts the issue of “disclaimer of opinion” only to situations where existing uncertainties prevent the auditor from forming an opinion, auditors tend to use the “disclaimer” report (in the going concern context) to signal more extreme client firm’s distress. In the high litigation-risk environment of the US, researchers have attributed this tendency to the idea that “disclaimer of opinion” reports are used by auditors to provide some protection against potential legal liability. The results of this study provide evidence that, even in the low litigation-risk environment of Hong Kong, auditors still use “disclaimer” reports to signal more extreme client firm financial distress. Thus, the maintenance of a high litigation-risk environment does not appear to be a necessary pre-requisite for high quality audits.     

A Bayesian analysis of a variance decomposition for stock returns

We apply Bayesian methods to study a common vector autoregression (VAR)-based approach for decomposing the variance of excess stock returns into components reflecting news about future excess stock returns, future real interest rates, and future dividends. We develop a new prior elicitation strategy, which involves expressing beliefs about the components of the variance decomposition. Previous Bayesian work elicited priors from the difficult-to-interpret parameters of the VAR. With a commonly used data set, we find that the posterior standard deviations for the variance decomposition based on these previously used priors, including “non-informative” limiting cases, are much larger than classical standard errors based on asymptotic approximations. Therefore, the non-informative researcher remains relatively uninformed about the variance decomposition after observing the data. We show the large posterior standard deviations arise because the “non-informative” prior is implicitly very informative in a highly undesirable way. However, reasonably informative priors using our elicitation method allow for much more precise inference about components of the variance decomposition.     

The Latin American World Model (a.k.a. the Bariloche model): three decades ago

Almost twenty five years ago, “Catastrophe and New Society. A Latin American World Model” was published [Herrera AO et al. Catastrophe or New Society? A Latin American World Model. Canada: DRC, 1976]. It described the work of a group of Latin American researchers, led by the late Amilcar O. Herrera, and it represented both a response to the diagnostic and proposal embodied in World 3, the first world model sponsored by the Club of Rome [Meadows D, et al. The Limits to Growth. New York: Universe Books, 1972], and a new proposal for the global system. It remains to date the only global model made in the South.The present paper is a personal reflection by one of the authors of the Latin American World Model (LAWM) on what the model meant (and what it may still mean) in the context of the limits debate and the more general issue of the future(s) of the world system.     

Interstellar humanity

Fifty years after Olaf Stapledon's landmark essay “Interplanetary man?”, we propose the coming era of “interstellar humanity”. Over the next 1000 years the domain of humanity will increasingly spread to the stars, a process that will alter our future in profound ways. At least three factors will drive this expansion: (1) increased understanding of cosmic evolution, changing our perception of ourselves and our place in the universe; (2) contact with extraterrestrial intelligence, bringing knowledge, wisdom, and problems of culture contact now unforeseen; and (3) interstellar travel, transporting humanity's emissaries to at least the nearest stars. The consequences of these events are not predictable in detail, but may be studied by examining the lessons of cosmic evolution; by using history to analyze the reception of new world views and intellectual culture contacts on Earth; and by anticipating the likelihood of success in interstellar travel and its effects. The prospect of interstellar humanity during the next millennium is likely to have an effect on all branches of terrestrial endeavor, whether religion, philosophy, science or the arts. The stage of human drama will be vastly expanded.     

Accounting for decisions and decisions for accounting

Behavioral decision theory (BDT) is concerned with “accounting for decisions”. The development of this interdisciplinary field is traced from the appearance of several key publications in the 1950s to the present. Whereas the 1960s saw increasing theoretical and empirical work, the field really started to flourish in the 1970s with the appearance of the review by Slovic & Lichtenstein (Organizational Behavior and Human Performance, pp. 549–744, 1971), and key papers on probabilistic judgment (Tversky & Kahneman, Science, pp. 1124–1131, 1974), and choice (Kahneman & Tversky, Econometrica, pp. 263–291, 1979). From the early 1980s to the present, BDT has seen considerable consolidation and expansion and its influence now permeates many fields of enquiry. After this brief history, eight major ideas or findings are discussed. These are: (1) that judgment can be modeled; (2) bounded rationality; (3) to understand decision making, understanding the task is more important than understanding the people; (4) levels of aspiration/reference points; (5) use of heuristic rules; (6) the importance of adding; (7) search for confirmation; and (8) thought as construction. Next, comments are addressed to differences between BDT and problem solving/cognitive science. It is argued that whereas many substantive differences are artificial, two distinct communities of researchers do exist. This is followed by a discussion of some major shortcomings currently facing BDT that include questions about the robustness of findings as well as overconcern with a few specific, “paradoxial” results. On the other hand, there are many interesting issues that BDT could address and several specific suggestions are made. Moreover, these issues represent opportunities for accounting research and several are enumerated. Finally, BDT presents “decisions for accounting” in the sense that scarce resources need to be allocated to different types of research that could illuminate accounting issues. The argument is made that BDT is one research metaphor or paradigm that has proved useful in accounting and that should be supported. Such support, however, may mean that some researchers may work on issues that, at first blush, might seem distant from accounting per se.     

Applicability Of The Conservatism Accounting Convention in China: Empirical Evidence

“Conservatism” is a widely accepted accounting convention in the industrialized world, but it has long been slated and prohibited in China under the orthodox ideological influences. To date, the conservatism convention has not been fully adopted or implemented in Chinese accounting although the Chinese government has made substantial efforts to reform its accounting system to bridge the gaps between the accounting practices in China and other industrialized countries in recent years. This study has, through a wide range questionnaire survey, empirically investigated the applicability of the conservatism accounting convention in China. We found that the survey respondents (consisted of business accountants, management, government officials, bank loan officers, investment analysts and auditors), in general, held no negative attitudes against the conservatism convention under the changing business environment in the country. There is clear evidence that various interested parties of business accounting would support an expanded adoption of “conservatism” in Chinese accounting. The study findings will facilitate a proper assessment of the future development of accounting standards and practices in China.     

Experimental research in financial accounting

This paper uses recent experimental studies of financial accounting to illustrate our view of how such experiments can be conducted successfully. Rather than provide an exhaustive review of the literature, we focus on how particular examples illustrate successful use of experiments to determine how, when and (ultimately) why important features of financial accounting settings influence behavior. We first describe how changes in views of market efficiency, reliance on the experimentalist’s comparative advantage, new theories, and a focus on key institutional features have allowed researchers to overcome the criticisms of earlier financial accounting experiments. We then describe how specific streams of experimental financial accounting research have addressed questions about financial communication between managers, auditors, information intermediaries, and investors, and indicate how future research can extend those streams. We focus particularly on (1) how managers and auditors report information; (2) how users of financial information interpret those reports; (3) how individual decisions affect market behavior; and (4) how strategic interactions between information reporters and users can affect market outcomes. Our examples include and integrate experiments that fall into both the “behavioral” and “experimental economics” literatures in accounting. Finally, we discuss how experiments can be designed to be both effective and efficient.