Balanced management control systems as a mechanism for achieving corporate entrepreneurship

Abstract

As organizations evolve, a variety of procedures, planning requirements, budgetary policies, and operating guidelines are put in place in order to facilitate control of operations. The system of controls within an organization can be an important inhibitor or facilitator of a firm's strategic initiatives. Entrepreneuriai initiatives represent a case in point. There is a potential for control measures to limit employee initiative and constrain ongoing entrepreneurial behavior, but also for well-conceptualized controls to incentivize and support innovation within a firm. Past attempts to link control systems to innovation and entrepreneurship have tended to examine control in uni-dimensional terms, or to examine only linear relationships between measures of control and entrepreneurship. The current study explores three underlying dimensions of the organizational control system: administrative formality/informality, managerial rigidity/flexibility, and budgetary tightness/looseness. Building on anecdotal suggestions in the literature that entrepreneurship requires a balance between formal and informal, rigid and flexible, and loose and tight properties, a series of hypotheses are proposed regarding non-linear relationships between dimensions of control and levels of entrepreneurship with the organization. Results are reported of a survey directed at a large sample of managers regarding perceptions of their organization's control system and the level of entrepreneurship in their company. Support is provided for non-linearity in the relationships. Implications are drawn and suggestions made for ongoing research.