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The management control of innovation: the role of management control technologies in the offshoring of R&D processes

Final Report Summary - INNOVATION CONTROL (The management control of innovation: the role of management control technologies in the offshoring of R&D processes)



The overall objective of the research project was to contribute to the understanding of innovation processes as practices by inquiring how elements of various control systems engaged in the development of innovation. The empirical enquiry was concerned with controlling innovation at a distance by analyzing inter-organizational networks which were characterized by a high geographic dispersion. In these social arenas the research attention was centered on accounting and management control technologies that mediate and transform uncertainties linked to innovation development and shape networks which develop across time and space. This research sought to shed light on the effects of these management accounting tools on innovative practice in highly dispersed geographical networks. To this end two case studies have been carried out in two selected multinational organizations which off-shored their R&D departments abroad and one case study has been carried out in a multinational organization which had concentrated its R&D department in only one country.

Data collection was based on directed interviews with managers, employees, observation of meetings and analysis of documents.

Results show that relations between creativity and control are not given, they are more complex than typically assumed. These calculative practices perform innovative spaces in a surprising way. R&D staff acknowledged the potential of accountings and management control tools to provide more accurate costs, and hence to be the basis for more accurate prices and investment decisions. Managers underlined the crucial role of management accounting tools in building up global creative and innovative networks and in coordinating innovation in complex and distributed innovation teams.

Work carried out to achieve the project's objectives

The research project had the following main phases:

# Understanding the context

In order to understand the relationships between innovation and control in multinational contexts, the fellow studied official documents and reviewed the extant literature. The analysis of these documents allowed her to understand the state of the art and the direction of inquire to be followed. The fellow summarized her conclusions in a working paper, which she discussed with her supervisor.

# Drafting of research proposal for controlling innovation

The fellow detailed the design of the case studies to be conducted in the two multinational organizations. In collaboration with the supervisor, objective, methods and a guide for semi-structures interviews were specified. Following the original proposal to carry out two in-depth case studies in multinational organizations which had off-shored their R&D departments abroad, it was decided to select the following multinational organizations in two different industries:

- Vestas Wind Systems A/S. A Danish manufacturer, seller, installer, and servicer of wind turbines. It is the largest in the world. The company operates manufacturing plants and has R&D departments in Denmark, EU, India, Singapore, Australia, China, and the United States
- Four Soft Limited. An Indian IT company specialized in providing innovative software solutions exclusively for the logistics, transportation and supply chain market space. Based in Hyderabad (India), it is a case of reverse off-shoring as it delocalize its research centres in Europe, USA, Australia, Japan and Singapore.

To these a third multinational organization (Autostrade Spa) which had its R&D department concentrated in one country only was added. This would enable the fellow to do within the analysis a comparison between use of management accounting tools in multinational and less geographically dispersed organizations.

# Structuring relationships with the three organizations

The Fellow contacted two CEO and a former employee from the R&D Department, who was involved in managing research projects. They provided her with contacts in the R&D and Management Accounting Departments.

# Discussing research proposal and negotiating access to the field

The fellow then contacted different managers, met responsible staff, negotiated and adapted research proposals for each of the three organizations.

# Carrying out the case studies

Case studies were carried out in the two multinational organizations. The Fellow interviewed in each organization responsible managers and staff. On the whole 30 interviews were carried out and about 10 meetings were observed. Most part of the information was audio tape recorded and subsequently transcribed. Among professionals there was a common believe that these tools contributed to perform innovative spaces. Yet there was considerable awareness that these tools could have unwanted effects on innovation practices.

# Analysis of the case studies

The fellow analyzed the information collected in the case studies and gave feed back to the participating organizations. Articles based on the case studies are currently drafted and developed.

# Results and degree to which the objectives were met

The case studies were carried out as planned.

# The fellow drafted reports for the organizations under study. Two articles for scientific journals have been sent in review. Others are currently drafted and developed.

# The research project allowed the fellow to establish contacts with other top European research institutions and experts in the field, which will result in a larger scale project the fellow will shape after the end of the Marie Curie Fellowship.

Socio-economic impact of the project target groups such as policy makers or civil society for whom the research could be relevant.

This research, in line with the Lisbon partnership for growth and jobs, can positively impact the creation of new spaces for innovation making Europe a more attractive place to work and invest. But it is also relevant for the exploitation of market and technological heterogeneity worldwide, with a move away from the traditional ‘home-cantered’ approach to innovation.