Accounting for Competition, ‘Circuits of Power’ and Negotiated Order Between Not‐For‐Profit and Public Sector Organisations

• Author: Lars G. Hassel,Jean C. Mutiganda,Arne Fagerström
• Date: 01 November 2013
• DOI: http://doi.org/10.1111/faam.12023
• Published date: 01 November 2013

Financial Accountability & Management, 29(4), November 2013, 0267-4424

Accounting for Competition,

‘Circuits of Power’ and Negotiated

Order Between Not-For-Profit and

Public Sector Organisations

JEAN C. MUTIGANDA,LARS G. HASSEL AND ARNE FAGERSTR¨

OM∗

Abstract: This study analyses the role of accounting information in negotiating

contractual relationships in the framework of circuits of power during a competitive

tendering process. The study asks how institutionalised accounting information

affects taken-for-granted ways of thinking and acting by institutional actors in

negotiating inter-organisational order when analysed using the framework of circuits

of power. Field research took place in a Finnish not-for-profit aged care organisation

and municipality from 2008 to 2012. The study shows that institutionalised

accounting information cannot be taken-for-granted to prevail in obligatory passage

points of the circuits of power in negotiating order.

Keywords: accounting information, circuits of power, institutional change, negoti-

ated order, public sector competition

INTRODUCTION

Accounting for competition, within the public sector, has attracted increased

attention among academics and practitioners since the European Union (EU)

∗The first author is M.Sc. in Economics, Finance Director and Research Fellow in Accounting

at the School of Business and Economics at ˚

Abo Akademi University, Henriksgatan, Finland.

The second author is Dr. Sc. and Professor of Accounting at Ume˚

a School of Business and

Economics, Sweden. The third author is Dr. Sc. and Associate Professor of Accounting at the

University of G¨

avle, Sweden. An earlier version of this paper was presented at the 13th Biennial

CIGAR, Ghent, Belgium, 8–10 June, 2011. The authors wish to thank participants at that

conference, Professor Gary Cunningham, Professor Giuseppe Grossi, and two anonymous

referees for their constructive comments. The authors are thankful for financial support

provided by the research institute and the School of Business and Economics, ˚

Abo Akademi

University.

Address for correspondence: Jean Mutiganda, School of Business and Economics at ˚

Abo

Akademi University, Henriksgatan 7, 20500 ˚

Abo-Turku, Finland.

e-mail: jmutigan@abo.fi.

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ACCOUNTING, CIRCUITS OF POWER AND NEGOTIATED ORDER 379

passed a directive on competitive tendering for the public procurement of

goods and services in its member countries (Arlbjørn and Freytag, 2012).

Mandatory competition has led to institutional change in public sector

organisations by opening the door for foreign competition (Gunnar, 2009). In

some areas, such as health care, however, public authorities still have discretion

to negotiate contractual relationships with local organisations directly when

deemed necessary (Mossialos et al., 2010). How local organisations use their

accounting information in this context, as a source of power1to negotiate con-

tractual relationships with public authorities, remains an unexplored research

area.

Burns and Scapens (2000) provided a conceptual framework to analyse

the intra-organisational process through which institutionalised management

accounting rules and routines shape the ways of thinking and acting of

institutional actors that are taken-for-granted in their fields (Scapens, 2006).

Their framework has been applied in accounting studies focusing on insti-

tutionalisation of management accounting change (Lukka, 2007; and Ribeiro

and Scapens, 2006), budgetary practices (Hyv¨

onen and J¨

arvinen, 2006; and

Macinati, 2010), cost allocation (Lucas and Rafferty, 2008), and management

control systems (Nyland et al., 2009). However, the Burns and Scapens (2000)

framework has a theoretical gap (Scapens and Varoutsa, 2010), especially when

analysing how institutionalised accounting information can be taken-for-granted

as a stream of power in negotiating inter-organisational relationships.

This study uses a multiple theory approach, based on the framework of

circuits of power (Clegg, 1989) and theory of negotiated order (Strauss, 1982),

to extend the Burns and Scapens (2000) framework. The theory of negotiated

order states that the ways of doing of organisations and their actors are

outcomes of negotiations. Negotiation is any process through which two or

more negotiating parties use their thinking, talking and doing to influence

each other (Strauss, 1978). Therefore, any negotiated order depends on the

organisational setting and the context of negotiation (Strauss, 1982). The theory

of negotiated order provides a platform to analyse how institutionalised policies

become tools of negotiating further institutional change (Basu et al., 1999) and

macro institutional factors that affect institutionalisation of accounting change

(Modell, 2006). Lapsley et al. (2011) have shown, however, that the theory of

negotiated order is not useful in conceptualising the role of power in negotiating

order.

In order to extend the Burns and Scapens (2000) framework to the theory

of negotiated order, this study uses the framework of circuits of power (Clegg,

1989). Clegg (1989) argues that power and resistance go hand in hand and

form various circuits that shape the actions of organisational actors. A circuit

of power is an inter-related structure of power that is held by a given number

of actors or organisations (Clegg, 1989). Circuits of power are, according to

Clegg (1989), threefold. The power to influence the action or conduct of another

person or organisation is episodic; the power to use discretion about how to apply

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