'Rationales' of accounting control and ownership change in a development context: A mode of production theory analysis of two Sri Lankan case studie

Privatisation has recently become an important policy ingredient in developing countries to promote industrialisation (Cook & Kirkpatrick, 1988; Adam et al, 1992). Accounting is integral to these changes, but researchers in development studies have not, to date, regarded accounting as an important part of this policy option. Although some researchers in accounting have been concerned with the role of accounting in economic development policy (e.g. Enhoven, 1973), they inadvertently neglected broader socioeconomic factors underlying accounting practices in Third World countries, assuming that the transfer of Western accounting technologies is unproblematic and automatically beneficial to the host country adopting them. This study is concerned with the dynamics of accounting controls in the social and organisational context of Sri Lanka which focuses on recent privatisation issues. The study also links these issues to control systems under colonialisation and nationalisation. The theory, methodology, epistemology and ontological assumptions in this study are taken from political economy research within development economics and sociology. In particular, the study articulates accounting controls in capitalist and non-capitalist modes of production, based on Articulation of Mode of Production Theory (Taylor, 1979). This theory is used to typify accounting controls as private and public modes, both under capitalist and non-capitalist contexts. The qualitative data collected form two organisations, a public sector and a privatised firm, link the country's history of industrial development to privatisation issues, including associated transformations in accounting control systems. In particular, these data are used to understand how changes in accounting controls vary upon changes in ownership and management. Through a series of comparative interpretations, the study finds that the political influences over management control and ineffective bureaucratic relations are essentially common in the public mode of accounting control while these characteristics are always connected to traditional "king-concept". The powerful segments such as politicians and bureaucrats maintain their power relations as the relations between king and his people. Politicians maintained their maintained power over bureaucrats and, sometimes, organisational managers, bureaucrats maintained their power over managers, and managers maintained their power over employees. In the public mode of accounting, both under colonialisation and nationalisation, as control is seen in this traditional king-people relationship, it can be argued that "economic rationalities" (e.g. Jensen & Meckling, 1976; Vickers & Yarrow, 1988) are insufficient to explain how and why people in Third World countries such as Sri Lanka control over their subordinates and are controlled by their superiors. Given that traditional relationships are unconcerned by policy makers, organisational performances cannot be achieved through "conventional management techniques" such as incentives and motivation (ibid.). In the private mode of accounting, the political influences and ineffective bureaucratic controls are inconsiderable, except time to time trade unions' agitations. Although this institutional change is predominant in this mode of accounting, the articulation of cultural beliefs and the dominance of production controls over the accounting controls are common to both modes of accounting in both firms. In one firm, engineering rationalities have become the main element in the control process and this results in negligence of those cultural and behavioural aspects. In the other firm is also tending to enhance engineering aspects of production controls, considering that it is the main remedy for the problem of poor performance. The new management under private ownership assume that people's expectations are "economic based" and they have to be motivated by providing more incentives. Both policy-makers and accounting researchers in Third World countries, however, are unconcerned with the central problem of articulation of traditional beliefs and cultural-based behaviour of workers. Having addressed these issue, this thesis provides a research space in the domain of development accounting, by articulating accounting within a development paradigm.