Comments on ‘Interplay of management control systems and social capital in
social enterprises – a case study of a social enterprise in Vietnam’ by Vieira, Ha
and O’Dwyer
Report prepared by Matthew Hall for IPA 2012
This paper examines the interplay between management control systems and social
capital using a case study of a social enterprise in Vietnam. The paper is interesting
and generally well-written for a rough first draft. It presents some interesting
empirical data from a social enterprise setting, a field of organisations that have
received very little attention in the accounting literature. In general, I feel the paper
has promise, particularly if the setting of social enterprise can be further developed,
and the paper is positioned more appropriately in relation to prior studies in the area.
Strengths of the paper:
The paper seeks to contribute to emerging areas of research in two respects – one
focused on research in management accounting that utilises the concept of social
capital, and the other focused on the field of non-government and social enterprises.
Both areas require further development and this paper is positioned to potentially
provide some interesting contributions.
The empirical material seems relatively unique in that it seeks to understand the
operation of management control systems in both a social enterprise and in Vietnam,
both of which seem to have received scant attention in the literature. I feel much more
could be made of the social enterprise setting, in terms of providing more background
to the sector (under one page of discussion in the present version of the paper), by
providing more discussion in the theoretical section about what might make the
operation of management control systems in social enterprises different from both the
private sector and the NGO sector, and, combining these themes, by having more
interpretation in the empirical material that seeks to draw out these features.
Similarly, more could be made of the Vietnamese context and the operation of MCS
in developing economies. Overall, the setting is very interesting and thus provides the
potential for some interesting insights to be developed.
Areas for improvement:
The current aim of the paper seems a little confused. The paper makes much of the
(apparent) differences between the findings of this paper and that of Chenhall et al.
This gives the impression, at least to me, that the paper is trying to test whether the
results from that paper hold in other settings. If this is the purpose of the paper, i.e., it
is designed as a replication of that study, it could be stated explicitly up-front. But I
think such an approach is likely to be problematic because the setting in this study is a
social enterprise (and not a NGO) and a developing country context (rather than a
developed economy), thus making it rather different to the setting of the Chenhall et
al paper. So, to me, the paper is not really a replication. As such, the purpose of the
comparison to the Chenhall et al paper needs to be clarified. In this respect, there
seems to be confusion about comparisons at the empirical level and comparisons at
the theoretical level. In the current version of the paper it seems many of the apparent
inconsistencies that the authors’ draw are at the level of the empirical settings – yet,
we would of course expect to see empirical differences between the studies because
one is an NGO in Australia and the other is a social enterprise in Vietnam. If there are
theoretical differences that the paper can highlight, then these should be developed in
more detail in the theory development and expanded upon more fruitfully in the
empirical sections (but, as discussed below, to me there are not theoretical
inconsistencies as such, more a case of theoretical elaborations). As such, I would
suggest re-positioning the paper as seeking to extend and elaborate the findings of
Chenhall et al and develop theory around this – the current focus seems premised on
searching for supposed ‘inconsistencies’, which, in any case, are not theorised to any
significant extent.
In relation to the comparison between the findings of Chenhall et al and this paper, I
found the reading of the Chenhall et al paper to be superficial in places and at times
some of the comparisons just seemed to be incorrect:

For example, on p.39 it states that the data show little evidence to support the
interpretation that belief systems can enhance bonding but also inhibit bridging
social capital. First, at a methodological level, it’s not clear how a study in a
different context can provide evidence against the ‘interpretation’ in another
study. You could argue against the interpretation that Chenhall et al draw from
their data, but you cannot use data from a different study to argue against this.
Perhaps what is meant here is that the findings reported in Chenhall et al are not
necessarily the same as the findings in this paper, which can then be explored and
analysed in more detail? For example, what struck me here is that KOTO seems to
have developed belief systems in a way that encourage perhaps the ‘right’ level of
bonding, that is, in a way that prevetns tipping over towards an inward focus. So
this would help develop theory in this case as it shows that it might be possible to
use belief systems to develop an appropriate level of bonding and bridging. And
such a result would be consistent, theoretically, with that of the Chenhall paper, in
that in that study we see an ‘over’ application of belief systems that generates too
much bonding. So this is a good example where the empirical differences between
the two studies can be used to develop theory about the relations between MCS
and social capital.

Another example is on p.40, where it states that the KOTO study provides
evidence against the conclusions that boundary systems had little effect on social
capital. Again, methodologically, this study cannot refute the evidence from the
Chenhall et al study. It was a fact that in the Chenhall et al study the boundary
systems were not used in any meaningful way and as such did not relate to social
capital. That does not mean that other studies, like this one, may find that
boundary systems are important. And, importantly, the Chenhall et al study does
not make any claims to generalisation regarding this finding; it occupies one
paragraph on p.751. What would be interesting to develop here is why would
these differences exist? We have some hints of this from the Chenhall et al study
where it states that perhaps the strong belief systems meant that boundary systems
were not necessary, whereas perhaps in KOTO the belief systems are not as strong
and therefore boundary conditions are necessary? Or it is likely to do with the
context, e.g., most of the social workers in the Chenhall et al study have a
professional code of ethics, thus making an internal code redundant. The KOTO
setting is very different because, as I understand it, workers do not belong to a
profession? Again, I think this paper can try to develop theory around the
differences observed in the two studies rather than seeking to refute apparent
inconsistencies.

On p.42 there are further claims that this study does not support the arguments of
Chenhall et al in relation to incorporating a cost focus into belief systems that can
later be developed by interactive and diagnostic systems. Again, here, the context
seems very important. KOTO is in a time of financial crisis and needs to reduce
costs and increase revenue very rapidly. The focus on interactive systems here in
taking the lead is consistent with Simon’s studies about the use of interactive
controls in times of strategic change and/or crisis (see his two papers in SMJ in
the 1990s). Thus, again, here there is an opportunity to develop theory because of
the different context, rather than seek to provide supposed evidence to contradict
prior findings. This could be along the lines that using belief systems to articulate
a cost focus seems appropriate in business-as-usual settings, but in times of crisis
like at KOTO there is perhaps no time for this and so interactive systems need to
be used immediately.
Following the above points, in general, the importance of the setting is not really
explored in sufficient depth, especially the growth of KOTO and the financial crisis it
experienced – these seem to be key issues in the case. For example, the discussion on
p.29 seems to reflect the usual issues that emerge when a firm grows from very small
to the point where it requires more formal controls. And, importantly, this highlights a
key difference between the setting in this case and that of Chenhall et al. In that paper
there is no financial mismanagement or financial crisis anywhere near the magnitude
described in this case. Thus, it is not surprising that KOTO needs to introduce
stronger formal controls and that these are seen to have very positive effects. For
example, the statement on p.33 that the informal controls can have negative effects if
overused especially when formal MCS should be in place instead is exactly what you
would expect to find given the setting. The setting in the Chenhall study is very
different, however, as formal controls have existed for some time, and there is no
sense that funds are being mismanaged. Therefore, a big part of the explanation here
seems to be the growth from a very small to a larger organisation and the financial
crisis that engulfed KOTO in 2010 – these could be developed more in the paper by
drawing on literature in these areas (see Davila’s work on growing firms).
The introduction is very short; there is no outline of major themes and contributions
of the paper, all of which would be very helpful.
It would be helpful to develop the discussion on the ‘nature of social enterprise’. And,
given that KOTO receives 47% of its income from donations, it’s perhaps might not
be positioned as a ‘true’ social enterprise as is reflected in the definition used in the
paper. So, this might make KOTO a kind of double hybrid, both a social enterprise
and an NGO?
The review of the social capital literature and the relation to MCS is rather redundant
as in its present form it is a rehearsal of much of the Chenhall et al article. It would be
very helpful to see some discussion here about how the relations might be different
because of the social enterprise context and the Vietnamese context. And, as
discussed above, it would be helpful to provide some further theory to help explain
any differences that emerge in the findings in contrast to prior research.
The method section is very long and could be shortened considerable. It would be
helpful to have more information on how many days were spent at KOTO as part of
the observation period. It would also be helpful to understand whether any
confirmation of KOTO’s reputation etc was gained from third parties or the data is
from KOTO material only?
The description of the management control systems and their linkage to the analytical
categories of Simons’ framework could be improved. For example, the discussion on
p.19 regarding belief systems does not provide any evidence from interviews or
documents to support the descriptions. In relation to the interactive control systems,
it’s not clear how the recruitment process is an interactive control system. Whilst I
can see how recruitment is interactive in the usual use of that term, that is not the
definition of such a system in the context of Simons framework, as here it relates to
the use of information-based routines, e.g., budgets, financial reports, etc – I’m not
aware of any studies that class recruitment processes as part of an interactive control
system. Again, with the diagnostic control system, it’s not clear why the performance
appraisal system is classed in this way. In general, much stronger linkage back to the
definitions of each of the control system types would be helpful.
The use of quotes in the paper could be clarified. In many cases there are 2-3 quotes
presented in support of a claim. It’s not clear why this is done. It seems one
explanation is that the paper is taking a positivist position and thus presents the 2-3
quotes as a way to provide evidence on the objective state of the world that is being
claimed in the discussion. If the paper is taking this position, then this could be made
more explicit. If the paper is adopting an interpretive position, then it’s not clear why
2-3 quotes are necessary.