(*) corresponding author. We are grateful to KU Leuven for research funding and for sponsoring the survey. We received many helpful comments from workshop participants at the University of Melbourne, Georgetown University, University of Central Florida, Australian National University, University of New AbstractTransaction cost economics predicts that investments in management control will enable risky interfirm transactions. Risk is rarely eliminated, because firms trade off costs of management control and expected costs of control loss (together, the "cost of control"). The resultant solution typically comprises a mix of control investments with residual performance and residual relational risks. Transaction cost economics also predicts that the control-residual risk tradeoff will vary with the cost of control. We use survey data on 287 risky information technology transactions to test whether the control-residual risk tradeoff varies predictably with two partnership-specific factors that proxy for variation in the cost of control: prior ties between exchange partners and the criticality of strategic resources to the transaction. The results support the hypotheses, providing novel evidence on tradeoffs that managers make when investing in management controls while also prudently accepting some risks.

In this paper, we examine the role of budgets, as a central instrument within the management control system, in a creative context. In particular we investigate whether Simons' (199'8 1991, 1995) claim that stimulating creativity requires an interactive use of management controls, holds when differences in the kind of creativity are taken into account. We hereby distinguish between expected creativity (for open, self-discovered problems) versus responsive creativity (for closed, presented problems) (Unsworth, 2001). Based on a comparative study involving four creative organizations, we find indications that creative firms being mainly characterized by expected creativity use their budgets in a more interactive way. In creative firms in which responsive creativity is most important, the budgets are used in a rather diagnostic way. This study makes an important contribution to the management control literature by acknowledging that a diagnostic use of budgets does not per se stifle creativity. Instead, it is important to understand that the specific creative context might have implications for the way in which management control instruments are used to sustain the creative process.

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