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The relevance of accounting and control to entrepreneurship and innovation has become more salient over the last few years. The traditional paradigm that identified accounting and control as nothing else but detrimental to these two aspects of management has been challenged both through new concepts and recent empirical evidence. This paper presents a review of this emerging literature. It examines the theoretical concepts that are shaping these fields as well as the evidence that is accumulating. It also presents a framework to structure the study of management control systems in innovative settings and future opportunities for research.

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Adopting management accounting systems are important events in the life of young and growing companies. Using a sample of 78 startup companies, we document cross-sectional differences in the adoption of operating budgets as well as seven other management accounting systems. We find that our proxies for agency costs, perceived benefits and costs, company scale, and top management style explain cross-sectional differences in the time-to-adoption of budgets. In particular, the presence of venture capital, CEO experience, presence of a financial manager, number of employees, and the CEO beliefs about management planning systems are associated with this adoption decision. We further investigate the effect of hiring a financial manager as an endogenous variable. In the first stage of a two-stage model, we find that CEO experience, the presence of venture capital funds, CEO beliefs about management accounting systems, and number of employees are associated with crosssectional variation in this hiring decision. When treating this decision as endogenous, time-to-hiring a financial manager is unrelated to operating budget adoption. The paper also examines the association between the time-to-adoption of operating budgets and company performance. We find a significant increase in the number of employees of the company around the adoption of operating budgets; moreover, faster adoption of operating budgets is associated with faster growing companies. We extend the findings to additional management accounting systems including: cash budgets, variance analysis, operating expense approval policies, capital expenditure approval policies, product profitability, customer profitability, and customer acquisition costs. The influence of industry (biotechnology, information technology, or non-tech) is examined in each stage of the research.

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This paper uses a multi-method, multi-case field research design to study the evolving portfolio of the management control systems (MCSs) of 78 early-stage startup companies. We examine 46 individual systems from eight different MCS categories—financial planning, financial evaluation, human resource planning, human resource evaluation, strategic planning, product development, sales/marketing, and partnerships. We report analysis of the following: (1) The speed of adoption of financial planning and financial evaluation systems in relation to six other MCS categories. These systems are considered key MCSs associated with management accounting. We find financial planning to be the most widely adopted MCS category at an early stage, followed by the human resource planning and strategic planning categories. Financial evaluation systems are typically adopted at a later stage. (2) Variables associated with the rate of adoption of MCSs. Our results indicate that number of employees, presence of venture capital, international operations, and time to revenue are positively associated with the rate of adoption. Furthermore, the rate of adoption simultaneously affects company size. (3) CEO turnover and the rate of adoption of MCSs. We find that CEOs who have adopted fewer MCSs have shorter tenures. This is consistent with the hypothesized difference between entrepreneurs and managers. Overall, the evidence strongly supports the relevance of MCSs to the growth of early-stage startup companies.

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