Beyond the decision to ally: Constraints on adapting to emergent control risks

Abstract

Partners' efforts to manage risk extend far beyond decisions made when an alliance is formed and continue throughout its lifecycle. As an alliance matures, it is expected that partners will adapt controls to address unanticipated, emergent risks; however, empirical evidence indicates that such changes are relatively rare. This study aims to advance our understanding of the constraints on control adaptation by examining the role of governance inseparability, a condition in which partners' prior control choices limit the range and types of subsequent strategic control options. Using a longitudinal analysis of two mature alliances, we examine episodes where partners struggled to switch from or differentiate alliance controls compromised by emergent risks. We trace these constraints to a range of sources, including contractual commitments, alliance-specific regulation, and control consistency. Furthermore, we observe how partners introduced 'compensatory controls', that is, additional controls to remedy secondary control problems created by the existing control infrastructure.

To imitate or not to imitate? A note on control misalignment in supply chains

“…Despite the fact that such misalignments commonly exist in practice, and have been associated with negative performance implications (e.g. Anderson and Dekker 2005; Mooi and Ghosh 2010; Kumar et al 2011;Handley 2017;Sutton and Brown 2021), our understanding remains limited as to why misalignment occurs (Cuypers et al 2021). Summarizing prior work, this article brings to the attention the managerial process of imitating as a potential explanation for control misalignment (Vosselman 2002;Reusen and Stouthuysen 2017).…”

“…Additionally, realizing that misalignment might occur due to imitation and imperfect adoption of MCS in interfirm relationships, this should trigger efforts by inappropriately aligned organizations to reduce their degree of misalignment (Nickerson and Silverman 2003). In particular, accountants and controllers could help their firm to realign control structures that are misaligned from a TCE perspective, knowledgeably considering the firm's risk appetite (Anderson et al 2017), as well as accounting for adjustment (Sutton and Brown 2021) and opportunity (Phua et al 2011) costs.…”

A Bibliographic Study for Management Control Systems on Journal of Management Accounting Research

“…The controls have been categorized in many ways. For example, formal and informal controls (Akroyd, Kober, and Li 2019) output and behavior controls (Rehman et al 2021) market, bureaucratic and clan controls (Dierynck and Pelt 2021) administrative and social controls (Rodrigues et al 2021) and outcomes, actions, and control personnel (Sutton and Brown 2021).…”

Partner selection as a control mechanism in inter-organizational relationships: a meta-model approach

“…More recently, taking a dynamic view of IORs, Sutton and Brown (2021) also find that when partners are limited in strategic options to renegotiate contracts, they respond to emergent risks mainly through partner selection strategies and interfirm management controls. Their findings highlight the “versatility of partner selection strategies in attending to a wide range of risks” (p. 34).…”