Paradoxes of Control and Creativity: Evidence from Indian Public Sector Enterprises

Abstract

Management control systems (MCSs) are commonly assumed to limit autonomy and freedom, thereby hindering innovation. Over the past several years, researchers have studied this relationship in western societies and have compiled contradictory findings. As such, the relationship between MCSs and innovation needs to be further explored. This study seeks to provide a better understanding of this relationship by applying the theoretical levers-of-control (LoC) framework while using two new second-order constructs. Quantitative data are collected from large Indian public sector enterprises (PSE) and are analyzed using the structural equation modeling (SEM) partial least squares (PLS) method. Findings confirm that Indian PSEs tend to use all four levers of the framework and that control and innovation can co-exist. It also differentiates the effect on innovation of two new second-order control constructs: constraining and inspirational. Findings of this study may help managers influence innovation by giving them the ability to adjust the different LoC.