The diffusion of managerial accounting procedures in the People's Republic of China and the influence of foreign partnered joint ventures

Abstract

Until recently management accounting information and detailed cost and profitability data were of limited use to the management of enterprises in the People's Republic of China (P.R.C.) as they had few discretional decision-making responsibilities. The recent move away from central economic planning and the introduction of competitive markets and private ownership of firms has led Chinese enterprises to question whether their existing accounting systems are adequate and to search for alternatives. As the P.R.C. moves toward a free market economy it seems plausible that they at least consider the adoption of the various management accounting concepts used in capitalist societies. One avenue for the dissemination of capitalist style management accounting practices to Chinese enterprises is via participating in a joint venture company with a foreign partner. I hypothesize that the accounting systems employed by the joint venture operation, which are invariably designed by the foreign partner, will have a significant influence on the development of, and content of, management accounting in the Chinese partner. Various explanations of the rate of adoption of capitalist style accounting systems by Chinese firms are developed and tested; these explanations are consistent with theoretical frameworks developed in the institutional isomorphism and diffusion of innovation literatures. Survey results show those Chinese (Sino) enterprises who participated in foreign partnered joint ventures made more changes to their management accounting systems when compared to similar P.R.C. companies who had no collaborative venture operations with foreign firms. These changes involved a move towards the accounting techniques employed by the joint venture.