Description
Path-creating change in organizational form is proposed as an important element in achieving management control in
hybrid organizations. Using case examples from large-scale projects in the architectural, engineering, and construction
industry, as well as from joint ventures in the oil and gas industry, we highlight the role of mindfully synthesizing new
organizational forms in the design of management control systems.
Designing management control in hybrid organizations:
The role of path creation and morphogenesis
Richard J. Boland Jr.
a,
*
, Arun K. Sharma
a
, Paulo Se´rgio Afonso
b
a
Weatherhead School of Management, Case Western Reserve University, Cleveland, OH, United States
b
Department of Production and Systems, University of Minho, 4500-058 Guimara˜es, Portugal
Abstract
Path-creating change in organizational form is proposed as an important element in achieving management control in
hybrid organizations. Using case examples from large-scale projects in the architectural, engineering, and construction
industry, as well as from joint ventures in the oil and gas industry, we highlight the role of mindfully synthesizing new
organizational forms in the design of management control systems. A series of paradoxes is disclosed, in which attempts
to achieve control through mimetic adoption of established management control techniques lead to reduced control. On
the other hand, path-creating deviations from institutionalized practices, resulted in improved project and venture perfor-
mance. It has been argued that the design of inter-organizational management control systems seeks to enable organiza-
tions to compete for resources and e?ciency, and also to obtain institutional legitimacy. Institutional theory proposes that
isomorphism permits organizations to obtain that legitimacy and explains their design. In this paper, we propose that path
creation and morphogenesis, which deviates from isomorphism, is an additional consideration in explaining management
control system design.
Ó 2008 Elsevier Ltd. All rights reserved.
Introduction
We will explore some perplexing issues in the
design of management control systems for hybrid
forms of organization. The types of hybrid ?rms
that we will consider here include joint ventures in
the oil and gas industry, as well as multi-year,
multi-?rm construction projects. The oil and gas
joint ventures we will consider are for the explora-
tion and development of o?shore ?elds by multina-
tional oil companies, and the construction projects
are those of the architect Frank O. Gehry. These
hybrid organizations involve rapid change in the
use of technologies, materials, and practices, and
are high-stake, high-risk enterprises that critically
rely on their management control systems.
The intense rates of change, increased require-
ments for innovation, and high levels of risk in these
two domains exemplify the prime reasons for creat-
ing hybrid forms. Their hybrid organization enables
diverse skills and resources to come together for
accomplishing especially challenging organizational
tasks (Borys & Jemison, 1989; Powell, 1987). Dyer
and Singh (1998) note that these cooperative strate-
gies lead to inter-corporate competitive advantage
by encouraging interactions that are di?cult, if
not impossible, to manage through third-party or
0361-3682/$ - see front matter Ó 2008 Elsevier Ltd. All rights reserved.
doi:10.1016/j.aos.2008.06.006
*
Corresponding author.
E-mail address: [email protected] (R.J. Boland Jr.).
Available online at www.sciencedirect.com
Accounting, Organizations and Society 33 (2008) 899–914
www.elsevier.com/locate/aos
hierarchical enforcement (i.e., sharing tacit knowl-
edge, exchanging di?cult-to-price resources, o?er-
ing innovations, etc.). Little attention has been
given to the motives for management accounting
changes generally (Hopwood, 1987; Malmi, 1999),
and the literature on the design of inter-organiza-
tional management control systems for hybrid orga-
nizational forms is in its infancy.
Institutional theory, which goes beyond the neo-
classical principles of economic rationality (Lapsley
& Mitchell, 1994) and is not centered in the price-
mechanism concept (Kapp, 1976), has been used
to explain the structures of such hybrid forms and
their inter-organizational management control sys-
tems. It assumes that organizations develop their
practices and systems in order to achieve a higher
level of conformity to the surrounding institutional
environment. Institutional-based research in the
management accounting literature has followed
three di?erent streams: new institutional economics
or transaction cost economics, old institutional eco-
nomics, and new institutional sociology (Burns &
Scapens, 2000; Scapens, 2006). An approach based
on new institutional sociology is particularly useful
when di?erent organizations are connected through
relationships of dominance and dependence, and
emphasizes the pressures and processes of isomor-
phism that shape organizations in such collabora-
tive projects (DiMaggio & Powell, 1983).
However, institutional approaches are not free from
limitations, and institutional isomorphism cannot
accommodate the complexity and distinctiveness
of some relevant cases.
In this paper, we will ?rst consider the control of
hybrid forms of organization in the construction
projects of Frank O. Gehry. Then, we will consider
some unique aspects of management control in sev-
eral major oil and gas joint ventures. In a complex,
long-term construction project, architects, engi-
neers, construction managers, contractors, fabrica-
tors, and multiple specialist consultants form a
hybrid organization in which each member ?rm per-
forms unique functions as an autonomous entity
within the project structure. The diverse expertise
required for the project is not found within a single
?rm, and is not available in an established market.
The problem of management control is to bring
these autonomous actors together in a way that
enables each ?rm to succeed, as well as the project
as a whole, even though these two needs are often
at odds with each other. In oil and gas joint ven-
tures, by contrast, the ?rms involved are often very
similar in operational capabilities and in technolog-
ical and engineering expertise, yet the control of
?eld operations is typically held by one of the joint
venture partners, creating a di?erent sort of tension
over controlling informational and ?nancial aspects
of the project. Here again, management control is
employed to ensure hybrid success and optimize
partner returns.
At ?rst glance, it may seem as though the prob-
lems of hybrid organizations parallel the problems
of designing transfer pricing and reward systems
in traditional ?rms that pursue a decentralized, div-
isionalized structure. Although there may be a
resemblance between the two, the problems of cre-
ating a management control system are deeply dif-
ferent. In fact, the problems in the hybrid form are
unique and require a path-creating change of orga-
nizational form in order to design an e?ective man-
agement control system. Why a path-creating
change of organizational form is required in hybrid
?rms and some examples of e?orts to create such
changes in the high complexity, high-risk context
of our research sites, is the major focus of our
paper.
Taking an enterprise and decomposing it into
operating units for the purpose of creating a man-
agement control system is fundamentally di?erent
from bringing separate enterprises together in a
temporary assemblage and designing a management
control system for them. The ?rst sequence is a
movement from a hierarchy to a market (creating
market elements within a pre-existing organization)
and the second sequence is a movement from mar-
ket to hierarchy (creating an organization among
pre-existing market elements). This di?erence in
sequence is all-important, and we ?nd that a sys-
tem-theoretic approach to the problems of decom-
position versus synthesis is helpful in framing our
discussion of it. Simply put, the logic of breaking
a system down into component parts (decomposi-
tion) is distinct from the logic of putting parts
together to form a whole (synthesis), even though,
at the end, a similar mix of market and hierarchy
may appear to be in place. In the case of a division-
alized ?rm, the decomposition takes place in a
multi-layered system with a history that is ‘‘taken
for granted”. Institutional theory has a special com-
mitment to such ‘‘taken-for-granted” situations
(Carruthers, 1995; Scapens, 2006) and, as a conse-
quence, can neglect the existence of con?icts within
organizations, and the associated questions about
power and control, which have been highlighted
900 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
by some accounting researchers (e.g., Collier, 2001;
Major & Hopper, 2005).
In a divisionalized organization, the history of
the system is the history of the ?rm that is being
decomposed into the mixture of market/hierarchy
hybrid relations, which will in?uence the operating
logics of the decentralized operating units. Our
ideas about what the system is, how it came to be,
what its missions are, how its cultures operate,
why its routines are the way they are, its current sit-
uation and trajectory, etc., are all ways in which the
history of the decomposed ?rm is manifest to us at a
given moment in time. Designing its management
control system takes place within this understand-
ing, and while not always perfect, that pre-under-
standing of the system is part of the problem
space for the logic of its management control design
as re?ected in the mix of its market/hierarchy rela-
tions. In a hybrid organization, on the other hand,
its form is synthesized from pre-existing, indepen-
dent elements, which have multiple, di?use histories,
leaving it without a clear history of its own, and not
necessarily tied to any coherent logic of operations.
The histories that the initially separate ?rms carry
with them in the form of work practices, origins,
routines, cultures, situations, trajectories, etc., are
in a sense ‘‘hidden” from the management control
designers. In the ?rst case, the autonomy of the
units is a ?ction, useful for decomposing a complex
task, and in the second, the autonomy of the units is
a real condition.
In a hybrid situation, the logic of synthesis does
not come from within the autonomous operating
units, but instead comes from the project of the lar-
ger hybrid ?rm into which they are being synthe-
sized: in our case studies, these are the American
architecture, engineering and construction industry,
and the transnational oil and gas industry. The dif-
ference in the form of logic could not be more pro-
found. Decomposition employs the logic of an
existing ?rm to create market/hierarchy relations
among its subsystems, whereas synthesis uses the
logic of a larger system to create the market/hierar-
chy relations among pre-existing ?rm level compo-
nents. We will now ground this argument in
concrete examples from the hybrid organizational
forms found in the American construction industry
on large, complex construction projects, and in the
oil and gas industry on exploring and developing
o?shore ?elds.
An organization’s institutional environment
includes beliefs, habits, and rules that are external
and hierarchically above the organization (Scott,
1987). Organizations are dependent on the support
of these external elements in order to survive
(Gupta, Dirsmith, & Fogarty, 1994). Such hierarchy
implies sources of domination that in?uence the
design and evolution of management control sys-
tems in order to conform to external expectations.
Furthermore, the understanding of how these mar-
ket pressures and forms of dominance are forces
in the emergence of management control systems
is also important. Thus, both market and institu-
tional environments and their intertwined roles
should be considered. In fact, some theorists (e.g.,
Geiger & Ittner, 1996; Gupta et al., 1994; Scott,
1987) suggest a combined analysis of economic
and institutional pressures to enrich the understand-
ing of the design of new management accounting
systems. This is an issue that has been neglected in
management accounting literature, particularly
when change is characterized by complex organiza-
tional processes or forms (Abernethy & Chua, 1996;
Carruthers, 1995).
We begin with a brief overview of the way archi-
tectural, engineering and construction ?rms come
together in order to complete a project. The impor-
tant point is that these individual ?rms come
together in a temporary contractual arrangement
through a bidding process in order to coordinate
their separate operations in designing and con-
structing a building or other structure. How they
come together does not ?ow from a logic of opera-
tions, as in the single ?rm being decomposed, but
from the historical, path-dependent practices of
contracting and risk allocation that happen to be
in place in the industry. The structural relations that
result from these practices are where path-creating
change can take place, if management control sys-
tems are to break from mimicry. In other words,
the institutional level of formal and informal con-
tracting and the many practices, routines, and com-
munication patterns that are the path dependent
history of the construction industry can be subject
to mindful deviation as part of designing a manage-
ment control system. The next section summarizes
institutional economics and related key concepts,
emphasizing the contribution of new institutional
sociology for the argument made here. The section
‘‘Traditions forming a structured set of relations
in the construction industry” presents four cases in
the construction industry, and the sections ‘‘Tradi-
tions and structured relationships in the upstream
oil and gas industry” presents two cases in the
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 901
upstream oil and gas industry. The relevance of path
creation and the contrast of morphogenesis to iso-
morphism are discussed in the section ‘‘Morphogen-
esis in hybrid organizational forms”, and the section
‘‘Concluding thoughts and implications” presents
the conclusions and implications of such an
approach.
Institutional economics
Institutional economics is concerned with
explaining the evolution of social systems and the
social processes that emerge during this evolution
(Kapp, 1976). The use of institutional frameworks
for explaining management processes goes beyond
the principles of economic rationality, equilibrium,
and neoclassical economic theory (Lapsley &
Mitchell, 1994). The three di?erent streams of insti-
tutional research in the accounting literature, new
institutional (or transaction cost) economics, old
institutional economics, and new institutional soci-
ology, all o?er valuable insights that help to concep-
tualize management accounting practices (Burns &
Scapens, 2000).
Many scholars have used transaction cost eco-
nomics, as developed by Coase (1937) and William-
son (1975, 1985), to analyze the nature of inter-
corporate relationships and partnerships. It predicts
that ?rms will choose the most e?cient form of gov-
ernance to optimize transaction and production
costs. Thus, managers will form partnerships when
alternative (contractual or hierarchical) manage-
ment controls are more costly. Transaction cost eco-
nomics, however, best models ?rm behavior in
terms of either a hierarchy or a market, and is not
well suited to describe hybrid combinations of the
two (Stinchcombe, 1990; Williamson, 1991). How-
ever, it may provide a sound fundamental under-
standing of the nature of strategic dependencies
between ?rms using single transactions as the pri-
mary unit of analysis (Doz & Prahalad, 1991). Ring
and Van de Ven (1992) note that recurrent, rela-
tional transactions between trustworthy ?rms may
provide partners the ?exibility and risk reduction
necessary to reduce transaction costs, thereby
encouraging a move toward hybrid forms of
governance.
New institutional sociology neglects internal con-
?icts and issues related to power, but old institu-
tional economics explores the di?erent forms of
resistance to change in order to analyze the role of
prevailing institutions in change processes, and the
reproduction or change in institutions over time. In
this context, habits and routines are important com-
ponents of institutions. The reproduction of habits
and routines through time can lead to institutionali-
zation, the process through which speci?c patterns
of thought and action become taken for granted as
the way things are (Burns & Scapens, 2000; Ribeiro
& Scapens, 2006; Scapens, 2006). This implies that
change occurs when organizational routines evolve,
but does not explain how and why new systems
and practices are adopted by organizations. New
institutional sociology, in contrast, focuses on the
pressures and processes that shape organizations.
Such processes are explained through three types
of isomorphism: coercive, normative, and mimetic
(DiMaggio & Powell, 1983). Furthermore, new insti-
tutional sociology theorists argue that organizations
are not only pushed to achieve technical e?ciency
within their operations but also to accept and adopt
the rules and expectations of others outside the orga-
nization. Accordingly, technical and institutional
environments should be distinguished in order to
accommodate these di?erent types of pressures.
Institutional theory is based on the following
main concepts: institution, institutional and techni-
cal environments, interconnectedness, conformity,
and institutional isomorphism. Asymmetric infor-
mation and non-equilibrium market solutions imply
the existence of institutions. These institutions,
which Williamson prefers to call governance struc-
tures, are ‘‘the human devised constraints that shape
human action” (North, 1990, p. 3). These con-
straints can be informal (e.g., customs) or formal
(e.g., legal contracts). According to Hodgson
(1998), ‘‘institutions play an essential role in provid-
ing a cognitive framework for interpreting data and
provide habits and routines to support the exercise
of transforming information into useful knowl-
edge.” Institutions are embedded in day-to-day
activities and, according to Veblen, they re?ect the
knowledge and know-how recognized and appre-
hended by the organization’s elements in a ‘‘passing
on [process] of relevant information over time”
(Burns & Scapens, 2000). The technical environ-
ment is where products and services are produced
and exchanged and where organizations aim to be
e?ective and e?cient. According to Modell (2002,
p. 668), it ‘‘comprises factors related to the technol-
ogies applied in the transformation of inputs into
outputs and the market conditions facing organiza-
tions” (see also Scott & Meyer, 1983, and Powell,
1991).
902 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
Granlund and Lukka (1998) distinguish institu-
tional from economic pressures, presenting the lat-
ter as the technical or functional pressure for
change. They exemplify these ‘‘technical or func-
tional pressures” as ‘‘corporate size and technol-
ogy,” ‘‘advanced production and information
technologies,” and ‘‘competition strategies.” Fur-
thermore, an organization’s institutional environ-
ment comprises beliefs, habits, and rules that are
external and hierarchically superior to the organiza-
tion. This hierarchy implies sources of domination
(e.g., the government) that push organizations to
become passive, molded by the pressure of institu-
tional elements (Zucker, 1987, p. 450). Organiza-
tions depend on the support of these external
elements to survive (Gupta et al., 1994, p. 268).
Thus, they conform to their institutional environ-
ment by adopting appropriate operating practices
and procedures. The institutional environment is
the arena where organizations face isomorphic pres-
sures. These pressures occur predominantly within
the organization’s inter-organizational context
(Meyer & Rowan, 1977). Institutional theory recog-
nizes the existence of both technical and institu-
tional environments, but it stresses the in?uence of
institutional pressures (Oliver, 1991). Organiza-
tional structures and practices are shaped by all of
these forces, as is the accounting profession itself
(Boland, 1982). Scott (1987, p. 507) posits that
‘‘no organization is just a technical system
and. . .many organizations are not primarily techni-
cal systems. All. . .organizations exist in an institu-
tional environment. . .” The role of both
institutional and technical environments in organi-
zational change is supported by Scott and Meyer
(1991), and Carruthers (1995).
On the other hand, according to Granlund and
Lukka (1998), institutional isomorphism is a key
element in management accounting change. It is
supported by two general propositions: Environ-
ments are interconnected, and organizations react
to external demands and expectations in order to
survive in a particular environment. Connectedness
implies the existence of transactions between orga-
nizations that can happen through contractual rela-
tionships or through other formal or informal
activities (DiMaggio & Powell, 1983, p. 147). Dacin
(1997, p. 46) de?nes institutional pressures as exog-
enous elements that in?uence the structure and
behavior of organizations. These elements can be
found in ‘‘broadly based socio-cultural norms” as
well as in the connections between organizations
characterized by relationships of dependency. Thus,
isomorphism results from the interconnectedness of
organizations or from broader societal pressures.
The latter are macro-environmental and in?uence
all organizations in that institutional environment.
However, interconnectedness also supports isomor-
phic processes at a micro-environmental level. In
this context, organizations are pushed to become
isomorphic, which means they have to conform to
a set of institutionalized rules, habits, and beliefs
(Abernethy & Chua, 1996; Oliver, 1991).
According to DiMaggio and Powell’s (1983) con-
cept of institutional isomorphism, institutional pres-
sures can be classi?ed as coercive pressures,
normative pressures, or mimetic processes. These
di?erent types of elements characterize the three
mechanisms through which isomorphism takes
place. Although speci?c forms of pressure may play
a dominant role at a speci?c situation or point of
time, all three forms of institutional isomorphism
presented by DiMaggio and Powell (1983) are
important for the study of management accounting
change (Abernethy & Chua, 1996, p. 597; Modell,
2002, p. 672). Coercive isomorphism is de?ned by
Oliver (1988) simply as an institutional element
resulting from formal or informal pressures exerted
by one organization on another. These pressures
can be exerted by headquarters, national or interna-
tional institutions, or by business partners, depend-
ing on the regulative nature of the institution
concerned. Coercive pressures occur when organiza-
tions depend on others for critical resources or long-
term survival, which implies the adoption of speci?c
attributes to be legitimated. Public agencies, hospi-
tals, and schools that are funded by the state are
good examples of political coercive in?uence. Like-
wise, suppliers that depend on important buyers for
their long-term survival can experience this type of
isomorphic pressure.
Normative isomorphism is based on values and
professional norms or roles, and comes from within
the organization itself (Zucker, 1987). A kind of
homogenization of management practices in di?er-
ent organizations is produced when these practices
are carried out by the same professionals. Univer-
sity education, professional networks, and profes-
sional training are three signi?cant sources of this
kind of isomorphism (DiMaggio & Powell, 1983).
Furthermore, normative pressures are based on val-
ues and institutionalized rules that can be exerted at
a supra-individual level through what Granlund and
Lukka (1998) called ‘‘national and corporate cul-
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 903
tures.” Miller and OLeary’s (1993) study of the
adoption of Japanese production practices in the
United States o?ers a good example of normative
pressures on a supra-organizational or societal level.
They stated that these types of practices were imple-
mented not only because of the particular interest of
each organization but also because there was a
strong national normative pressure for improve-
ments in production e?ciency. Thus, in this context,
managers were able to justify investments in new
production technology even without clear evidence
of their economic bene?ts.
Finally, mimetic processes come from outside the
company and are essentially driven by consultants.
Mimetic isomorphism is an important source of
institutionalization because (a) in practice there
are not many alternatives for management account-
ing practices, (b) competition pushes ?rms to follow
similar courses of action, and (c) in general, leading
organizations are advised by a small number of con-
sulting ?rms, implying that a limited set of alterna-
tives are e?ectively followed. In fact, according to
DiMaggio and Powell (1983, pp. 151–152), in prac-
tice there is relatively little variation in alternatives.
Because managers actively seek models upon which
they can design their own management practices,
mimetic or imitative (DiMaggio & Powell, 1983, p.
150) processes promote the replication of ‘‘good”
practices among companies. In order to achieve
their goals, organizations in general try to imitate
‘‘the most prevalent or successful alternatives”
(Granlund & Lukka, 1998, p. 167). However, in
practice, organizations tend to copy ‘‘good organi-
zations” and not ‘‘good solutions.” They tend to
follow the example of leading organizations even
if they do not have an exact idea of the bene?ts of
the behaviors they are copying.
Abernethy and Chua (1996) presented three main
criticisms of applying institutional theory to explain
management accounting. First, the impact of
change on the internal e?ciency of an organization
is ignored. Second, the process by which new values
and beliefs replace old norms is not well explained.
Third, power and control issues are usually
neglected (see Covaleski, Dirsmith, & Michelman,
1993). They also suggested that research should
specify more clearly the relations between technical
and institutional environments. This suggests that:
(1) institutional environments may be characterized
by complexity rather than homogeneity and (2) the
relationship between technical and institutional fac-
tors has not been fully analyzed. Furthermore, for
Oliver (1991), the isomorphic process, as explained
by institutional theory, fails to address strategic
behavior. Modell (2002, p. 673) also argues that
there is a lack of knowledge about the interplay
between institutional pressures and organizational
response. She suggests that institutional frameworks
should be extended to include the degree of an orga-
nization’s resistance to institutional pressures. This
implies that institutional models should assume a
range of possible organizational responses to iso-
morphic processes, re?ecting di?erent degrees of
conformity represented by a ‘‘continuum of
resistance.”
Finally, the intertwined roles of technical and
institutional environments require more attention.
Carruthers (1995) pointed out that the relationship
between technical and institutional factors is a key
topic that remains unexplored in the literature. Per-
haps institutional and technical environments
should not be viewed as independent, but symbiotic,
in some cases of management accounting change.
Although the three lines of institutional theories dis-
cussed above represent di?erent approaches for the
study of change processes in management control
systems, all three o?er insights that are helpful for
conceptualizing new theories in this ?eld. In this
paper, new institutional sociology, and particularly
institutional isomorphism, will be considered in
terms of the concept of path creation. It is argued
that the latter is more suited to understand the
design, adoption, and use of new management con-
trol practices for complex, hybrid organizational
forms.
Traditions forming a structured set of relations in the
construction industry
The mix of market/hierarchy structures in large
projects in the construction industry is largely taken
for granted as they way things work. They are tradi-
tional practices that have taken shape over decades
and in some case centuries. Architects, engineers,
and contractors ‘‘know how to go on,” in Wittgen-
stein’s sense, because their skillful activity is
grounded in their niche in the hybrid industry, be
it as an architect, construction manager, contractor,
subcontractor, or consultant. Bidding and contract-
ing processes, patterns of information exchange,
and roles of each participant in a typical building
project are all formally speci?ed or informally
implied and understood in standardized contracts
that are interdependent and mutually reinforcing.
904 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
Competitive bidding calls for restricted communica-
tions among parties, in order to avoid collusion.
Contracting is structured in speci?c ways in order
to distribute risk among the parties, thus further
shaping allowable and required communications.
Contracts de?ne the scope of speci?c work and
the responsibility for each party. Expected patterns
and formats of information exchange are speci?ed
in contracts, and the sequence and timing of mes-
sages to resolve ambiguities in those documents
are also speci?ed.
We can brie?y summarize the standard practices
of a traditional, design/bid project in the construc-
tion industry as follows. An owner selects an archi-
tect who works with the owner to identify
requirements and create a design as a set of draw-
ings, which indicate the intention of what is to be
built. Standard contracts assume that these draw-
ings will be paper based and two-dimensional.
The drawings do not show every detail of the con-
struction that is required, but instead suggest typi-
cal ways in which details are to be handled. They
leave it to the discretion of contractors and subcon-
tractors to identify a suitable method of construct-
ing the intended elements in a workmanlike way,
following accepted practices. Contractors and sub-
contractors who are successful in bidding for a job
take the architect’s drawings and use them as a
basis for creating their own documents for the
architect’s approval, showing how they intend to
fabricate and install their part of the overall build-
ing. In preparing these ‘‘shop drawings,” contrac-
tors ask architects questions by submitting RFIs
(requests for information) or RFCs (requests for
clari?cation). In all projects of reasonable complex-
ity, RFIs and RFCs are to be expected, and con-
tracts specify the sequence of reviews and timing
of responses for them. But such requests for clari?-
cation or information can also serve as the basis for
declaring a change order, and requesting more
compensation.
Our research on Frank Gehry followed his ?rm
(Gehry Partners LLP) for four years, as they
adopted three-dimensional software tools for docu-
menting the exceedingly complex surface geometries
of his designs. We used the concept of path creation
to guide our research, tracing the mindful deviations
from established practices that a shift to three-
dimensional representations entailed. We found that
the changes in practice that accompanied adoption
of three-dimensional representations were very
widespread and included innovations in organiza-
tion structures and strategies, work practices, and
a range of technologies.
Contracts and accepted practices on construction
projects have evolved with the assumption that
design and construction information will be repre-
sented with two-dimensional images and associated
text documents (e.g., component and material lists).
Standards have evolved in which the 2-D drawings
are expected to contain enough information for
the contractor to apply their trade-speci?c knowl-
edge to complete the work. In this way, responsibil-
ity for errors can be traced to either the architect or
the engineer for having speci?ed a design that was
inherently inadequate, or to the contractor for hav-
ing failed to apply the correct workmanlike exper-
tise. Contracting also assumes that the sequencing
of the design, bidding, and construction will be in
discrete stages, with a full set of design documents
put out for competitive bidding by contractors.
Even from this brief overview, we can see that a
path-creating technological change from two-
dimensional to three-dimensional representations
has the potential to be a signi?cant disruption in
the established pattern of relations among the actors
in a large and complex project. What we discuss
below are some unique issues related to manage-
ment control that were encountered in the study
of Gehry Partner projects as they incorporated
three-dimensional representations in their design
and construction. Their innovations with represen-
tational forms bring into relief the way that mor-
phogenesis of the structural relations in the
industry as a whole, including its contracting, risk
allocation, scope of work, communication patterns,
and work practices, is required for e?ective manage-
ment control of a large project. The following intro-
duces some of the ways that Gehry Partners LLP
sought to e?ect those changes.
We will brie?y recount a number of instances in
which Gehry Partners or other members of their
project teams take a path-creating action intended
to change the form of relations that characterize
large construction projects. These examples of path
creation are morphogenic in the sense that they
stimulated a change in accepted organizational
practices, and that the management control system
in those projects was shaped by the morphogenic
quality of these innovations. Four examples of path
creation and morphogenesis in the hybrid organiza-
tion of construction projects will be presented.
First, however, we will present the main features
of path creation as we use it.
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 905
Path creation is the way a single agent, such as
Gehry Partners, mindfully deviates from tradition-
ally reinforced patterns of practice and resource
use in order to instigate a new set of self-reinforcing
relationships (Garud & Karnoe, 2001). Mindful
innovators attend to this deviation with reasoning
grounded in their own organizational conditions,
and not on random decisions or mere imitation
(Swanson & Ramiller, 1997). Path creation is best
explained in relation to path dependence, which is
a theoretical construct in evolutionary economics
that has grown from the work of David (1985)
and Arthur (1989) and brings a historical, systems
view to economic explanations of technology inno-
vation. In contrast to traditional micro-economic
accounts, the concept of path dependence recog-
nizes that temporality and dynamic adaptation to
unanticipated events are important in understand-
ing how technological innovations come to be and
are adopted over time. A path dependent process
is one in which a chance historical event, seemingly
insigni?cant at the time of its occurrence, comes to
have a major impact on the way an innovative pro-
cess unfolds. Path dependence is thus a retrospective
view of how historical events become reinforced by
subsequent (learning) events in a way that reshapes
the probability of moves by actors, such that a self-
perpetuating cycle is established (Arthur, 1989;
March, 1991). Often, in the end state, technology
and learning is in some sense sub-optimal, re?ected
by a technological and behavioral lock-in. Overall,
the concept of path dependence is used to explain
why neither technology innovation and di?usion
nor learning conform to rational choice models.
Although path dependency does not rule out
human agency as a source of historical change, it
does not normally explore agency as a creative force
that makes history by establishing new cycles of
positively reinforced feedback relations. Its primary
assumption is that human actors are passive or con-
servative with respect to the alternatives present in
their environment, and that they follow reinforced
patterns of feedback relations in choosing their
courses of action and targets of learning. Path crea-
tion, in contrast, emphasizes human agency and
emphasizes that actors can and will mindfully devi-
ate from what appears to be the common expecta-
tion (a reinforced pattern of action) in order to
sample new experience, explore new forms of prac-
tice and create new resources (Garud & Karnoe,
2001). Below we present a series of examples from
our ?eld research in which the path-creating agency
of human actors is an important element for
explaining the design of management accounting
systems. By breaking from path dependent modes
of management accounting, the actors mindfully
deviated from the mimicry of institutional the-
ory—choosing, in a sense, morphogenesis rather
than isomorphism.
Example 1 (The Fish Sculpture project—avoiding
management control over the project in order to
increase chances for project success). Gehry Part-
ners’ ?rst use of three-dimensional software tools in
design and construction was a Fish Sculpture that
Frank Gehry proposed for the Barcelona Olympics.
It was a relatively small project and was done
‘‘paperless”, using only the digital models. The time
allowed was very short, and there was no design—
just an idea. Jim Glymph, Frank Gehry’s senior
partner tells it best:
The ?rst project (using 3D) was the most success-
ful we may have ever had. . .. And what con-
vinced us was we got the job done a month
early. Everybody made money, there were no
extras—that never happens.
But the other thing that happened was a lot of
rules were suspended in order to allow that to
happen. . .We literally agreed to attempt it only
if the project managers were left out of it and
the whole management process was abandoned
because it was too slow. We made some deals
with the city on approvals, a lot of deals were
made to operate outside the rules and basically,
most of the deals had to do with peeling away
layers of oversight and management and getting
down to just the people that are doing the work.
And then putting only the absolute minimum
amount of management back on top of that to
keep it from going o? the rail.
And in construction, well like anything else, but
in construction, you know, there’s been a tradi-
tion built up about paper and a paper process,
an approval process for everything you do that
is very complicated. We didn’t sacri?ce any qual-
ity control measures, we clearly didn’t sacri?ce
any management. We just eliminated manage-
ment where it wasn’t necessary, which was most
places. . .We haven’t done a paperless project
again, because we’ve not had that environment
where we were committed to suspend all the
rules. And so that still remains the most e?cient,
the most successful use and it was the ?rst use.”
(Jim Glymph, November 9, 2002)
906 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
Stripping away layers of management, removing
oversight and chains of approval, and bring the
actors together in an intense, self-regulating team
can be seen as an idealization of what a hybrid form
is intended to accomplish, but is de?nitely not in
keeping with institutional practice. The inability to
achieve that type of hybrid form again suggests that
the institutional pressures are considerable, but this
instance of path creation goes beyond mere resis-
tance and its accomplishment is available for all of
us to enjoy in Barcelona.
Example 2 (Replacing managers and control systems
with builders in order to increase project con-
trol). The contrast between two Gehry Partners’
projects with radically different approaches to man-
agement control illustrate a recurring theme in their
efforts at path creation in control systems. Both
were large, complex projects of comparable size,
whose identities we have been asked to conceal.
One had an experienced builder and two assistants
running the job from their construction trailers;
another had eight managers working spreadsheets
to control the project from their construction trail-
ers. The former project went smoothly, the latter
went poorly. The builder and his assistants created
cost and schedule reports as needed for milestone
meetings, but focused on orchestrating the project
team members and on collaborative problem solv-
ing. The managers and their spreadsheets spent
energy on tracking deviation in performance and
allocating blame when problems arose. That project
employed intensive risk-control strategies in the
?eld, focusing on the ?nancial aspects of the daily
work activity, only to experience ?nancial dif?cul-
ties, ?nger pointing, and gaming of the requests
for change orders. The ?rst project minimized man-
agement control in the ?eld, allowing it to take place
behind the scenes, while focusing on coordination
and collaboration of the work. They experienced a
more successful, well-controlled project.
Example 3 (On the Experience Music Project, layers
of decision oversight are removed in order to improve
decisions). On the Experience Music Project (EMP)
in Seattle, the construction company, Hoffman
Construction, organized construction teams in a
unique way. Normally, teams would include con-
tractor, owner, and architect representatives who,
when a problem was encountered, would discuss
issues, identify alternatives, return to their respec-
tive ?rms to make engineering studies, have further
discussions, and make approvals before the next
scheduled team meeting or preset deadline. This
standard procedure in construction projects reduces
the risk that sub-optimal actions will be taken or
that actors would make agreements that their supe-
riors would later undo. But it also increases the time
required for making a decision and draws out the
problem-solving process. On the EMP project,
Hoffman responded to its high levels of complexity
by forming teams that included all the usual actors,
plus any advisors, engineers, and fabricators who
would eventually be involved in the decision pro-
cess. They then set as a goal that all decisions were
to be made in these team meetings. This was a major
change in the coordination mechanism, and
increased the risk that a decision would lead to a
costly error, but it also created an atmosphere of
genuine collaboration, intense creativity, and one
of the most memorable and exciting project experi-
ences that many of the highly seasoned participants
had ever encountered.
Example 4 (Accounts payable disbursements within
24 h instead of 45 days). Traditionally, the multiple
?rms on large construction projects submit invoices
for work to date on a monthly basis. The invoices
will include request for additional payments, based
on ‘‘change orders,” which are claims by the con-
tractor that a change in the scope of work from
what was depicted in the contract drawings and
speci?cations has occurred, and the billing party
has suffered additional expenses that should be
reimbursed over and above the fees speci?ed in the
contract. The owner, in turn, traditionally paid pro-
gress invoices 45 or more days after they were sub-
mitted. The total elapsed time between the
submission of an invoice, resolution of change order
disputes, and ?nal payment could be substantial.
On the MIT Stata Center project, the university
changed its payment policy, and agreed to pay
invoices within 24 h if there were no open disputes
concerning change order requests. This path-creat-
ing restructuring of organizational practices
increased the risk that a proper approval could
not be performed on the invoiced amounts and that
an inappropriate payment could be made. It also
reduced the school’s ability to gain the advantage of
the time value of money. Nonetheless, it changed
the relational structure of the hybrid organization
that was constructing the Stata Center and dramat-
ically reduced requests for change orders, which
allowed more of the project communication to be
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 907
about solving construction problems and less about
assigning blame and making claims.
Traditions and structured relationships in the
upstream oil and gas industry
The upstream oil and gas industry (which ?nds
and produces petroleum from underground depos-
its) has a rich history of collaboration in the form
of hybrid organizations. Such collaboration takes
place between oil companies and their suppliers,
similar to the construction industry examples dis-
cussed above, as well as between oil companies
themselves in the form of joint ventures in the devel-
opment of large, high-risk oil ?elds. As noted in the
construction industry examples, the mix of market/
hierarchy forms in large joint ventures in the oil and
gas industry is largely taken for granted by its mem-
ber ?rms. The oil and gas joint venture is typically
governed through a Joint Operating Agreement that
re?ects the hierarchical forms of its parents. It is a
formal agreement between two or more oil company
partners and a resource holder (i.e., a government)
to produce oil and gas from a publicly held natural
resource (a petroleum reservoir). The terms of the
agreement span numerous areas including pro?t dis-
tribution, capital management, decision processes,
use of local contractors, social bene?ts and training,
and technology development and deployment. As
the pursuit of petroleum deposits is inherently risky
and requires signi?cant capital expenditures, oil
companies typically use the joint venture hybrid
form to distribute risk. However, the formation of
such a partnership generates its own forms of risk,
such as opportunism, information asymmetry, hold-
ups, and balancing one partner’s portfolio of ?elds
at the expense of another’s.
In an attempt to reduce partnership risk, operat-
ing agreements are designed to closely imitate the
hierarchical structure of its parents, complete with
a strict line of operational control. Thus, even when
ownership shares are 50/50 between two ?rms, an
oil and gas joint venture typically awards all opera-
tional control to one of the venture partners (the
operator) leaving all other joint venture partners
as non-operators. Oil ?eld development plans are
prepared by the ‘‘operating” partner with input
and approval from ‘‘non-operating” partners. The
joint venture is managed by the operating partner,
while non-operating partners are consulted for tech-
nical advice and are informed of the joint venture’s
activities. Non-operating partners, in order to pro-
tect their substantial ?nancial commitment (which
can amount to billions of dollars) will establish a
‘‘shadow” engineering o?ce that will duplicate
many of the engineering data collection and techni-
cal studies being performed by the operating part-
ner. This enables the non-operator to make
independent assessments about the potential of the
?eld and the options for developing it. Although
they do not have the power of the operating partner
to determine ?nal decisions, they can participate as
equally informed members in discussions about
technical and operational options, and in giving
approvals to the operator’s plans. Two examples
of morphogenesis in hybrid organizations found in
the case of the upstream oil and gas industry are
presented below.
Example 5 (West African offshore development -
giving up knowledge to gain in?uence and con-
trol). The West African coast is rich in large oil
deposits. However, these reservoirs can lie many
miles offshore in very deep water, making their
development an especially expensive and risky
endeavor. This particular case study was compiled
from interviews with a non-operating company in a
two party (50/50) multi-billion dollar West African
oil and gas joint venture. Even though the operating
agreement was structured to reduce risk through an
independently designed and strictly de?ned chain of
operational control, the operator’s culture and
procedures dominated the joint venture operations.
As a result, the non-operator attempted to in?uence
the operator in various ways, bringing the non-
operator into the loop of control. The interaction
between operator and non-operator resulted in a
morphogenesis that restructured the working rela-
tionship between the two partners, restoring a
balance in their ability to participate as a non-
operator in a more collaborative, if less authorita-
tive, way.
A key issue for the non-operating manager was
the relationship structure that developed through-
out the early years of the joint venture. The non-
operator’s manager and technical center was located
in Houston, while the operator was housed in
London. Early in the relationship, the non-operator
recognized the geographical gap was causing infor-
mation asymmetry between the partners, mostly at
the detriment of the non-operator. Senior non-
operator managers moved to London to be closer to
operator management, leaving their technical sta?
908 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
behind in Houston in the process. Thus, to avoid a
gap within operator/non-operator managers, the
non-operator was willing to create a gap within its
own organization.
A major concern for the operator was getting
quick approvals for operational budgets from the
non-operators. To ensure this, the partners to the
joint venture needed technical agreement as to the
state of the ?eld and the technical options open to
them, but with two technical groups separated by
the Atlantic, agreement became di?cult to obtain.
Although multiple technical organizations worked
harmoniously within each parent company, within
the joint venture the same organizational structure
caused operational di?culties. As noted by the non-
operating manager in regards to his technical team,
‘‘it was clear that there were ownership issues about
who made the technical decisions and who made
leadership decisions and some concerns about
giving us too much power and in?uence.”
The structure of the joint venture was thus
intended to reduce risk by engaging the technical
capabilities of both parents. But technical review
points and technical operating strategies were not
being aligned between the partners. Operator and
non-operator decision review boards were not
synchronized, and had di?erent technical require-
ments at di?erent decision points. Con?icting tech-
nical views did little to ensure better engineering
solutions, but rather slowed the engineering review
process. The two technical teams (divided by an
ocean) were getting in the way of each other more
than they were helping to provide better engineering
solutions. Internal con?ict within the joint venture
clouded the engineering discovery process, and led
to confusion regarding the best technical path
forward. With both operating and non-operating
management consolidated in London, the decision
was made to forgo operational review boards in
Houston, streamlining the decision-making process
to better meet the operational needs of the joint
venture itself. Thus, to enhance engineering design
clarity and the speed of technical decision making,
the joint venture reduced its engineering resources.
Example 6 (Canadian offshore development—Build-
ing in synthesis from the start). Like the western
coast of Africa, the eastern coast of Canada is rich
in oil and gas deposits. Although these oil ?elds
are not found in exceptionally deep water, their
development poses other challenges. Individually,
each ?eld is small, requiring ‘‘cluster developments”
or a consolidation of ?elds into a single offshore
platform to spread the cost of the platform over a
number of ?elds. In one Canadian joint venture,
three major oil companies consolidated six offshore
?elds for which they held rights under one offshore
platform for development. Unlike the typical joint
venture as described in the West African case, these
companies set out from the beginning to take a dif-
ferent approach. Their idea was to give the joint
venture the freedom to evolve on its own: to develop
its own culture and processes, to mold itself around
the combination of market/hierarchy forms that
emerged from the context of the ?elds, rather than
mimicking the organizational forms of their par-
ents. They were, in effect, encouraged to create their
own history—building the joint venture through a
synthesis of their technical and operational talents
rather than a decomposition of their parent forms.
From the very start, the joint venture was
structured di?erently from others the parent com-
panies were involved in. Rather than assigning one
partner to be an operator and infusing their existing
hierarchy into the hybrid, the joint venture was
organized as an independent, truly joint enterprise
from its inception and across all layers of engineer-
ing, operations, and management. The CEO, CFO,
and COO were all selected from di?erent parents.
The joint venture sta? was also selected from all of
the parents, thereby allowing those with the best
competencies from the entire pool of parental
resources to be actively involved in the project.
Unlike the traditional joint operating agreement
described above, this joint venture was free to select
sta? and services directly from the marketplace.
Thus, the Canadian joint venture treated the parents
as part of the market and a source for expertise and
services rather than a source of hierarchy. One
manager described the relationship as follows:
But technically we primarily—you know for the
surface we went to (Partner A), if we were look-
ing for some information on geotechnical or
structural or whatever we went to (Partner B).
But where we thought (Partner C) could add
incremental value and things like ?ow assurance
or two phase ?ow we would go get where we
thought the best was. So, if we thought (Partner
A) at that time had some knowledge on drilling
that was better than ours, so it was kinda like
let’s go to (Partner A) for this. And so, we picked
and chose where we went. And ultimately, what
they formed was a joint company.
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 909
The Canadian venture also had the opportunity
to develop its own culture; ‘‘it was a pretty fun place
to work as well. I mean you had your own culture
essentially. . .it really became a sub-culture. People
got a lot of responsibility—which they ate up.”
Thus, the Canadian venture had the ability to grow
through synthesis, molding its culture and processes
to the market, rather than adopting templates from
its parents.
Morphogenesis in hybrid organizational forms
We have identi?ed anomalies of risk reduction
in the hybrid organization of the construction
industry. The contracting arrangements in the con-
struction industry, including both formal and
informal aspects, are supposedly intended to bal-
ance the tensions and reduce overall risk of a
hybrid project organization. But in the environ-
ment of changing technologies and practices that
we observed in our study of Gehry Partners’ pro-
jects, we repeatedly saw path creation, not mim-
icry, in their contracting and risk-control
strategies. Gehry Partners and other member ?rms
of the hybrid project organization struggled to
achieve e?ective management control through
e?orts at morphogenesis of the organizational
structures themselves. Let us ?rst look at the tradi-
tional, institutionalized management control ele-
ments that are imbedded in the contracting
practices of the construction industry, and the
way they are intended to reduce risk:
a. Open bidding with contracts awarded to the
lowest, competent bidder is intended to reduce
the risk of overpaying.
b. Change orders being tied carefully to contract
language and to the representations of the
design that it includes is intended to reduce
the risk of cost overruns by isolating responsi-
bility among parties and assigning liability for
errors.
c. Minimum communication among parties
before bidding is intended to avoid the risk
of favoritism or collusion in the bidding
process.
d. Delay in payment of contractor invoices from
45 to 60 or more days is intended to assure an
audit function can reduce the risk of overpay-
ing and loss of the time value of money made
available to the owner.
e. Placing control system managers on-site is
intended to minimize the risk of scope creep,
cost overruns, unauthorized activities, etc.
f. A system of layers of approval that includes
communication exchanges between owner,
contractor, architect, and consultants is
intended to avoid the risk of unauthorized
decisions that result in costly changes or elab-
orations of the design.
g. Established risk recognition/risk mitigation
procedures are intended to guide identi?cation
of high-risk situations, making of go/no-go
decisions, and assuring appropriate responses
to potential risks.
h. Financing break points for go/no-go decisions
being tightly de?ned at early stages of project
planning are intended to reduce the risk of
over-investing in unfeasible projects by the
?nancing sources.
All of these seem at face value to be sensible, and
have come to be accepted practices. But when the
technologies change, when representational prac-
tices change, and when work practices change, as
is increasingly the case with innovation in all indus-
trial sectors, these tradition-bound elements of a
management control system cease functioning as
intended. The open bidding system becomes a game
in which contractors rely on ambiguities in the con-
tract documents and changing representational
forms to make claims for extra payments (change
orders) during construction, which can be signi?-
cant. Minimizing communication slows learning
and ensures that new circumstances will be
approached with inappropriate, older construction
techniques. Delays in making disbursements create
a vacuum in which change order gaming can take
place by building arguments and collecting data
for supporting contentious claims. Spreadsheet-
wielding managers on-site can inhibit collaborative
communications within the project team by focus-
ing energy on building arguments to support change
order requests.
Layers of approval with contractually explicit
patterns for exchanging communications and
obtaining signatures from the hierarchy of each ?rm
involved, predictably slow down the problem-solv-
ing process and increase the risk of cost overruns.
Risk recognition and mitigation procedures are tra-
ditionally based on historical experience, which is
inherently more linear and less complexly intercon-
nected than a present project. This can result in risk
910 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
reducing decisions that potentially increase risk
instead. Finally, enforcing very short go/no-go deci-
sion timelines for projects means that less time will
be spent on planning and designing before ‘‘?rm”
construction estimates are committed to by the
funding sources, thereby increasing the risk that less
costly or alternative designs or materials will
surface.
In short, the problem we observed in the institu-
tional setting of construction projects is that the suc-
cess of the hybrid organization is dependent on
communication among all participants with the
intent to collaborate in a joint problem-solving
e?ort. Team-building exercises among ?rms are
increasingly standard in these large hybrid project
organizations. But, the management control sys-
tems that are employed often mimic those of a sys-
tem that has been decomposed, rather than one that
has been synthesized. Their logics do not match
those inherent to hybrids. The result is forms of
management control in hybrid relations that are
intended to decrease the risk of an overall project,
but serve to increase the project risk instead. In a
nicely balanced paradoxical equation, we argue that
the path-creating innovations that we observed
often included practices that seemed to increase pro-
ject risks in order to decrease them. We also argue
that in the absence of morphogenesis at the institu-
tional (construction industry) level of hybrid organi-
zational forms, the chances of having e?ective
management control systems are minimal.
Furthermore, the hybrid organizational form
adopted by the oil and gas joint venture is highly
infused with pre-existing, independent elements
from its parent companies, based on separate
path-dependent histories. As in the construction
industry, each parent organization brings a history
of work practices, routines, cultures, etc., that drives
the management control systems followed by the
joint venture. The strict hierarchical control estab-
lished to reduce risk, however sensible within a sin-
gle organization, can be counterproductive when
decomposed and infused within the hybrid form of
their joint ventures. The preceding two oil and gas
examples demonstrated the con?ict created by
decomposition, and the resolution found in mor-
phogenesis. Both examples show the bene?ts of
designing management control systems with synthe-
sis in mind.
We cannot say whether the changes in organiza-
tional form re?ected by moving the non-operator
managers to London and disconnecting them from
their engineering resources and decision support
processes in Houston resulted in a ‘‘better” outcome
for the West African oil ?eld, but we can say that
the path-creating action to restore a sense of bal-
anced control between the operator and non-opera-
tor in that joint venture entailed a morphogenic
change in the organizational structure of the hybrid
form. As part of that change, the non-operator
traded o? many millions of dollars of engineering
knowledge that it was spending in Houston, in order
to achieve what they believed were better outcomes
for the project by making more timely decisions in
London. They gave up knowledge in order to
become more knowledgeable, and abandoned their
decision processes in order to become more involved
in the decisions. Finally, it was shown that the
Canadian venture had the path-creating action to
grow through synthesis, molding its culture and
processes to the market, rather than adopting tem-
plates from its parents. It used this freedom of syn-
thesis to create a new contracting system,
abandoning the rigid practices of its parents for a
more inclusive strategy. This morphogenesis
attempted to reshape typical industry practice
regarding contracting relationships in terms of risk
allocation, reward, and communication.
The contracting strategy to actually execute the
facilities was di?erent, in that we did it as an alli-
ance. . .We got all our contractors in a joint ven-
ture and with a common target price and shared
the risk and reward of the project. So we all
worked together. So they were aligned as well
with you—knew our goals for the most part,
and tried to get this thing on stream. . .and on
budget. . . It worked very well, and they were
involved in all the sessions as well.
Unlike hierarchical decomposition, this synthesis
approach gave the Canadian venture opportunities
to adapt to the market and use its parents as a mar-
ket resource. Inevitably, the Canadian venture was
in?uenced in some degree by the history of all its
parents, and the true amalgamation of di?erent
parental histories further encouraged morphogene-
sis and the emergence of a new distinct culture.
Finally, the Canadian venture became an industrial
pioneer of contracting methods, encouraging a
more collaborative approach to oil company/ser-
vice company relationships. Paradoxically, by
abandoning hierarchy and control, the parent orga-
nizations reduced both project risk and time to
delivery.
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 911
Concluding thoughts and implications
The examples we presented show that path cre-
ation and morphogenesis at the project and joint
venture levels are key elements in a management
control system design for hybrid organizational
forms in the construction and oil and gas indus-
tries. Path creation and morphogenesis is impor-
tant so that the elements of practice, including
routines, industry standards, histories, and trajec-
tories, of individual ?rms can form a hybrid
through synthesis rather than decomposition.
Design elements that seem perfectly sensible when
hybrid forms were emerging in decentralized ?rms
by decomposing their hierarchy in order to infuse
market elements, can be counterproductive for a
hybrid organization that is being formed by adding
elements of hierarchy to a market-based industrial
system.
As stated previously, an approach based on new
institutional sociology is particularly useful when
di?erent organizations are connected through rela-
tionships of dominance and dependence. New insti-
tutional sociology focuses on the pressures and
processes that shape organizations in collaborative
projects. Furthermore, the concept of institutional
isomorphism (DiMaggio & Powell, 1983) is particu-
larly relevant. However, institutional isomorphism
cannot accommodate the complexity and distinc-
tiveness of some cases, as shown in our research.
The design of inter-organizational management
control systems in situations characterized by
hybrid organizational forms may represent a para-
digmatic case. The concepts of path creation and
morphogenesis contrast with isomorphism, and
extend previous explanations based on continua of
resistance and pressure (e.g., Abernethy & Chua,
1996; Oliver, 1991). In this way, we believe it repre-
sents a contribution to the literature on manage-
ment control change. As our examples show, the
implications can be disturbing for the control sys-
tem designers for several reasons. It presents the
designers with a richly paradoxical situation in
which:
Control can be enhanced by reducing the number
of controllers.
Financial e?ciency is found by doing ?nancially
ine?cient things.
Partners can more e?ectively participate in con-
trol processes by giving up knowledge
resources.
Abandoning the control culture of parent organi-
zations can develop more vibrant cultures of
control.
One message that comes through in our study of
hybrid organizational forms in the construction and
oil and gas industries is that in the absence of path
creation, an institutionalized mix of market and
hierarchy has evolved in those industries. It is those
hybrid forms themselves that have to be redesigned,
through a process of path-creating morphogenesis,
in order to achieve management control. The
path-creating action should include a change in
the set of formal and informal contracting proce-
dures of the industry, a more re?exive process of
borrowing organizational elements from parent
organizations, and a commitment to challenge
understandings of ‘‘the way things work” in order
to create an e?ective management control system.
Further, it suggests that increasing the attention
paid to designing management control by applying
control procedures borrowed from our familiar set
of management control techniques is probably not
a viable approach in complex, high risk situations.
The concepts of path creation and morphogene-
sis interpret the design of management control sys-
tems as a dynamic process in?uenced by
technological, economic and institutional pressures.
Thus, it o?ers an analysis of management account-
ing change from a di?erent theoretical perspective.
The institutional literature explains the adoption
of new management control systems through insti-
tutional isomorphism and underestimates the rela-
tionship between management accounting change
and gains in the e?ciency of organizations. In par-
ticular, the relationship between technical and insti-
tutional factors has not been adequately
conceptualized. This paper contributes to the litera-
ture, extending the concepts of continua of resis-
tance and pressure based on strategic response
(Oliver, 1991) by o?ering a more complex conceptu-
alization of management accounting change.
Empirical evidence collected in this work demon-
strates that theoretical approaches should go
beyond the analysis of institutional pressures versus
an organization’s resistance to such pressures. The
design of management control systems may be a
much more dynamic process than can be suggested
by models based on continua of resistance and pres-
sure. In this context, alternative theoretical
approaches that go beyond such conceptualizations
should be developed.
912 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
The study of hybrid organizational forms is an
important topic in recent management accounting
research. In fact, ?rms are blurring their organiza-
tional boundaries in many di?erent ways, including
sharing research and development projects, placing
their employees in other ?rms, and developing
inter-organizational cost management practices
(Cooper & Yoshikawa, 1994). Cooper and Slagmul-
der (2004) emphasized that inter-organizational cost
management practices are ‘‘hybrid relational forms”
that ‘‘cross the organizational boundary between
buyers and suppliers.” Formal buyer–supplier ini-
tiatives undertaken to reduce costs through
collaborative e?orts should be included in this
domain. The concepts of path creation and morpho-
genesis may be also applied in the study of the
emerging issues in inter-organizational cost manage-
ment systems.
Finally, by drawing upon empirical evidence of
changes in management control systems in hybrid
organizational forms, this paper contributes to a
better understanding of these speci?c cases, which
may represent a paradigmatic example of path cre-
ation and morphogenesis. This paper was centered
on empirical evidence collected in large-scale pro-
jects, particularly in the architectural, engineering
and construction industry, and oil and gas industry.
Additional insights could be obtained if research is
extended to other sites and industries.
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doc_863481011.pdf
Path-creating change in organizational form is proposed as an important element in achieving management control in
hybrid organizations. Using case examples from large-scale projects in the architectural, engineering, and construction
industry, as well as from joint ventures in the oil and gas industry, we highlight the role of mindfully synthesizing new
organizational forms in the design of management control systems.
Designing management control in hybrid organizations:
The role of path creation and morphogenesis
Richard J. Boland Jr.
a,
*
, Arun K. Sharma
a
, Paulo Se´rgio Afonso
b
a
Weatherhead School of Management, Case Western Reserve University, Cleveland, OH, United States
b
Department of Production and Systems, University of Minho, 4500-058 Guimara˜es, Portugal
Abstract
Path-creating change in organizational form is proposed as an important element in achieving management control in
hybrid organizations. Using case examples from large-scale projects in the architectural, engineering, and construction
industry, as well as from joint ventures in the oil and gas industry, we highlight the role of mindfully synthesizing new
organizational forms in the design of management control systems. A series of paradoxes is disclosed, in which attempts
to achieve control through mimetic adoption of established management control techniques lead to reduced control. On
the other hand, path-creating deviations from institutionalized practices, resulted in improved project and venture perfor-
mance. It has been argued that the design of inter-organizational management control systems seeks to enable organiza-
tions to compete for resources and e?ciency, and also to obtain institutional legitimacy. Institutional theory proposes that
isomorphism permits organizations to obtain that legitimacy and explains their design. In this paper, we propose that path
creation and morphogenesis, which deviates from isomorphism, is an additional consideration in explaining management
control system design.
Ó 2008 Elsevier Ltd. All rights reserved.
Introduction
We will explore some perplexing issues in the
design of management control systems for hybrid
forms of organization. The types of hybrid ?rms
that we will consider here include joint ventures in
the oil and gas industry, as well as multi-year,
multi-?rm construction projects. The oil and gas
joint ventures we will consider are for the explora-
tion and development of o?shore ?elds by multina-
tional oil companies, and the construction projects
are those of the architect Frank O. Gehry. These
hybrid organizations involve rapid change in the
use of technologies, materials, and practices, and
are high-stake, high-risk enterprises that critically
rely on their management control systems.
The intense rates of change, increased require-
ments for innovation, and high levels of risk in these
two domains exemplify the prime reasons for creat-
ing hybrid forms. Their hybrid organization enables
diverse skills and resources to come together for
accomplishing especially challenging organizational
tasks (Borys & Jemison, 1989; Powell, 1987). Dyer
and Singh (1998) note that these cooperative strate-
gies lead to inter-corporate competitive advantage
by encouraging interactions that are di?cult, if
not impossible, to manage through third-party or
0361-3682/$ - see front matter Ó 2008 Elsevier Ltd. All rights reserved.
doi:10.1016/j.aos.2008.06.006
*
Corresponding author.
E-mail address: [email protected] (R.J. Boland Jr.).
Available online at www.sciencedirect.com
Accounting, Organizations and Society 33 (2008) 899–914
www.elsevier.com/locate/aos
hierarchical enforcement (i.e., sharing tacit knowl-
edge, exchanging di?cult-to-price resources, o?er-
ing innovations, etc.). Little attention has been
given to the motives for management accounting
changes generally (Hopwood, 1987; Malmi, 1999),
and the literature on the design of inter-organiza-
tional management control systems for hybrid orga-
nizational forms is in its infancy.
Institutional theory, which goes beyond the neo-
classical principles of economic rationality (Lapsley
& Mitchell, 1994) and is not centered in the price-
mechanism concept (Kapp, 1976), has been used
to explain the structures of such hybrid forms and
their inter-organizational management control sys-
tems. It assumes that organizations develop their
practices and systems in order to achieve a higher
level of conformity to the surrounding institutional
environment. Institutional-based research in the
management accounting literature has followed
three di?erent streams: new institutional economics
or transaction cost economics, old institutional eco-
nomics, and new institutional sociology (Burns &
Scapens, 2000; Scapens, 2006). An approach based
on new institutional sociology is particularly useful
when di?erent organizations are connected through
relationships of dominance and dependence, and
emphasizes the pressures and processes of isomor-
phism that shape organizations in such collabora-
tive projects (DiMaggio & Powell, 1983).
However, institutional approaches are not free from
limitations, and institutional isomorphism cannot
accommodate the complexity and distinctiveness
of some relevant cases.
In this paper, we will ?rst consider the control of
hybrid forms of organization in the construction
projects of Frank O. Gehry. Then, we will consider
some unique aspects of management control in sev-
eral major oil and gas joint ventures. In a complex,
long-term construction project, architects, engi-
neers, construction managers, contractors, fabrica-
tors, and multiple specialist consultants form a
hybrid organization in which each member ?rm per-
forms unique functions as an autonomous entity
within the project structure. The diverse expertise
required for the project is not found within a single
?rm, and is not available in an established market.
The problem of management control is to bring
these autonomous actors together in a way that
enables each ?rm to succeed, as well as the project
as a whole, even though these two needs are often
at odds with each other. In oil and gas joint ven-
tures, by contrast, the ?rms involved are often very
similar in operational capabilities and in technolog-
ical and engineering expertise, yet the control of
?eld operations is typically held by one of the joint
venture partners, creating a di?erent sort of tension
over controlling informational and ?nancial aspects
of the project. Here again, management control is
employed to ensure hybrid success and optimize
partner returns.
At ?rst glance, it may seem as though the prob-
lems of hybrid organizations parallel the problems
of designing transfer pricing and reward systems
in traditional ?rms that pursue a decentralized, div-
isionalized structure. Although there may be a
resemblance between the two, the problems of cre-
ating a management control system are deeply dif-
ferent. In fact, the problems in the hybrid form are
unique and require a path-creating change of orga-
nizational form in order to design an e?ective man-
agement control system. Why a path-creating
change of organizational form is required in hybrid
?rms and some examples of e?orts to create such
changes in the high complexity, high-risk context
of our research sites, is the major focus of our
paper.
Taking an enterprise and decomposing it into
operating units for the purpose of creating a man-
agement control system is fundamentally di?erent
from bringing separate enterprises together in a
temporary assemblage and designing a management
control system for them. The ?rst sequence is a
movement from a hierarchy to a market (creating
market elements within a pre-existing organization)
and the second sequence is a movement from mar-
ket to hierarchy (creating an organization among
pre-existing market elements). This di?erence in
sequence is all-important, and we ?nd that a sys-
tem-theoretic approach to the problems of decom-
position versus synthesis is helpful in framing our
discussion of it. Simply put, the logic of breaking
a system down into component parts (decomposi-
tion) is distinct from the logic of putting parts
together to form a whole (synthesis), even though,
at the end, a similar mix of market and hierarchy
may appear to be in place. In the case of a division-
alized ?rm, the decomposition takes place in a
multi-layered system with a history that is ‘‘taken
for granted”. Institutional theory has a special com-
mitment to such ‘‘taken-for-granted” situations
(Carruthers, 1995; Scapens, 2006) and, as a conse-
quence, can neglect the existence of con?icts within
organizations, and the associated questions about
power and control, which have been highlighted
900 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
by some accounting researchers (e.g., Collier, 2001;
Major & Hopper, 2005).
In a divisionalized organization, the history of
the system is the history of the ?rm that is being
decomposed into the mixture of market/hierarchy
hybrid relations, which will in?uence the operating
logics of the decentralized operating units. Our
ideas about what the system is, how it came to be,
what its missions are, how its cultures operate,
why its routines are the way they are, its current sit-
uation and trajectory, etc., are all ways in which the
history of the decomposed ?rm is manifest to us at a
given moment in time. Designing its management
control system takes place within this understand-
ing, and while not always perfect, that pre-under-
standing of the system is part of the problem
space for the logic of its management control design
as re?ected in the mix of its market/hierarchy rela-
tions. In a hybrid organization, on the other hand,
its form is synthesized from pre-existing, indepen-
dent elements, which have multiple, di?use histories,
leaving it without a clear history of its own, and not
necessarily tied to any coherent logic of operations.
The histories that the initially separate ?rms carry
with them in the form of work practices, origins,
routines, cultures, situations, trajectories, etc., are
in a sense ‘‘hidden” from the management control
designers. In the ?rst case, the autonomy of the
units is a ?ction, useful for decomposing a complex
task, and in the second, the autonomy of the units is
a real condition.
In a hybrid situation, the logic of synthesis does
not come from within the autonomous operating
units, but instead comes from the project of the lar-
ger hybrid ?rm into which they are being synthe-
sized: in our case studies, these are the American
architecture, engineering and construction industry,
and the transnational oil and gas industry. The dif-
ference in the form of logic could not be more pro-
found. Decomposition employs the logic of an
existing ?rm to create market/hierarchy relations
among its subsystems, whereas synthesis uses the
logic of a larger system to create the market/hierar-
chy relations among pre-existing ?rm level compo-
nents. We will now ground this argument in
concrete examples from the hybrid organizational
forms found in the American construction industry
on large, complex construction projects, and in the
oil and gas industry on exploring and developing
o?shore ?elds.
An organization’s institutional environment
includes beliefs, habits, and rules that are external
and hierarchically above the organization (Scott,
1987). Organizations are dependent on the support
of these external elements in order to survive
(Gupta, Dirsmith, & Fogarty, 1994). Such hierarchy
implies sources of domination that in?uence the
design and evolution of management control sys-
tems in order to conform to external expectations.
Furthermore, the understanding of how these mar-
ket pressures and forms of dominance are forces
in the emergence of management control systems
is also important. Thus, both market and institu-
tional environments and their intertwined roles
should be considered. In fact, some theorists (e.g.,
Geiger & Ittner, 1996; Gupta et al., 1994; Scott,
1987) suggest a combined analysis of economic
and institutional pressures to enrich the understand-
ing of the design of new management accounting
systems. This is an issue that has been neglected in
management accounting literature, particularly
when change is characterized by complex organiza-
tional processes or forms (Abernethy & Chua, 1996;
Carruthers, 1995).
We begin with a brief overview of the way archi-
tectural, engineering and construction ?rms come
together in order to complete a project. The impor-
tant point is that these individual ?rms come
together in a temporary contractual arrangement
through a bidding process in order to coordinate
their separate operations in designing and con-
structing a building or other structure. How they
come together does not ?ow from a logic of opera-
tions, as in the single ?rm being decomposed, but
from the historical, path-dependent practices of
contracting and risk allocation that happen to be
in place in the industry. The structural relations that
result from these practices are where path-creating
change can take place, if management control sys-
tems are to break from mimicry. In other words,
the institutional level of formal and informal con-
tracting and the many practices, routines, and com-
munication patterns that are the path dependent
history of the construction industry can be subject
to mindful deviation as part of designing a manage-
ment control system. The next section summarizes
institutional economics and related key concepts,
emphasizing the contribution of new institutional
sociology for the argument made here. The section
‘‘Traditions forming a structured set of relations
in the construction industry” presents four cases in
the construction industry, and the sections ‘‘Tradi-
tions and structured relationships in the upstream
oil and gas industry” presents two cases in the
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 901
upstream oil and gas industry. The relevance of path
creation and the contrast of morphogenesis to iso-
morphism are discussed in the section ‘‘Morphogen-
esis in hybrid organizational forms”, and the section
‘‘Concluding thoughts and implications” presents
the conclusions and implications of such an
approach.
Institutional economics
Institutional economics is concerned with
explaining the evolution of social systems and the
social processes that emerge during this evolution
(Kapp, 1976). The use of institutional frameworks
for explaining management processes goes beyond
the principles of economic rationality, equilibrium,
and neoclassical economic theory (Lapsley &
Mitchell, 1994). The three di?erent streams of insti-
tutional research in the accounting literature, new
institutional (or transaction cost) economics, old
institutional economics, and new institutional soci-
ology, all o?er valuable insights that help to concep-
tualize management accounting practices (Burns &
Scapens, 2000).
Many scholars have used transaction cost eco-
nomics, as developed by Coase (1937) and William-
son (1975, 1985), to analyze the nature of inter-
corporate relationships and partnerships. It predicts
that ?rms will choose the most e?cient form of gov-
ernance to optimize transaction and production
costs. Thus, managers will form partnerships when
alternative (contractual or hierarchical) manage-
ment controls are more costly. Transaction cost eco-
nomics, however, best models ?rm behavior in
terms of either a hierarchy or a market, and is not
well suited to describe hybrid combinations of the
two (Stinchcombe, 1990; Williamson, 1991). How-
ever, it may provide a sound fundamental under-
standing of the nature of strategic dependencies
between ?rms using single transactions as the pri-
mary unit of analysis (Doz & Prahalad, 1991). Ring
and Van de Ven (1992) note that recurrent, rela-
tional transactions between trustworthy ?rms may
provide partners the ?exibility and risk reduction
necessary to reduce transaction costs, thereby
encouraging a move toward hybrid forms of
governance.
New institutional sociology neglects internal con-
?icts and issues related to power, but old institu-
tional economics explores the di?erent forms of
resistance to change in order to analyze the role of
prevailing institutions in change processes, and the
reproduction or change in institutions over time. In
this context, habits and routines are important com-
ponents of institutions. The reproduction of habits
and routines through time can lead to institutionali-
zation, the process through which speci?c patterns
of thought and action become taken for granted as
the way things are (Burns & Scapens, 2000; Ribeiro
& Scapens, 2006; Scapens, 2006). This implies that
change occurs when organizational routines evolve,
but does not explain how and why new systems
and practices are adopted by organizations. New
institutional sociology, in contrast, focuses on the
pressures and processes that shape organizations.
Such processes are explained through three types
of isomorphism: coercive, normative, and mimetic
(DiMaggio & Powell, 1983). Furthermore, new insti-
tutional sociology theorists argue that organizations
are not only pushed to achieve technical e?ciency
within their operations but also to accept and adopt
the rules and expectations of others outside the orga-
nization. Accordingly, technical and institutional
environments should be distinguished in order to
accommodate these di?erent types of pressures.
Institutional theory is based on the following
main concepts: institution, institutional and techni-
cal environments, interconnectedness, conformity,
and institutional isomorphism. Asymmetric infor-
mation and non-equilibrium market solutions imply
the existence of institutions. These institutions,
which Williamson prefers to call governance struc-
tures, are ‘‘the human devised constraints that shape
human action” (North, 1990, p. 3). These con-
straints can be informal (e.g., customs) or formal
(e.g., legal contracts). According to Hodgson
(1998), ‘‘institutions play an essential role in provid-
ing a cognitive framework for interpreting data and
provide habits and routines to support the exercise
of transforming information into useful knowl-
edge.” Institutions are embedded in day-to-day
activities and, according to Veblen, they re?ect the
knowledge and know-how recognized and appre-
hended by the organization’s elements in a ‘‘passing
on [process] of relevant information over time”
(Burns & Scapens, 2000). The technical environ-
ment is where products and services are produced
and exchanged and where organizations aim to be
e?ective and e?cient. According to Modell (2002,
p. 668), it ‘‘comprises factors related to the technol-
ogies applied in the transformation of inputs into
outputs and the market conditions facing organiza-
tions” (see also Scott & Meyer, 1983, and Powell,
1991).
902 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
Granlund and Lukka (1998) distinguish institu-
tional from economic pressures, presenting the lat-
ter as the technical or functional pressure for
change. They exemplify these ‘‘technical or func-
tional pressures” as ‘‘corporate size and technol-
ogy,” ‘‘advanced production and information
technologies,” and ‘‘competition strategies.” Fur-
thermore, an organization’s institutional environ-
ment comprises beliefs, habits, and rules that are
external and hierarchically superior to the organiza-
tion. This hierarchy implies sources of domination
(e.g., the government) that push organizations to
become passive, molded by the pressure of institu-
tional elements (Zucker, 1987, p. 450). Organiza-
tions depend on the support of these external
elements to survive (Gupta et al., 1994, p. 268).
Thus, they conform to their institutional environ-
ment by adopting appropriate operating practices
and procedures. The institutional environment is
the arena where organizations face isomorphic pres-
sures. These pressures occur predominantly within
the organization’s inter-organizational context
(Meyer & Rowan, 1977). Institutional theory recog-
nizes the existence of both technical and institu-
tional environments, but it stresses the in?uence of
institutional pressures (Oliver, 1991). Organiza-
tional structures and practices are shaped by all of
these forces, as is the accounting profession itself
(Boland, 1982). Scott (1987, p. 507) posits that
‘‘no organization is just a technical system
and. . .many organizations are not primarily techni-
cal systems. All. . .organizations exist in an institu-
tional environment. . .” The role of both
institutional and technical environments in organi-
zational change is supported by Scott and Meyer
(1991), and Carruthers (1995).
On the other hand, according to Granlund and
Lukka (1998), institutional isomorphism is a key
element in management accounting change. It is
supported by two general propositions: Environ-
ments are interconnected, and organizations react
to external demands and expectations in order to
survive in a particular environment. Connectedness
implies the existence of transactions between orga-
nizations that can happen through contractual rela-
tionships or through other formal or informal
activities (DiMaggio & Powell, 1983, p. 147). Dacin
(1997, p. 46) de?nes institutional pressures as exog-
enous elements that in?uence the structure and
behavior of organizations. These elements can be
found in ‘‘broadly based socio-cultural norms” as
well as in the connections between organizations
characterized by relationships of dependency. Thus,
isomorphism results from the interconnectedness of
organizations or from broader societal pressures.
The latter are macro-environmental and in?uence
all organizations in that institutional environment.
However, interconnectedness also supports isomor-
phic processes at a micro-environmental level. In
this context, organizations are pushed to become
isomorphic, which means they have to conform to
a set of institutionalized rules, habits, and beliefs
(Abernethy & Chua, 1996; Oliver, 1991).
According to DiMaggio and Powell’s (1983) con-
cept of institutional isomorphism, institutional pres-
sures can be classi?ed as coercive pressures,
normative pressures, or mimetic processes. These
di?erent types of elements characterize the three
mechanisms through which isomorphism takes
place. Although speci?c forms of pressure may play
a dominant role at a speci?c situation or point of
time, all three forms of institutional isomorphism
presented by DiMaggio and Powell (1983) are
important for the study of management accounting
change (Abernethy & Chua, 1996, p. 597; Modell,
2002, p. 672). Coercive isomorphism is de?ned by
Oliver (1988) simply as an institutional element
resulting from formal or informal pressures exerted
by one organization on another. These pressures
can be exerted by headquarters, national or interna-
tional institutions, or by business partners, depend-
ing on the regulative nature of the institution
concerned. Coercive pressures occur when organiza-
tions depend on others for critical resources or long-
term survival, which implies the adoption of speci?c
attributes to be legitimated. Public agencies, hospi-
tals, and schools that are funded by the state are
good examples of political coercive in?uence. Like-
wise, suppliers that depend on important buyers for
their long-term survival can experience this type of
isomorphic pressure.
Normative isomorphism is based on values and
professional norms or roles, and comes from within
the organization itself (Zucker, 1987). A kind of
homogenization of management practices in di?er-
ent organizations is produced when these practices
are carried out by the same professionals. Univer-
sity education, professional networks, and profes-
sional training are three signi?cant sources of this
kind of isomorphism (DiMaggio & Powell, 1983).
Furthermore, normative pressures are based on val-
ues and institutionalized rules that can be exerted at
a supra-individual level through what Granlund and
Lukka (1998) called ‘‘national and corporate cul-
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 903
tures.” Miller and OLeary’s (1993) study of the
adoption of Japanese production practices in the
United States o?ers a good example of normative
pressures on a supra-organizational or societal level.
They stated that these types of practices were imple-
mented not only because of the particular interest of
each organization but also because there was a
strong national normative pressure for improve-
ments in production e?ciency. Thus, in this context,
managers were able to justify investments in new
production technology even without clear evidence
of their economic bene?ts.
Finally, mimetic processes come from outside the
company and are essentially driven by consultants.
Mimetic isomorphism is an important source of
institutionalization because (a) in practice there
are not many alternatives for management account-
ing practices, (b) competition pushes ?rms to follow
similar courses of action, and (c) in general, leading
organizations are advised by a small number of con-
sulting ?rms, implying that a limited set of alterna-
tives are e?ectively followed. In fact, according to
DiMaggio and Powell (1983, pp. 151–152), in prac-
tice there is relatively little variation in alternatives.
Because managers actively seek models upon which
they can design their own management practices,
mimetic or imitative (DiMaggio & Powell, 1983, p.
150) processes promote the replication of ‘‘good”
practices among companies. In order to achieve
their goals, organizations in general try to imitate
‘‘the most prevalent or successful alternatives”
(Granlund & Lukka, 1998, p. 167). However, in
practice, organizations tend to copy ‘‘good organi-
zations” and not ‘‘good solutions.” They tend to
follow the example of leading organizations even
if they do not have an exact idea of the bene?ts of
the behaviors they are copying.
Abernethy and Chua (1996) presented three main
criticisms of applying institutional theory to explain
management accounting. First, the impact of
change on the internal e?ciency of an organization
is ignored. Second, the process by which new values
and beliefs replace old norms is not well explained.
Third, power and control issues are usually
neglected (see Covaleski, Dirsmith, & Michelman,
1993). They also suggested that research should
specify more clearly the relations between technical
and institutional environments. This suggests that:
(1) institutional environments may be characterized
by complexity rather than homogeneity and (2) the
relationship between technical and institutional fac-
tors has not been fully analyzed. Furthermore, for
Oliver (1991), the isomorphic process, as explained
by institutional theory, fails to address strategic
behavior. Modell (2002, p. 673) also argues that
there is a lack of knowledge about the interplay
between institutional pressures and organizational
response. She suggests that institutional frameworks
should be extended to include the degree of an orga-
nization’s resistance to institutional pressures. This
implies that institutional models should assume a
range of possible organizational responses to iso-
morphic processes, re?ecting di?erent degrees of
conformity represented by a ‘‘continuum of
resistance.”
Finally, the intertwined roles of technical and
institutional environments require more attention.
Carruthers (1995) pointed out that the relationship
between technical and institutional factors is a key
topic that remains unexplored in the literature. Per-
haps institutional and technical environments
should not be viewed as independent, but symbiotic,
in some cases of management accounting change.
Although the three lines of institutional theories dis-
cussed above represent di?erent approaches for the
study of change processes in management control
systems, all three o?er insights that are helpful for
conceptualizing new theories in this ?eld. In this
paper, new institutional sociology, and particularly
institutional isomorphism, will be considered in
terms of the concept of path creation. It is argued
that the latter is more suited to understand the
design, adoption, and use of new management con-
trol practices for complex, hybrid organizational
forms.
Traditions forming a structured set of relations in the
construction industry
The mix of market/hierarchy structures in large
projects in the construction industry is largely taken
for granted as they way things work. They are tradi-
tional practices that have taken shape over decades
and in some case centuries. Architects, engineers,
and contractors ‘‘know how to go on,” in Wittgen-
stein’s sense, because their skillful activity is
grounded in their niche in the hybrid industry, be
it as an architect, construction manager, contractor,
subcontractor, or consultant. Bidding and contract-
ing processes, patterns of information exchange,
and roles of each participant in a typical building
project are all formally speci?ed or informally
implied and understood in standardized contracts
that are interdependent and mutually reinforcing.
904 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
Competitive bidding calls for restricted communica-
tions among parties, in order to avoid collusion.
Contracting is structured in speci?c ways in order
to distribute risk among the parties, thus further
shaping allowable and required communications.
Contracts de?ne the scope of speci?c work and
the responsibility for each party. Expected patterns
and formats of information exchange are speci?ed
in contracts, and the sequence and timing of mes-
sages to resolve ambiguities in those documents
are also speci?ed.
We can brie?y summarize the standard practices
of a traditional, design/bid project in the construc-
tion industry as follows. An owner selects an archi-
tect who works with the owner to identify
requirements and create a design as a set of draw-
ings, which indicate the intention of what is to be
built. Standard contracts assume that these draw-
ings will be paper based and two-dimensional.
The drawings do not show every detail of the con-
struction that is required, but instead suggest typi-
cal ways in which details are to be handled. They
leave it to the discretion of contractors and subcon-
tractors to identify a suitable method of construct-
ing the intended elements in a workmanlike way,
following accepted practices. Contractors and sub-
contractors who are successful in bidding for a job
take the architect’s drawings and use them as a
basis for creating their own documents for the
architect’s approval, showing how they intend to
fabricate and install their part of the overall build-
ing. In preparing these ‘‘shop drawings,” contrac-
tors ask architects questions by submitting RFIs
(requests for information) or RFCs (requests for
clari?cation). In all projects of reasonable complex-
ity, RFIs and RFCs are to be expected, and con-
tracts specify the sequence of reviews and timing
of responses for them. But such requests for clari?-
cation or information can also serve as the basis for
declaring a change order, and requesting more
compensation.
Our research on Frank Gehry followed his ?rm
(Gehry Partners LLP) for four years, as they
adopted three-dimensional software tools for docu-
menting the exceedingly complex surface geometries
of his designs. We used the concept of path creation
to guide our research, tracing the mindful deviations
from established practices that a shift to three-
dimensional representations entailed. We found that
the changes in practice that accompanied adoption
of three-dimensional representations were very
widespread and included innovations in organiza-
tion structures and strategies, work practices, and
a range of technologies.
Contracts and accepted practices on construction
projects have evolved with the assumption that
design and construction information will be repre-
sented with two-dimensional images and associated
text documents (e.g., component and material lists).
Standards have evolved in which the 2-D drawings
are expected to contain enough information for
the contractor to apply their trade-speci?c knowl-
edge to complete the work. In this way, responsibil-
ity for errors can be traced to either the architect or
the engineer for having speci?ed a design that was
inherently inadequate, or to the contractor for hav-
ing failed to apply the correct workmanlike exper-
tise. Contracting also assumes that the sequencing
of the design, bidding, and construction will be in
discrete stages, with a full set of design documents
put out for competitive bidding by contractors.
Even from this brief overview, we can see that a
path-creating technological change from two-
dimensional to three-dimensional representations
has the potential to be a signi?cant disruption in
the established pattern of relations among the actors
in a large and complex project. What we discuss
below are some unique issues related to manage-
ment control that were encountered in the study
of Gehry Partner projects as they incorporated
three-dimensional representations in their design
and construction. Their innovations with represen-
tational forms bring into relief the way that mor-
phogenesis of the structural relations in the
industry as a whole, including its contracting, risk
allocation, scope of work, communication patterns,
and work practices, is required for e?ective manage-
ment control of a large project. The following intro-
duces some of the ways that Gehry Partners LLP
sought to e?ect those changes.
We will brie?y recount a number of instances in
which Gehry Partners or other members of their
project teams take a path-creating action intended
to change the form of relations that characterize
large construction projects. These examples of path
creation are morphogenic in the sense that they
stimulated a change in accepted organizational
practices, and that the management control system
in those projects was shaped by the morphogenic
quality of these innovations. Four examples of path
creation and morphogenesis in the hybrid organiza-
tion of construction projects will be presented.
First, however, we will present the main features
of path creation as we use it.
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 905
Path creation is the way a single agent, such as
Gehry Partners, mindfully deviates from tradition-
ally reinforced patterns of practice and resource
use in order to instigate a new set of self-reinforcing
relationships (Garud & Karnoe, 2001). Mindful
innovators attend to this deviation with reasoning
grounded in their own organizational conditions,
and not on random decisions or mere imitation
(Swanson & Ramiller, 1997). Path creation is best
explained in relation to path dependence, which is
a theoretical construct in evolutionary economics
that has grown from the work of David (1985)
and Arthur (1989) and brings a historical, systems
view to economic explanations of technology inno-
vation. In contrast to traditional micro-economic
accounts, the concept of path dependence recog-
nizes that temporality and dynamic adaptation to
unanticipated events are important in understand-
ing how technological innovations come to be and
are adopted over time. A path dependent process
is one in which a chance historical event, seemingly
insigni?cant at the time of its occurrence, comes to
have a major impact on the way an innovative pro-
cess unfolds. Path dependence is thus a retrospective
view of how historical events become reinforced by
subsequent (learning) events in a way that reshapes
the probability of moves by actors, such that a self-
perpetuating cycle is established (Arthur, 1989;
March, 1991). Often, in the end state, technology
and learning is in some sense sub-optimal, re?ected
by a technological and behavioral lock-in. Overall,
the concept of path dependence is used to explain
why neither technology innovation and di?usion
nor learning conform to rational choice models.
Although path dependency does not rule out
human agency as a source of historical change, it
does not normally explore agency as a creative force
that makes history by establishing new cycles of
positively reinforced feedback relations. Its primary
assumption is that human actors are passive or con-
servative with respect to the alternatives present in
their environment, and that they follow reinforced
patterns of feedback relations in choosing their
courses of action and targets of learning. Path crea-
tion, in contrast, emphasizes human agency and
emphasizes that actors can and will mindfully devi-
ate from what appears to be the common expecta-
tion (a reinforced pattern of action) in order to
sample new experience, explore new forms of prac-
tice and create new resources (Garud & Karnoe,
2001). Below we present a series of examples from
our ?eld research in which the path-creating agency
of human actors is an important element for
explaining the design of management accounting
systems. By breaking from path dependent modes
of management accounting, the actors mindfully
deviated from the mimicry of institutional the-
ory—choosing, in a sense, morphogenesis rather
than isomorphism.
Example 1 (The Fish Sculpture project—avoiding
management control over the project in order to
increase chances for project success). Gehry Part-
ners’ ?rst use of three-dimensional software tools in
design and construction was a Fish Sculpture that
Frank Gehry proposed for the Barcelona Olympics.
It was a relatively small project and was done
‘‘paperless”, using only the digital models. The time
allowed was very short, and there was no design—
just an idea. Jim Glymph, Frank Gehry’s senior
partner tells it best:
The ?rst project (using 3D) was the most success-
ful we may have ever had. . .. And what con-
vinced us was we got the job done a month
early. Everybody made money, there were no
extras—that never happens.
But the other thing that happened was a lot of
rules were suspended in order to allow that to
happen. . .We literally agreed to attempt it only
if the project managers were left out of it and
the whole management process was abandoned
because it was too slow. We made some deals
with the city on approvals, a lot of deals were
made to operate outside the rules and basically,
most of the deals had to do with peeling away
layers of oversight and management and getting
down to just the people that are doing the work.
And then putting only the absolute minimum
amount of management back on top of that to
keep it from going o? the rail.
And in construction, well like anything else, but
in construction, you know, there’s been a tradi-
tion built up about paper and a paper process,
an approval process for everything you do that
is very complicated. We didn’t sacri?ce any qual-
ity control measures, we clearly didn’t sacri?ce
any management. We just eliminated manage-
ment where it wasn’t necessary, which was most
places. . .We haven’t done a paperless project
again, because we’ve not had that environment
where we were committed to suspend all the
rules. And so that still remains the most e?cient,
the most successful use and it was the ?rst use.”
(Jim Glymph, November 9, 2002)
906 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
Stripping away layers of management, removing
oversight and chains of approval, and bring the
actors together in an intense, self-regulating team
can be seen as an idealization of what a hybrid form
is intended to accomplish, but is de?nitely not in
keeping with institutional practice. The inability to
achieve that type of hybrid form again suggests that
the institutional pressures are considerable, but this
instance of path creation goes beyond mere resis-
tance and its accomplishment is available for all of
us to enjoy in Barcelona.
Example 2 (Replacing managers and control systems
with builders in order to increase project con-
trol). The contrast between two Gehry Partners’
projects with radically different approaches to man-
agement control illustrate a recurring theme in their
efforts at path creation in control systems. Both
were large, complex projects of comparable size,
whose identities we have been asked to conceal.
One had an experienced builder and two assistants
running the job from their construction trailers;
another had eight managers working spreadsheets
to control the project from their construction trail-
ers. The former project went smoothly, the latter
went poorly. The builder and his assistants created
cost and schedule reports as needed for milestone
meetings, but focused on orchestrating the project
team members and on collaborative problem solv-
ing. The managers and their spreadsheets spent
energy on tracking deviation in performance and
allocating blame when problems arose. That project
employed intensive risk-control strategies in the
?eld, focusing on the ?nancial aspects of the daily
work activity, only to experience ?nancial dif?cul-
ties, ?nger pointing, and gaming of the requests
for change orders. The ?rst project minimized man-
agement control in the ?eld, allowing it to take place
behind the scenes, while focusing on coordination
and collaboration of the work. They experienced a
more successful, well-controlled project.
Example 3 (On the Experience Music Project, layers
of decision oversight are removed in order to improve
decisions). On the Experience Music Project (EMP)
in Seattle, the construction company, Hoffman
Construction, organized construction teams in a
unique way. Normally, teams would include con-
tractor, owner, and architect representatives who,
when a problem was encountered, would discuss
issues, identify alternatives, return to their respec-
tive ?rms to make engineering studies, have further
discussions, and make approvals before the next
scheduled team meeting or preset deadline. This
standard procedure in construction projects reduces
the risk that sub-optimal actions will be taken or
that actors would make agreements that their supe-
riors would later undo. But it also increases the time
required for making a decision and draws out the
problem-solving process. On the EMP project,
Hoffman responded to its high levels of complexity
by forming teams that included all the usual actors,
plus any advisors, engineers, and fabricators who
would eventually be involved in the decision pro-
cess. They then set as a goal that all decisions were
to be made in these team meetings. This was a major
change in the coordination mechanism, and
increased the risk that a decision would lead to a
costly error, but it also created an atmosphere of
genuine collaboration, intense creativity, and one
of the most memorable and exciting project experi-
ences that many of the highly seasoned participants
had ever encountered.
Example 4 (Accounts payable disbursements within
24 h instead of 45 days). Traditionally, the multiple
?rms on large construction projects submit invoices
for work to date on a monthly basis. The invoices
will include request for additional payments, based
on ‘‘change orders,” which are claims by the con-
tractor that a change in the scope of work from
what was depicted in the contract drawings and
speci?cations has occurred, and the billing party
has suffered additional expenses that should be
reimbursed over and above the fees speci?ed in the
contract. The owner, in turn, traditionally paid pro-
gress invoices 45 or more days after they were sub-
mitted. The total elapsed time between the
submission of an invoice, resolution of change order
disputes, and ?nal payment could be substantial.
On the MIT Stata Center project, the university
changed its payment policy, and agreed to pay
invoices within 24 h if there were no open disputes
concerning change order requests. This path-creat-
ing restructuring of organizational practices
increased the risk that a proper approval could
not be performed on the invoiced amounts and that
an inappropriate payment could be made. It also
reduced the school’s ability to gain the advantage of
the time value of money. Nonetheless, it changed
the relational structure of the hybrid organization
that was constructing the Stata Center and dramat-
ically reduced requests for change orders, which
allowed more of the project communication to be
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 907
about solving construction problems and less about
assigning blame and making claims.
Traditions and structured relationships in the
upstream oil and gas industry
The upstream oil and gas industry (which ?nds
and produces petroleum from underground depos-
its) has a rich history of collaboration in the form
of hybrid organizations. Such collaboration takes
place between oil companies and their suppliers,
similar to the construction industry examples dis-
cussed above, as well as between oil companies
themselves in the form of joint ventures in the devel-
opment of large, high-risk oil ?elds. As noted in the
construction industry examples, the mix of market/
hierarchy forms in large joint ventures in the oil and
gas industry is largely taken for granted by its mem-
ber ?rms. The oil and gas joint venture is typically
governed through a Joint Operating Agreement that
re?ects the hierarchical forms of its parents. It is a
formal agreement between two or more oil company
partners and a resource holder (i.e., a government)
to produce oil and gas from a publicly held natural
resource (a petroleum reservoir). The terms of the
agreement span numerous areas including pro?t dis-
tribution, capital management, decision processes,
use of local contractors, social bene?ts and training,
and technology development and deployment. As
the pursuit of petroleum deposits is inherently risky
and requires signi?cant capital expenditures, oil
companies typically use the joint venture hybrid
form to distribute risk. However, the formation of
such a partnership generates its own forms of risk,
such as opportunism, information asymmetry, hold-
ups, and balancing one partner’s portfolio of ?elds
at the expense of another’s.
In an attempt to reduce partnership risk, operat-
ing agreements are designed to closely imitate the
hierarchical structure of its parents, complete with
a strict line of operational control. Thus, even when
ownership shares are 50/50 between two ?rms, an
oil and gas joint venture typically awards all opera-
tional control to one of the venture partners (the
operator) leaving all other joint venture partners
as non-operators. Oil ?eld development plans are
prepared by the ‘‘operating” partner with input
and approval from ‘‘non-operating” partners. The
joint venture is managed by the operating partner,
while non-operating partners are consulted for tech-
nical advice and are informed of the joint venture’s
activities. Non-operating partners, in order to pro-
tect their substantial ?nancial commitment (which
can amount to billions of dollars) will establish a
‘‘shadow” engineering o?ce that will duplicate
many of the engineering data collection and techni-
cal studies being performed by the operating part-
ner. This enables the non-operator to make
independent assessments about the potential of the
?eld and the options for developing it. Although
they do not have the power of the operating partner
to determine ?nal decisions, they can participate as
equally informed members in discussions about
technical and operational options, and in giving
approvals to the operator’s plans. Two examples
of morphogenesis in hybrid organizations found in
the case of the upstream oil and gas industry are
presented below.
Example 5 (West African offshore development -
giving up knowledge to gain in?uence and con-
trol). The West African coast is rich in large oil
deposits. However, these reservoirs can lie many
miles offshore in very deep water, making their
development an especially expensive and risky
endeavor. This particular case study was compiled
from interviews with a non-operating company in a
two party (50/50) multi-billion dollar West African
oil and gas joint venture. Even though the operating
agreement was structured to reduce risk through an
independently designed and strictly de?ned chain of
operational control, the operator’s culture and
procedures dominated the joint venture operations.
As a result, the non-operator attempted to in?uence
the operator in various ways, bringing the non-
operator into the loop of control. The interaction
between operator and non-operator resulted in a
morphogenesis that restructured the working rela-
tionship between the two partners, restoring a
balance in their ability to participate as a non-
operator in a more collaborative, if less authorita-
tive, way.
A key issue for the non-operating manager was
the relationship structure that developed through-
out the early years of the joint venture. The non-
operator’s manager and technical center was located
in Houston, while the operator was housed in
London. Early in the relationship, the non-operator
recognized the geographical gap was causing infor-
mation asymmetry between the partners, mostly at
the detriment of the non-operator. Senior non-
operator managers moved to London to be closer to
operator management, leaving their technical sta?
908 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
behind in Houston in the process. Thus, to avoid a
gap within operator/non-operator managers, the
non-operator was willing to create a gap within its
own organization.
A major concern for the operator was getting
quick approvals for operational budgets from the
non-operators. To ensure this, the partners to the
joint venture needed technical agreement as to the
state of the ?eld and the technical options open to
them, but with two technical groups separated by
the Atlantic, agreement became di?cult to obtain.
Although multiple technical organizations worked
harmoniously within each parent company, within
the joint venture the same organizational structure
caused operational di?culties. As noted by the non-
operating manager in regards to his technical team,
‘‘it was clear that there were ownership issues about
who made the technical decisions and who made
leadership decisions and some concerns about
giving us too much power and in?uence.”
The structure of the joint venture was thus
intended to reduce risk by engaging the technical
capabilities of both parents. But technical review
points and technical operating strategies were not
being aligned between the partners. Operator and
non-operator decision review boards were not
synchronized, and had di?erent technical require-
ments at di?erent decision points. Con?icting tech-
nical views did little to ensure better engineering
solutions, but rather slowed the engineering review
process. The two technical teams (divided by an
ocean) were getting in the way of each other more
than they were helping to provide better engineering
solutions. Internal con?ict within the joint venture
clouded the engineering discovery process, and led
to confusion regarding the best technical path
forward. With both operating and non-operating
management consolidated in London, the decision
was made to forgo operational review boards in
Houston, streamlining the decision-making process
to better meet the operational needs of the joint
venture itself. Thus, to enhance engineering design
clarity and the speed of technical decision making,
the joint venture reduced its engineering resources.
Example 6 (Canadian offshore development—Build-
ing in synthesis from the start). Like the western
coast of Africa, the eastern coast of Canada is rich
in oil and gas deposits. Although these oil ?elds
are not found in exceptionally deep water, their
development poses other challenges. Individually,
each ?eld is small, requiring ‘‘cluster developments”
or a consolidation of ?elds into a single offshore
platform to spread the cost of the platform over a
number of ?elds. In one Canadian joint venture,
three major oil companies consolidated six offshore
?elds for which they held rights under one offshore
platform for development. Unlike the typical joint
venture as described in the West African case, these
companies set out from the beginning to take a dif-
ferent approach. Their idea was to give the joint
venture the freedom to evolve on its own: to develop
its own culture and processes, to mold itself around
the combination of market/hierarchy forms that
emerged from the context of the ?elds, rather than
mimicking the organizational forms of their par-
ents. They were, in effect, encouraged to create their
own history—building the joint venture through a
synthesis of their technical and operational talents
rather than a decomposition of their parent forms.
From the very start, the joint venture was
structured di?erently from others the parent com-
panies were involved in. Rather than assigning one
partner to be an operator and infusing their existing
hierarchy into the hybrid, the joint venture was
organized as an independent, truly joint enterprise
from its inception and across all layers of engineer-
ing, operations, and management. The CEO, CFO,
and COO were all selected from di?erent parents.
The joint venture sta? was also selected from all of
the parents, thereby allowing those with the best
competencies from the entire pool of parental
resources to be actively involved in the project.
Unlike the traditional joint operating agreement
described above, this joint venture was free to select
sta? and services directly from the marketplace.
Thus, the Canadian joint venture treated the parents
as part of the market and a source for expertise and
services rather than a source of hierarchy. One
manager described the relationship as follows:
But technically we primarily—you know for the
surface we went to (Partner A), if we were look-
ing for some information on geotechnical or
structural or whatever we went to (Partner B).
But where we thought (Partner C) could add
incremental value and things like ?ow assurance
or two phase ?ow we would go get where we
thought the best was. So, if we thought (Partner
A) at that time had some knowledge on drilling
that was better than ours, so it was kinda like
let’s go to (Partner A) for this. And so, we picked
and chose where we went. And ultimately, what
they formed was a joint company.
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 909
The Canadian venture also had the opportunity
to develop its own culture; ‘‘it was a pretty fun place
to work as well. I mean you had your own culture
essentially. . .it really became a sub-culture. People
got a lot of responsibility—which they ate up.”
Thus, the Canadian venture had the ability to grow
through synthesis, molding its culture and processes
to the market, rather than adopting templates from
its parents.
Morphogenesis in hybrid organizational forms
We have identi?ed anomalies of risk reduction
in the hybrid organization of the construction
industry. The contracting arrangements in the con-
struction industry, including both formal and
informal aspects, are supposedly intended to bal-
ance the tensions and reduce overall risk of a
hybrid project organization. But in the environ-
ment of changing technologies and practices that
we observed in our study of Gehry Partners’ pro-
jects, we repeatedly saw path creation, not mim-
icry, in their contracting and risk-control
strategies. Gehry Partners and other member ?rms
of the hybrid project organization struggled to
achieve e?ective management control through
e?orts at morphogenesis of the organizational
structures themselves. Let us ?rst look at the tradi-
tional, institutionalized management control ele-
ments that are imbedded in the contracting
practices of the construction industry, and the
way they are intended to reduce risk:
a. Open bidding with contracts awarded to the
lowest, competent bidder is intended to reduce
the risk of overpaying.
b. Change orders being tied carefully to contract
language and to the representations of the
design that it includes is intended to reduce
the risk of cost overruns by isolating responsi-
bility among parties and assigning liability for
errors.
c. Minimum communication among parties
before bidding is intended to avoid the risk
of favoritism or collusion in the bidding
process.
d. Delay in payment of contractor invoices from
45 to 60 or more days is intended to assure an
audit function can reduce the risk of overpay-
ing and loss of the time value of money made
available to the owner.
e. Placing control system managers on-site is
intended to minimize the risk of scope creep,
cost overruns, unauthorized activities, etc.
f. A system of layers of approval that includes
communication exchanges between owner,
contractor, architect, and consultants is
intended to avoid the risk of unauthorized
decisions that result in costly changes or elab-
orations of the design.
g. Established risk recognition/risk mitigation
procedures are intended to guide identi?cation
of high-risk situations, making of go/no-go
decisions, and assuring appropriate responses
to potential risks.
h. Financing break points for go/no-go decisions
being tightly de?ned at early stages of project
planning are intended to reduce the risk of
over-investing in unfeasible projects by the
?nancing sources.
All of these seem at face value to be sensible, and
have come to be accepted practices. But when the
technologies change, when representational prac-
tices change, and when work practices change, as
is increasingly the case with innovation in all indus-
trial sectors, these tradition-bound elements of a
management control system cease functioning as
intended. The open bidding system becomes a game
in which contractors rely on ambiguities in the con-
tract documents and changing representational
forms to make claims for extra payments (change
orders) during construction, which can be signi?-
cant. Minimizing communication slows learning
and ensures that new circumstances will be
approached with inappropriate, older construction
techniques. Delays in making disbursements create
a vacuum in which change order gaming can take
place by building arguments and collecting data
for supporting contentious claims. Spreadsheet-
wielding managers on-site can inhibit collaborative
communications within the project team by focus-
ing energy on building arguments to support change
order requests.
Layers of approval with contractually explicit
patterns for exchanging communications and
obtaining signatures from the hierarchy of each ?rm
involved, predictably slow down the problem-solv-
ing process and increase the risk of cost overruns.
Risk recognition and mitigation procedures are tra-
ditionally based on historical experience, which is
inherently more linear and less complexly intercon-
nected than a present project. This can result in risk
910 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
reducing decisions that potentially increase risk
instead. Finally, enforcing very short go/no-go deci-
sion timelines for projects means that less time will
be spent on planning and designing before ‘‘?rm”
construction estimates are committed to by the
funding sources, thereby increasing the risk that less
costly or alternative designs or materials will
surface.
In short, the problem we observed in the institu-
tional setting of construction projects is that the suc-
cess of the hybrid organization is dependent on
communication among all participants with the
intent to collaborate in a joint problem-solving
e?ort. Team-building exercises among ?rms are
increasingly standard in these large hybrid project
organizations. But, the management control sys-
tems that are employed often mimic those of a sys-
tem that has been decomposed, rather than one that
has been synthesized. Their logics do not match
those inherent to hybrids. The result is forms of
management control in hybrid relations that are
intended to decrease the risk of an overall project,
but serve to increase the project risk instead. In a
nicely balanced paradoxical equation, we argue that
the path-creating innovations that we observed
often included practices that seemed to increase pro-
ject risks in order to decrease them. We also argue
that in the absence of morphogenesis at the institu-
tional (construction industry) level of hybrid organi-
zational forms, the chances of having e?ective
management control systems are minimal.
Furthermore, the hybrid organizational form
adopted by the oil and gas joint venture is highly
infused with pre-existing, independent elements
from its parent companies, based on separate
path-dependent histories. As in the construction
industry, each parent organization brings a history
of work practices, routines, cultures, etc., that drives
the management control systems followed by the
joint venture. The strict hierarchical control estab-
lished to reduce risk, however sensible within a sin-
gle organization, can be counterproductive when
decomposed and infused within the hybrid form of
their joint ventures. The preceding two oil and gas
examples demonstrated the con?ict created by
decomposition, and the resolution found in mor-
phogenesis. Both examples show the bene?ts of
designing management control systems with synthe-
sis in mind.
We cannot say whether the changes in organiza-
tional form re?ected by moving the non-operator
managers to London and disconnecting them from
their engineering resources and decision support
processes in Houston resulted in a ‘‘better” outcome
for the West African oil ?eld, but we can say that
the path-creating action to restore a sense of bal-
anced control between the operator and non-opera-
tor in that joint venture entailed a morphogenic
change in the organizational structure of the hybrid
form. As part of that change, the non-operator
traded o? many millions of dollars of engineering
knowledge that it was spending in Houston, in order
to achieve what they believed were better outcomes
for the project by making more timely decisions in
London. They gave up knowledge in order to
become more knowledgeable, and abandoned their
decision processes in order to become more involved
in the decisions. Finally, it was shown that the
Canadian venture had the path-creating action to
grow through synthesis, molding its culture and
processes to the market, rather than adopting tem-
plates from its parents. It used this freedom of syn-
thesis to create a new contracting system,
abandoning the rigid practices of its parents for a
more inclusive strategy. This morphogenesis
attempted to reshape typical industry practice
regarding contracting relationships in terms of risk
allocation, reward, and communication.
The contracting strategy to actually execute the
facilities was di?erent, in that we did it as an alli-
ance. . .We got all our contractors in a joint ven-
ture and with a common target price and shared
the risk and reward of the project. So we all
worked together. So they were aligned as well
with you—knew our goals for the most part,
and tried to get this thing on stream. . .and on
budget. . . It worked very well, and they were
involved in all the sessions as well.
Unlike hierarchical decomposition, this synthesis
approach gave the Canadian venture opportunities
to adapt to the market and use its parents as a mar-
ket resource. Inevitably, the Canadian venture was
in?uenced in some degree by the history of all its
parents, and the true amalgamation of di?erent
parental histories further encouraged morphogene-
sis and the emergence of a new distinct culture.
Finally, the Canadian venture became an industrial
pioneer of contracting methods, encouraging a
more collaborative approach to oil company/ser-
vice company relationships. Paradoxically, by
abandoning hierarchy and control, the parent orga-
nizations reduced both project risk and time to
delivery.
R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914 911
Concluding thoughts and implications
The examples we presented show that path cre-
ation and morphogenesis at the project and joint
venture levels are key elements in a management
control system design for hybrid organizational
forms in the construction and oil and gas indus-
tries. Path creation and morphogenesis is impor-
tant so that the elements of practice, including
routines, industry standards, histories, and trajec-
tories, of individual ?rms can form a hybrid
through synthesis rather than decomposition.
Design elements that seem perfectly sensible when
hybrid forms were emerging in decentralized ?rms
by decomposing their hierarchy in order to infuse
market elements, can be counterproductive for a
hybrid organization that is being formed by adding
elements of hierarchy to a market-based industrial
system.
As stated previously, an approach based on new
institutional sociology is particularly useful when
di?erent organizations are connected through rela-
tionships of dominance and dependence. New insti-
tutional sociology focuses on the pressures and
processes that shape organizations in collaborative
projects. Furthermore, the concept of institutional
isomorphism (DiMaggio & Powell, 1983) is particu-
larly relevant. However, institutional isomorphism
cannot accommodate the complexity and distinc-
tiveness of some cases, as shown in our research.
The design of inter-organizational management
control systems in situations characterized by
hybrid organizational forms may represent a para-
digmatic case. The concepts of path creation and
morphogenesis contrast with isomorphism, and
extend previous explanations based on continua of
resistance and pressure (e.g., Abernethy & Chua,
1996; Oliver, 1991). In this way, we believe it repre-
sents a contribution to the literature on manage-
ment control change. As our examples show, the
implications can be disturbing for the control sys-
tem designers for several reasons. It presents the
designers with a richly paradoxical situation in
which:
Control can be enhanced by reducing the number
of controllers.
Financial e?ciency is found by doing ?nancially
ine?cient things.
Partners can more e?ectively participate in con-
trol processes by giving up knowledge
resources.
Abandoning the control culture of parent organi-
zations can develop more vibrant cultures of
control.
One message that comes through in our study of
hybrid organizational forms in the construction and
oil and gas industries is that in the absence of path
creation, an institutionalized mix of market and
hierarchy has evolved in those industries. It is those
hybrid forms themselves that have to be redesigned,
through a process of path-creating morphogenesis,
in order to achieve management control. The
path-creating action should include a change in
the set of formal and informal contracting proce-
dures of the industry, a more re?exive process of
borrowing organizational elements from parent
organizations, and a commitment to challenge
understandings of ‘‘the way things work” in order
to create an e?ective management control system.
Further, it suggests that increasing the attention
paid to designing management control by applying
control procedures borrowed from our familiar set
of management control techniques is probably not
a viable approach in complex, high risk situations.
The concepts of path creation and morphogene-
sis interpret the design of management control sys-
tems as a dynamic process in?uenced by
technological, economic and institutional pressures.
Thus, it o?ers an analysis of management account-
ing change from a di?erent theoretical perspective.
The institutional literature explains the adoption
of new management control systems through insti-
tutional isomorphism and underestimates the rela-
tionship between management accounting change
and gains in the e?ciency of organizations. In par-
ticular, the relationship between technical and insti-
tutional factors has not been adequately
conceptualized. This paper contributes to the litera-
ture, extending the concepts of continua of resis-
tance and pressure based on strategic response
(Oliver, 1991) by o?ering a more complex conceptu-
alization of management accounting change.
Empirical evidence collected in this work demon-
strates that theoretical approaches should go
beyond the analysis of institutional pressures versus
an organization’s resistance to such pressures. The
design of management control systems may be a
much more dynamic process than can be suggested
by models based on continua of resistance and pres-
sure. In this context, alternative theoretical
approaches that go beyond such conceptualizations
should be developed.
912 R.J. Boland Jr. et al. / Accounting, Organizations and Society 33 (2008) 899–914
The study of hybrid organizational forms is an
important topic in recent management accounting
research. In fact, ?rms are blurring their organiza-
tional boundaries in many di?erent ways, including
sharing research and development projects, placing
their employees in other ?rms, and developing
inter-organizational cost management practices
(Cooper & Yoshikawa, 1994). Cooper and Slagmul-
der (2004) emphasized that inter-organizational cost
management practices are ‘‘hybrid relational forms”
that ‘‘cross the organizational boundary between
buyers and suppliers.” Formal buyer–supplier ini-
tiatives undertaken to reduce costs through
collaborative e?orts should be included in this
domain. The concepts of path creation and morpho-
genesis may be also applied in the study of the
emerging issues in inter-organizational cost manage-
ment systems.
Finally, by drawing upon empirical evidence of
changes in management control systems in hybrid
organizational forms, this paper contributes to a
better understanding of these speci?c cases, which
may represent a paradigmatic example of path cre-
ation and morphogenesis. This paper was centered
on empirical evidence collected in large-scale pro-
jects, particularly in the architectural, engineering
and construction industry, and oil and gas industry.
Additional insights could be obtained if research is
extended to other sites and industries.
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