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1. Introduction
Organizational change has generated much discussion in the literature over the years (Mizruchi andFein, 1999; Townley, 2002). Perhaps no industry has attracted as much attention in terms of changein recent years as the utilities sector (Ogden, 1995, 1997; Nwaeze and Mereba, 1997; Shaoul, 1997;Parker, 2000). Several Western governments have deregulated their utility sectors and this has changedthe institutional environments of utility companies by creating more competition (Ogden, 1995, 1997;Dacin et al., 2002). In Spain, a wider privatization programme was started by the government in themid-1980s, and between the years 1996 and 1998, for example, more than D 21 billion was raised fromthe sale of equity shares in major public enterprises (Noceda, 1999).1 One of the major sectors affectedwas the Spanish electricity sector (SES), which was deregulated in 1997 (under Electricity Sector Law54/1997) in response to a European Union Directive.
Our case organization (Sevillana), which was one of the major electricity companies in Spain priorto the deregulation, was confronted with institutional change and market competition. As a result of theimpending deregulation, the company was partially privatized and sold to the Endesa Group at the end of1996. The new SES law also required the juridical separation of electricity activities and the introductionof competitive practices into the sector. The Endesa Group responded to these regulatory requirementsby dissolving Sevillana and other Endesa subsidiaries and instead created new business lines. By creatingthese new business lines, the Endesa Group was allowed to engage in all four electricity activities (Gen-eration, Commercialization, Transportation, and Distribution), which the new SES regulation prohibits asingle company from undertaking.
A new integrated accounting and financial information system was then implemented by the Group tosupport the new organizational form. Given the role of the regulatory environment in driving change inthe SES in general, and in our case organization in specific, New Institutional Sociology (NIS) (DiMaggioand Powell, 1983, 1991) is adopted in the paper to explain and understand the dynamics of the change inthe accounting and financial information system. The focus of the paper is therefore on explaining andunderstanding how the change in the accounting and financial information system was shaped by bothexogenous and endogenous forces.
NIS has been adopted in the accounting literature to explain accounting choice in both the public andthe private sector (Whitley, 1999; Hussain and Hoque, 2002; Collier, 2001; Modell, 2002). These studieshave focused on, amongst other things, identifying and explaining the sources of isomorphic pressureson the adoption of accounting systems (Brignall and Modell, 2000; Carpenter and Feroz, 2001; Hussainand Hoque, 2002), the interplay between institutional and technical environments (Hoque and Hopper,1997; Hussain and Hoque, 2002; Modell, 2002), and the power and actions of individual organizationalactors to respond to the institutional pressures (Collier, 2001; Modell, 2002). NIS is particularly relevantfor analysing organizations that are confronted with uncertainties and, as a result, compete for politicaland institutional legitimacy and market position. These fit in with our case organization.
While NIS has made a significant contribution to our understanding of accounting practices, it hasbeen criticized for its inability to capture the dynamics of organizational change because of its failure toadequately theorize market competition and intra-organizational power relations (Powell, 1991; Oliver,1992; D’Aunno et al., 2000; Dillard et al., 2004). As identified above, the change in our case company wasdriven by changes in the institutional environment and the introduction of market competition. However,
1 Examples of the enterprises sold include Telefonica, Iberia, Tabacalera, and Aceralia.
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the change was also shaped internally by intra-organizational power relations. It is thus imperative that, inorder to understand the dynamics of change in this context, our exploration needs to examine the interplaybetween these factors (Brignall and Modell, 2000; Collier, 2001; Modell, 2002). Based on this, the mainresearch question addressed in the paper is: How is the change in the accounting and financial informationsystem shaped by the interplay between institutional forces, market forces, and intra-organization powerrelations?2
The remainder of the paper is structured as follows. In the next section, we provide the theoreticaldevelopment by presenting institutional theory as the framework informing our analysis. The methods usedin gathering data, including brief background information about the case company, are then discussed. Thefollowing section discusses the changes that occurred in the accounting and financial information system.After this, we discuss how the changes in the accounting and financial information system are shaped bythe interplay between institutional forces, market forces, and intra-organizational power relations. Thefinal section provides concluding comments and suggests areas of future research.
2. Theoretical framework
In this section, we propose new institutional sociology as the theoretical framework informing ouranalysis. Initially, the concepts of NIS and their relationship with accounting choice are discussed. Thenwe examine the implications of the interplay between institutional and market forces on the one hand, andinstitutional forces and intra-organizational power relations on the other hand, for accounting change. Asidentified in the preceding section, this examination is necessary because the change in our case companywas shaped by the regulatory environment, market forces, and intra-organizational power relations.
2.1. NIS and accounting choice
NIS focuses on the elaboration of rules, symbols and beliefs, as well as the wider environment of anorganization (Scott, 1987; Scott and Meyer, 1994; Selznick, 1996), raising the awareness that organiza-tions need to conform to institutional rules and norms to legitimize their existence (Meyer and Rowan,1977; DiMaggio and Powell, 1983). NIS thus provides explanations for changes in organizational prac-tices (such as accounting practices), referred to as institutional isomorphism (DiMaggio and Powell, 1983,1991). DiMaggio and Powell (1983) identify three mechanisms through which institutional isomorphicchange occurs. Coercive isomorphism occurs when an organization adopts certain practices due to pres-sures exerted by those that the company depends on externally, such as the state and the credit markets,and the pressure on the organization to conform to the cultural expectations of the larger society. Mimeticisomorphic change occurs under conditions of uncertainty when organizations imitate other organizationsin their field that they perceive to be more legitimate or successful. Finally, normative isomorphism stemsprimarily from pressures from professional groups.
NIS has been adopted to provide an understanding of accounting choices and behaviour (Meyer, 1986;Ansari and Euske, 1987; Covaleski et al., 1993; Mouritsen, 1994; Scapens, 1994) because of its focus onboth exogenous and endogenous factors (Hussain and Hoque, 2002). Previous studies have identified alink between an organization’s institutional environment and its choice of accounting controls (Collier,
2 These issues are discussed in the next section.
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2001). For instance, Covaleski and Dirsmith (1988) examined how the articulation, enforcement and mod-ification of an organization’s budgeting system reflect societal expectations. More recently, Collier (2001)found that the introduction of financial management reforms in a UK local police force were driven byinstitutional demands for improved effectiveness and argued that NIS provides a useful theoretical frame-work for analysing how the police force coped with such external pressures. Similarly, Hussain and Hoque(2002) observed that NIS is a useful framework for analysing the relationship between organizationalstructures and the wider social environment and how this impacts on management accounting systems.
The organizational changes in our case company were driven by the general electricity sector reforms inSpain. Until 1997, the Spanish electricity sector (SES) was characterized by high state regulation, with theStable Legal Framework, the National Power Plans, and Law 40/1994 of the National Electricity SystemOrdinance being the key laws that regulated the operation of the SES. Spanish electricity companiesbenefited substantially from this high level of regulation, as it provided stability in the industry. In thisperiod, limited competition existed among them, as each company was assigned an exclusive area ofSpanish territory and the market was able to absorb any electric power produced.
From 1996, European Union Directive 96/92/CE, which prescribed common norms for the Europeanelectricity market, required the Spanish Government to establish independent regulatory agencies, pri-vatize public companies and hence promote competitive practices (Arocena, 2001). As a result, newconcepts such as ‘competence’ and ‘liberalization’ were introduced into the SES for the first time. TheSpanish Government approved the new regulation on 27th November 1997 under the Electricity SectorLaw 54/1997, which came into effect at the beginning of 1998. The law established “an electricity sys-tem that will work under objectivity, transparency and pure competitive principles”.3 The law regulates,among other things, the structure and operation of the new electricity market, the progressive reductionof the electricity tariff and the juridical separation of the electricity activities (Nombela, 2000; Rojas,2000). The electricity companies responded to this regulation by restructuring their operations, whichculminated in less vertical integration in the sector.
Given that these organizational changes were in response to the regulatory change, NIS provides auseful theoretical framework to discern how new accounting and financial information systems wereadopted in order to cope with these external pressures.4 The NIS literature suggests that, when facedwith these regulatory changes, organizations design structures to make themselves legitimate before theirexternal constituents (Oliver, 1991). However, these wider regulatory structures are likely to be shapedby and shape other forces. In our case company, market forces and intra-organizational power relationswere found to be factors that interacted with the institutional environment.
2.2. The interplay between institutional and market forces
The paper contributes to NIS research in management accounting by analysing the interplay betweeninstitutional and market forces in accounting choice. Initial analysis of NIS has de-emphasized the role ofthe market and competitive forces (DiMaggio and Powell, 1983). However, later studies (Powell, 1991;Oliver, 1992; Greenwood and Hinings, 1996) have recognized the potency of such competitive forces.For example Oliver (1992, p. 21) observes that, “. . . economic considerations should be incorporatedinto institutional explanations of organizational activities in order to specify more precisely the particular
3 See Exposicion de Motivos of the Electricity Sector Law 54/1997.4 The institutional factors in our case study are discussed later in the paper.
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situations or conditions within which institutionalized activities are most likely to persist or endure”. Ina study that examined change in US rural hospitals, D’Aunno et al. (2000) concluded that the decisionto maintain homogeneity (institutionalization) or heterogeneity (deinstitutionalization) is driven by bothinstitutional and competitive forces.
Within the management accounting literature, a few recent studies have examined the interplay betweeninstitutional and market forces (Hoque and Hopper, 1997; Brignall and Modell, 2000; Modell, 2002;Hussain and Hoque, 2002). Hussain and Hoque (2002), for instance, found the influence of both institu-tional factors and market forces to be driving the adoption of non-financial performance measures in fourJapanese Banks. Similarly, Modell (2002) examined the interplay between institutional forces and marketforces in the adoption of cost allocation techniques. He concluded that under conditions of greater levelsof market competition, institutionally induced cost allocations are more tightly coupled with operatingcontrols where the adoption of such techniques are voluntary and not coercively imposed on organiza-tions. This suggests that conflict may occur between institutional and market forces when the institutionalfactor at play is coercive isomorphism. Hoque and Hopper (1997) also examined the relationship betweeninstitutional isomorphism and market forces in budgeting decisions. They found that the managers wereconfronted with both high market competition and strong political and industrial relations turbulence.Whereas the market competition had positive effects on the use of accounting information, the politicaland industrial relations turbulence had negative effects. Under strong political and industrial relationsturbulence, for example, budgeting systems tend to be ritualistic, as they become decoupled from man-agerial practices. These findings suggest that institutional and market forces may be in conflict under highpolitical and industrial relations turbulence.
The view that institutional forces may be in conflict with market forces was also advanced earlier byOliver (1992), who argued that growing market competition reduces the influence of institutional forceson organizations. However, some have questioned such a dichotomy, arguing that institutional and marketforces may not automatically be in opposition (Powell, 1991). Powell noted that the distinction betweeninstitutional and competitive forces provided in the earlier work of DiMaggio and Powell (1983) wasmeant for analytical purposes only and that such a dichotomy is not necessary for empirical analysis.He cautioned against the misconception in prior studies that “. . . competitive settings are the turf whererational-actor models are most appropriate, and that institutional settings are dominated by satisficerswho strive only to reduce uncertainty and ensure their continued existence” (Powell, 1991, p. 184).Drawing on the work of Scott (1991) and Powell (1991), we argue that institutional and market forcesare not dichotomous but rather both exert pressures on organizations. To survive, organizations must findways of responding to both pressures.
In terms of the interplay between the institutional environment and market forces, the new regulationprovided for the separation of activities into the four areas of Generation, Commercialization, Transporta-tion, and Distribution. The law established a competitive market with freedom of entry for all agents.Electricity tariffs were to be based on market prices instead of standard costs, which was the practiceprior to the deregulation of the industry. The new regulation also allowed consumers to choose theirelectricity supplier, although a period of 10 years (1998–2007) was allowed for gradual implementationof the change.5
5 For example, before the deregulation, the electricity companies were territorial and consumers were only allowed to buyelectricity from the local electricity company. However, after the deregulation, consumers now have the freedom to choose anyelectricity company, irrespective of its territory.
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In this paper, we examine the interplay between government regulation (institutional force) and marketforces in the Spanish electricity sector, and how the company responded by designing structures andaccounting systems to cope.
2.3. The interplay between institutional forces and intra-organizational power relations
A second limitation in the NIS literature that we address in this paper is the interplay between insti-tutional forces and intra-organizational power relations. The earlier formulation of NIS theory has beencriticized for its focus on homogeneity and persistence with minimal attention to the role of interest andagency in shaping action (DiMaggio, 1988). This criticism has, however, been addressed in some of therecent work in NIS in general (Oliver, 1991; Powell, 1991; Goodstein, 1994; Goodrick and Salancik,1996; Kostova and Kendall, 2002) and its use in accounting research in specific (Abernathy and Chua,1996; Collier, 2001; Modell, 2002; Dillard et al., 2004).6 As a consequence, institutional change is notonly seen as arising out of pressures from an organization’s external environment, but also from theactions of organizational actors. Thus, the study of how the institutional environment interacts withorganizations should be located within the context of power relations. Collier (2001) observed that“accounting is implicitly involved in relations of power within the institution-organization environment”(p. 468).7
This approach allows us to move beyond the more deterministic perspective adopted in some priorNIS analysis in accounting (see for example, Carpenter and Feroz, 2001; Hussain and Hoque, 2002) andinstead to focus on the ability of agents to respond to institutional pressures (see for example, Abernathyand Chua, 1996; Collier, 2001; Modell, 2002). Collier (2001) and Modell (2002) recently encouragedother studies in management accounting using NIS to broaden their analyses to include the relations ofpower. Different notions of power have been drawn upon in analysing management accounting systemssuch as the Foucauldian perspective (Hoskin and Macve, 1986, 1988, 1994; Ezzamel et al., 1990; Hopperand Armstrong, 1991) and Giddens’ structuration theory (Macintosh and Scapens, 1990; Scapens andRoberts, 1993; Scapens and Macintosh, 1996).
Of particular interest to us in this paper is Giddens’ (1976, 1996) articulation of power, as this con-ceptualization is consistent with the nature of power observed in our case study (discussed later in thepaper). Giddens (1996, p. 744) defines power as the “ability of individuals, or the members of a group, toachieve aims or further the interests they hold”. Thus, while other definitions of power concentrate on itsconflicting properties (see for example, Clegg, 1979; Pfeffer, 1992), Giddens (1976, 1996) articulationemphasizes both its conflicting and enabling characters. Power is enabling when mobilized to pursueinterest, and conflicting where interests of actors are divergent. Greenwood and Hinings (1996) extendedthis conceptualization to the analysis of institutionally induced change. In the management accountingliterature, both Collier (2001) and Modell (2002) recently adopted this concept of power to analyse theintroduction of financial management and cost allocations, respectively. Collier (2001) found that theenabling character of power contributed to the minimization of conflicts, as it “facilitated loose coupling,by providing a consensus between, and a context for action that accommodated both institutional andtechnical demands” (p. 480). The constraining character of power, on the other hand, has largely been
6 Two recent studies that also addressed the issue of power in institutional analysis are Burns and Scapens (2000) and Burns(2000), though their analyses are located within old institutional rather than new institutional analysis.
7 For a detailed analysis of power and institutionalism in management accounting research, see Collier (2001).
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explained in terms of resistance to change (Armstrong, 1987; Hopper et al., 1987; Fincham, 1992; Hardy,1996; Burns, 2000; Collier, 2001; Modell, 2002).
In this paper, we examine both the enabling and constraining aspects of power in the adoption of thenew integrated accounting and financial information system. This approach allows us to understand howpower is mobilized to implement the new system in order to facilitate the coordination and managementof the activities of the organization. At the same time, we explore how the implementation of the newsystem created resistance among local employees because it took power away from them. In this context,we examine how the employees of the company attempted to mobilize power to resist organizationalrestructuring and the subsequent introduction of the new integrated accounting and financial regime.8
Our analysis also explores whether the actors were able to mobilize sufficient power to resist the change(Covaleski and Dirsmith, 1988; Modell, 2002).
3. Research method
The research is based on a longitudinal case study conducted between 1996 and 2002. This approachwas adopted because it enabled us: (1) to consider the historical, social, economic and organizationalcontext in which the studied phenomenon was developed (Otley and Berry, 1994; Bonache, 1999); (2)to analyse the impacts of diverse exogenous and endogenous factors which are difficult to quantify, suchas government regulations, organizational culture, conflicts, behaviours, and attitudes about the change(Escobar and Lobo, 2002); (3) to adopt a holistic approach to understand the change process (Scapens,1990); and (4) to obtain a rich description of the processes and to use multiple sources for collectingevidence over a long period of time (Yin, 1989; Scapens, 1990). The use of a longitudinal case study alsoallowed us to study institutional change (Dacin et al., 2002; Zilber, 2002).
The study is based on the Sevillana Company for several reasons. First, the company fits in withour research objective-to examine change in accounting and financial information systems and howthis is shaped by the interplay between institutional and market forces and intra-organizational powerrelations. Sevillana was established in 1894 to engage in the generation, transportation, distribution andcommercialization of electric power. Its market embraced the Andalusian Autonomous Community andthe county of Badajoz. At the end of 1996, in response to the Spanish government’s deregulation of theSES, Sevillana was acquired by the Endesa group. As a result, changes were made at Sevillana and thisprovided us with an opportunity to study the change process and to understand the interplay betweenthe various endogenous and exogenous forces. The case presents significant issues for managementaccounting and organizational change research, such as the liberalization of the SES, the acquisition ofSevillana by the Endesa Group and the privatization process of the parent company of this Group.9
The second reason for selecting Sevillana was that the company is very important in the Spanish econ-omy. Sevillana was classified as being amongst the group of Spanish large-size companies. For example,the company’s sales, net income and number of customers in 1997 were 21.790 GW, D 135.7 million and
8 For further discussion of the enabling and conflicting aspect of power in NIS research in management accounting, see Collier(2001) and Modell (2002).
9 Recent studies have shown interest in understanding management accounting and organizational change due to deregulationand privatization (Ogden, 1995, 1997; Vamosi, 2000; Uddin and Hopper, 2001). Our case company has gone through deregulationand privatization and therefore provides us with the opportunity to contribute to the literature in this area.
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Fig. 1. Abridged organizational chart of Sevillana.
3,570,715 customers (representing 38% of the total customers of the Endesa Group in 1997), respectively(Annual Financial Reports of Sevillana, 1997–2002). Fig. 1 shows an abridged organizational chart ofSevillana as at the end of 1996.
A third reason for selecting Sevillana was the opportunity that we had for full access to differentinformation sources. The principal information sources were: (1) participant observation, during 1 yearwhen one of the researchers worked in the Treasury Department (TD), (2) 52 semi-structured interviewswith employees of the TD and other functional areas (such as Accounting, Commercial, Internal Con-trol, Internal Auditing, Information System, and employees of the parent company), (3) non-participantobservation during three visits each month, undertaken during the period 1997–2002, (4) the analysis ofthe information systems together with their users, and (5) informal discussions with employees, whichwere very important, as they allowed us to make comparisons with the information collected through theformal sources.
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Table 1Research process
Timing of the various phases of the research
Source of data When was this source used?
Participant observation From December of 1996 to August of 1997, one of the researchers workedin the Treasury Department of Sevillana
52 Semi-structured interviews 8 interviews in 199814 interviews in 199914 interviews in 200010 interviews in 20016 interviews in 2002
Non-participant observation 3 visits each month undertaken during the period 1997-2002 by one of theresearchers
Analysis of the information systems togetherwith their users
In 1997, we analysed System-Cash
From 1999 to 2000, we analysed the treasury module of SAP R/3
Informal discussions with employees One of the researchers had informal discussions 2–3 times each monthfrom 1997 to 2002
Furthermore, these informal discussions allowed us to probe deeper into the political, social, historicaland organizational context of the studied organization. Whilst we were unable to undertake directinterviews with the consultants, an external consultant was present at two interviews that were undertakenwith computer specialists at Sevillana. In these interviews, the external consultants intervened on anumber of occasions to contribute to the discussion. These contributions were particularly focused ontechnical matters.
In addition to the above sources of data, further information was gathered from analysis of documentssuch as the internal bulletins of Sevillana (1997–1999) and the internal journals of the Endesa Group(1997–2002), annual financial reports of these companies, several documents about the SIE-2000, theagreement about the organizational restructuring, internal documents about the TD, and documents con-cerning the Share Programme. We also had access to the Intranet of Sevillana, where we were able tocollect news and developments concerning the SES and other internal news about the company. We alsoundertook regular consultations of the Web pages of Sevillana, Endesa Group and UNESA (the employersociety of the SES).
The timing of the various phases of the research is given in Table 1.While the data triangulation approach adopted was particularly useful, as it enabled us to “. . . capture
a comprehensive, holistic and contextual portrayal of the social phenomena under study” (Hoque andHopper, 1997, p. 126), it also created challenges in terms of analysing and making sense of data collectedfrom these various sources. To overcome this problem, we started our analysis by preparing tables listingissues frequently raised in our interviews. Several themes (such as, regulatory changes, market compe-tition, influence of professional bodies, and resistance to change) were drawn out from these responses.The data representing the themes were then clustered together at this stage. The documentary evidencecollected was subsequently matched with the themes.
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The next stage of our analysis was to establish links between the themes in order to discover anyrelationships. For example, we established how external regulatory changes impact on market compe-tition and internal power relations. Inconsistent responses were also checked for accuracy during thisstage, mainly using the documentary evidence and, where necessary, a follow-up interview, which wasundertaken to clarify issues. According to Potter and Wetherell (1995), inconsistencies are not unusualin interview data because of the ability of individuals to socially construct events. In the last part of theanalysis, we drew on our theoretical framework – the new institutional theory to make sense of the data.
4. Changes in the accounting and financial information system
In this section, we present the changes that occurred in the accounting and financial information system.However, these changes need to be understood in the context of the overall organizational changes thatoccurred. In terms of the organizational changes, in 1999 the Endesa Group assumed 100% control ofSevillana.10 The group then integrated the operating activities of Sevillana and that of other Endesasubsidiaries into four new business units. However, Sevillana was allowed to maintain the administrativeand finance departments. At the beginning of 2000, the group implemented the SIE-2000, which includesthe SAP R/3 module, to provide a single management model to integrate the group’s economic andfinancial processes. The aim of this was to provide a “common language” in all the subsidiaries to speedup decision-making and provide synergies from the Group’s investments and the cumulative experiencein previous projects with SAP R/3 (SIE-2000 Document).
The overall responsibility for the SIE-2000 project was delegated to very high officials at the headoffice (both the Group Economic and Financial Director and the Group Internal Management SystemsSub-Director). The actual implementation was undertaken by a centralized team at the head office and adecentralized team at the subsidiary level. The team at the head office was responsible for checking theexecution of plans, the elaboration of the implementation methodology and providing support during theimplementation. The team at the subsidiary level was responsible for the allocation of system resourcesand the supervision of the development of the system interfaces. Each team was made up of approximately40 people and comprised the intended users of the system (management and employees of subsidiaries),internal computer specialists, and external consultants. The external consultants were SAP specialists froma major international consulting firm brought in by the head office to advise the users about the technicalspecifications of the system. However, the internal computer specialists directed and implemented theproject and supervised the technological changes.
Sevillana’s top management was supportive of the SIE-2000 implementation and communicated thenew system to employees. To facilitate the use of the new system, a project leader was appointed in eachaffected department. Project leaders were heads of departments with significant hierarchical authority.This was necessary, as management believed that the project leaders needed sufficient authority to directthe project and make it acceptable to other employees. Most of the interviewees described the project leaderas the “visible head” of the SIE-2000, with the ability to implement and solve any problem associatedwith the new system.
There was a strong emphasis on change management, promoted and implemented through a processof communication and training in the SIE-2000. The communication and training were decentralized to
10 Endesa had earlier acquired 75% of the equity shares of Sevillana in 1996.
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Table 2Vision, mission and values of the Endesa Group
Vision An operator in the business of energy and connected services, focused on electricityA responsible, efficient and competitive multinational CompanyA Company prepared to compete at global level
Mission To maximize the value of its shareholders’ investmentTo serve its markets, surpassing its customers’ expectationsTo contribute to its employees’ development
Values People: we guarantee development opportunities based on merit and on professional contributionTeam work: we encourage everyone to participate in attaining a common goal, sharinginformation and knowledgeEthical conduct: we act professionally, with moral integrity, loyalty and respect for peopleOrientation towards the customer: we focus our efforts on customer satisfaction, providingcompetitive and quality solutionsInnovation: we promote ongoing improvement and innovation to reach optimum quality from thestandpoint of profitabilityOrientation to earnings: we direct our efforts to meeting the objectives of the corporate projectand obtaining profitability for our shareholders, aiming to surpass their expectationsCommunity and environment: we commit ourselves socially and culturally to the Communityand adapt our corporate strategies to the preservation of the environment
Source: Annual Financial Reports of the Endesa Group, 1997–2002, pp. 6–7.
the subsidiary level, in particular to the individual departments affected. The Endesa Director in chargeof the overall SIE-2000 project noted that: “The most effective way to communicate the new system toemployees is through their direct heads” (General View SIE-2000 Document). It was further noted bythe Director that: “a fundamental message of the communication plan will be to convince employees thatthe SIE-2000 is the vehicle which leads to the integration of the activities of the different subsidiaries ofthe Group. This will allow us to achieve our objective as an integrated industrial Group” (General ViewSIE-2000 Document).11
The change management planning focused on analysing the impacts of the new system on the workof employees. This was communicated to employees through internal news bulletins and journals, andpresentations to employees. In this way, Endesa’s top management and the upper levels of the organiza-tional hierarchy also demonstrated their commitment to the project and ensured that the new values andculture of the Group were communicated to employees (see Table 2). Specifically, the communicationprocess strongly emphasized the integration of the Group. The expression “Integrated Industrial Group”was constantly repeated to the employees by top management in various documents and reports. ThePresident of Endesa, for example, in various meetings and speeches, made reference to the Endesa Groupas consisting of “a family of employees”.12 In a speech to the shareholders at the 1999 annual generalmeeting, the President again noted that: “we are going to create a company which will belong and provideservice to all of us”.13
11 This document was also contained in a CD distributed to all the employees of the Group.12 This statement was made at the II Meeting of the Endesa Group Executives held at Seville in December 1998 under the theme
“Endesa is for all of us”.13 Speech at the annual general meeting held in April of 1999.
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Table 3Overview of the change process
Year Event Change
1996 75% of equity shares of Sevillana acquired byEndesa
No change in operationsHowever, key top management of Sevillana replacedby head officeMajor decisions made at head officeSevillana still allowed to maintain its finance function
1999 Remaining 25% of equity shares of Sevillanaacquired by Endesa, giving them a 100%controlling interest
Operations of Sevillana integrated into new businesslines with that of other subsidiariesSevillana still allowed to retain its finance function
2000–2002 Complete integration SIE-2000 project implemented, leading to thecentralization of the finance function through SAPR/3 at the end of 2001Other administration functions integrated at the endof 2002 and Sevillana ceased to exist as a company
The President specifically stated that: “the SIE-2000 is a key tool for the Group. It will contributeessential and on-line information. This is a giant step in our way of working and supports our aim as anintegrated industrial group. For this reason, the SIE-2000 has got the maximum support of the whole topmanagement and I appeal to your professional responsibility so that this project has the success which weall need”. He further noted that: “in a project in which so many people participate and so many functionsare affected, the human factor is fundamental. Therefore, I request that you put your biggest zeal into theimplementation of the new system. With the SIE-2000, all of us will win”.
In 2001, Endesa completed the centralization process of the Group’s accounting and financial activitiesby locating the internal control and the finance function in Madrid, and the accounting function inBarcelona. Each subsidiary, including Sevillana, was allowed to maintain only a small number of finance-related staff, whose roles were reduced mainly to administrative duties. A member of the finance staffat Sevillana commented during the interview that: “since the restructuring, we are only involved infilling paper, without any decision-making power”. At the end of 2002, Endesa completed the processof integration of the administrative functions of its subsidiaries. Sevillana and the other subsidiariestherefore ceased to exist as companies. However, the group decided to maintain the name of Sevillana inAndalusia in order to retain customer loyalty. One manager noted during the interview that, “Sevillanais an important name in Andalusia and Endesa wanted to keep the loyalty of the customers of Sevillanaso they were forced to keep the name even though Sevillana no longer existed as a company”. Endesa’soperation in Andalusia is now known as Sevillana-Endesa. The change described above is illustrated inTable 3.
5. Institutional explanation of the changes in the accounting and financial information system
The paper now goes on to analyse the changes in the accounting and financial information systemusing our theoretical framework developed earlier in the paper.
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5.1. Institutional forces and changes in the accounting and financial information system
DiMaggio and Powell (1983) argue that isomorphism can cause organizations in an industry to lookalike. Coercive pressure stemming from both the regulatory environment (DiMaggio and Powell, 1983;Dacin et al., 2002) and head office control (Fligstein, 1990) were influential in driving the change inour case organization. The regulatory changes identified earlier in the paper include the introduction ofcompetence, the liberalization of electricity licenses and the juridical separation of electricity activities,the reduction of electricity tariffs, and the use of market prices instead of standard costs to set electricitytariffs. The regulation, which also called for the reduction of the vertical integration of the electricitycompanies, also put pressure on the electricity companies to improve the quality of electricity supply. As aresult of these regulatory changes, the major Spanish electricity companies adopted similar organizationalstructures when they created new business lines.14
This explanation is consistent with the institutional account of coercive isomorphic pressure. Thedissolution of Sevillana by the Endesa Group in order to create the new business lines in response to theseregulatory requirements resulted in Sevillana becoming only a territorial trademark used by the EndesaGroup to maintain its recognition and customer loyalty in the Andalusia area. The new organizationalstructure, which was institutionally induced, necessitated the redesigning of the accounting and financialinformation system. This led to the centralization of the accounting and the financial function through theSIE-2000 project and the subsequent implementation of the SAP R/3 technology. As a result, head officebegan to establish guidelines that had to be followed by the different business lines. The new systemtransferred power to the head office and this resulted in increased head office control over the varioussubsidiaries (now business lines).
Head office control, as identified above, has been recognized by institutional researchers as a formof coercive isomorphism (Fligstein, 1990). In our case study, the head office directly coerced changesby forcing all of the subsidiaries to adopt a similar accounting and financial information system. InSevillana, the coercion began when the Endesa group acquired 75% of its equity shares in 1997. As theholding company, Endesa immediately replaced the President, the Vice-President, the Chief Executive,the Secretary and 12 of the 17 members of the Administrative Council of Sevillana with people mainlyfrom Endesa. All major decisions from this time were to be made at the Endesa Group’s head office.
The new corporate image of the Endesa Group was diffused among the employees from 2001 with theslogan “Hereafter Sevillana Endesa”. As part of the restructuring by Endesa, the number of employees ofSevillana was reduced by approximately 44%. Thus, at the end of 1996, Sevillana employed approximately5337 people. By the end of 2001, however, the number of employees had been reduced to approximately3000 after the implementation of two voluntary redundancy programmes in 1998 and 2001.
Though the redundancies were termed voluntary, some employees were laid off without volunteering todo so. Two examples were cited by the interviewees from the Human Resource Area as: “some secretarieslost their jobs when their bosses retired” and “some employees were in the services commission and whenthey came back to the organization they found that their departments had disappeared”. Some of thesepeople were reallocated to other jobs, while others were made redundant. In addition, there were severalcases in which Sevillana decided to grant “indefinite holidays” to some employees until they reached
14 The two main electricity companies are Endesa and Iberdrola. While the regulatory changes put pressure on these companiesto adopt similar structures, the focus in this paper is on the changes in the accounting and financial information system atSevillana. As a result, a comparison of the organizational structures between these companies is beyond our analysis.
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early retirement age. This was perceived by some employees as being very disrespectful given the amountof time and loyalty they had dedicated to the company.
The changes experienced by Sevillana eroded its original organizational values and culture. Prior tothe takeover by Endesa, the organizational culture of Sevillana was highly paternalistic. For example,the employees enjoyed stable jobs with good salaries and good working conditions. They were proud ofbeing part of Sevillana and, therefore, very loyal and patriotic to the company. The paternalistic natureof Sevillana, the job stability of the employees, and the pride that the employees had in the organizationwere all replaced by a purely professional relationship, insecurity, uncertainty, continuous change andanticipated redundancy and relocations. This resulted in disillusionment amongst the employees and evenresentment towards the organization. An interviewee commented on the change from a paternalistic to apurely professional relationship as “we feel abandoned during the changes which are taking place. Thecompany is no longer paternalistic. The employees are not identified by their names but rather by theirpassword. The company has been totally impersonalized. Now, we are no longer important to them”. The44% reduction in the employees exacerbated the problem since many older employees who had workedin the company for more than 30 years felt betrayed. Head office control, which is a form of coerciveisomorphism, affected the accounting and finance function by reducing the number of the personnel andalso reducing the job content of the remaining personnel to that of filling paper.
Some of the employees also questioned the top management’s claim that the main rationale for the uni-fied accounting and financial information system (SIE-2000) was to reduce cost. Instead, these employeeswere of the view that the SIE-2000 was implemented mainly to facilitate head office control over thesubsidiaries. One manager of the Information System Area of Sevillana noted that: “the most importantobjective of the SIE-2000 wasn’t to reduce costs. This target was mainly employed to sell the new systemto the employees because we already knew that the Group was going to implement SAP R/3 irrespective ofthe cost savings that other systems could contribute. The main target was the integration of the Group andhead office control and the best system for it was SAP R/3”. The fact that the overall responsibility for theSIE-2000 project was delegated to very high officials at the head office, as discussed earlier, reinforcedthe concerns of the employees that the aim of the new system was to facilitate head office control.
Normative isomorphism, which stems from the influence of professional groups, was also instrumentalin influencing the changes in the accounting and financial information system. For our case, SAP andIT professionals played key roles in legitimating the change in the accounting and financial informationsystem (DiMaggio and Powell, 1983; Lounsbury, 2002; Greenwood et al., 2002). This change resulted insimilar accounting and financial information system for Endesa subsidiaries. The SAP technicians werea very powerful group in Sevillana prior to the take over by the Endesa group. Because of this, Sevillanabecame the first company in Spain to implement the SAP technology. In addition, as a further illustrationof the power of the SAP technicians, the first Spanish association of SAP users (AUSAPE) was foundedby Sevillana. Some computer specialists of Sevillana even worked together with SAP consultants todevelop the SAP system during the 1990s. The experience acquired by Sevillana computer specialistsin SAP was so extensive that they introduced some modifications in SAP R/2 that were later adoptedby SAP. This historical connection helped Endesa to implement the new SAP system, as it made use ofexpertise from Sevillana to implement the technology at the group level. The engagement of the majorinternational consultants to oversee the implementation of the SIE-2000 also legitimized the system.
The SAP professionals were strongly influential during the implementation of the new accounting andfinancial information system. For example, whilst very experienced members of the design team (IT andSAP experts) were selected to serve on the implementation committee, it was noted that the accounting and
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finance representatives were inexperienced. One interviewee from the accounting and finance departmentnoted that, “they intentionally selected accounting and finance people who had worked in the company fora short period of time and therefore had limited experience. In this way, they were not able to challengethe implementation decision”.
The IT and SAP professionals focused on communicating only the technical specifications of theprogram to the managers. This gave them power in their relations with the managers. DiMaggio andPowell (1983) identify professionals as key sources of normative isomorphic pressures. Thus, the values,norms and rules of the SAP professionals facilitated the institutionalization of the new SAP system(see also Hussain and Hoque, 2002). The extent to which professional groups endorse local innovationsand shape their diffusion has been recognized in the literature (Greenwood et al., 2002). In our casestudy, the SAP professionals were able to promote their professional interest at the inter-organizationallevel (Carpenter and Feroz, 2001) through the formation of the Spanish SAP Users Association, whichpromoted the use of SAP in Spanish organizations. In this case, they have been able to legitimize the useof SAP by making it acceptable to the employees. They were able to promote it as a better system thanthe previous accounting and finance information system used by the employees of Sevillana.
So important was the influence of the SAP professional group that Endesa and the consultants estab-lished the SIE-2000 Support Centre (Endesa Services) as a business unit to provide maintenance, support,consultancy and training for the SIE-2000 and SAP R/3 to both national and international subsidiaries ofthe Endesa Group, and other outside organizations interested in acquiring the SIE-2000 project.
5.2. Market forces and change in the accounting and financial information system
The regulatory changes were driven by the need (European Union directive) to open up the utilitiesmarket in Europe and therefore create competition. At the same time, the changes in the regulatoryenvironment created some form of competition, though in our case study, the impact of competition inthe SES was minimal, mainly because of the capital-intensive nature of the generation, transportation anddistribution activities, which made it difficult for new entrants to the industry. Table 4 shows the impactof the deregulation on market share in the SES.
Table 4Impact of deregulation on competition in the SES (market share of major electricity companies)
Market share as at the end of 1997Endesa 49 41.5 42Iberdrola 32 39 39Other Spanish companies 19 19.5 19
Total 100 100 100
Market share as at the end of 2002Endesa 42.6 42 35.2Iberdrola 30.5 40 39.1Other Spanish companies 26.9 18 20.71Other foreign companies – – 4.99
Total 100 100 100
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It can be observed that the two main electricity groups in the SES (Endesa and Iberdrola) controlledabout 80% of the market for all the activities prior to the deregulation. There were no foreign companiesin the SES during this period. The deregulation, however, introduced some competition, although thishas been minimal. No new entrants entered the generation, transportation and distribution activities afterthe deregulation. However, both Endesa and Iberdrola lost 6.4 and 1.5% shares, respectively, of theirgeneration activities to other, smaller Spanish companies, but they both made moderate gains (0.5 and1%, respectively) in the transportation and distribution activities. Endesa also lost 6.8% of its marketshare in commercialization activities, where a few new companies (both foreign and local) entered themarket.
It can be concluded that the impact of the deregulation on competition was slow, as Endesa andIberdrola continue to control over 73% of all the electricity markets. Although some large, foreignelectricity companies, such as RWE, E.ON and EnBW (Germany), Electrabel (Belgium), EDF (France),Enel (Italy), EDP (Portugal) and TXU and Enron (USA), have shown interest in the SES (Cuartas, 2001;Larranaga, 2001), these companies were not able to enter the market due to a set of entry barriers. Thesebarriers include the high concentration of the SES, the loyalty of the customers to the existing electricitycompanies, the ‘costs of transition to competition’ that the government pays to the local Spanish electricitygroups (Arino, 2001; Carcar and Pozzi, 2001; Pozzi, 2001; Reinoso, 2000), and the Spanish government’sprotection of the main electricity companies due to its “golden shares” in these companies (Doyle, 1999;Arocena and Castro, 2000; Rodrıguez, 2001).15
Despite the minimal competition in the SES, we argue that the change in the accounting and financialinformation system did not occur only because of the pressures from the institutional environment, butalso indirectly due to the anticipated competition. Thus, the company implemented changes beyond thoserequired for external legitimation in order to respond to market competition. The deregulation of the SEScompelled the Endesa Group to dissolve its existing subsidiaries and to create new business lines as standalone entities. To be able to coordinate and control these new stand alone entities, the group designed anintegrated management information system (including an accounting and financial information system).Management noted that this was necessary to facilitate the integration and homogenization of the group’soperations and decision-making.
Market forces thus indirectly shaped the introduction of the new integrated accounting and financialinformation system. For example, a rationale cited by management for the centralization of the accountingand financial information system in Madrid and Barcelona was to reduce cost. Prior to the introductionof market reforms, electricity companies had no problem recovering their costs, as electricity prices werebased on standard costs. However, the new SES regulation required the use of market prices, insteadof standard cost, as the basis of pricing electricity services. This compelled Endesa to rationalize itsoperations by implementing cost cutting measures, including the centralization of the accounting andfinancial information system and the subsequent reduction in the number of employees.16 There is thusinterplay between the requirements of the regulatory environment (coercive pressure) and the need to
15 The new SES regulation provided for the Government to pay the electricity companies costs during the transition period onthe basis of the stranded assets possessed by these companies prior to the liberalization. The stranded assets are the resources thecompanies had invested in prior to them having knowledge of the liberalization. This payment is to ensure that the companiesare able to compete with any new entrants into the sector.16 A further argument is that the centralization is needed to support the new organizational structure, which was designed in
response to both regulatory changes and anticipated changes in competition.
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design systems to maintain efficiency and remain competitive (market forces). This argument is consistentwith Modell (2002), who observed that the interplay between coercively imposed cost accounting systemsand market competition is more apparent in deregulated public sector organizations.
While it is possible that conflict may occur between institutionally coerced and market driven manage-ment accounting systems (Hoque and Hopper, 1997), our case provides evidence that the two may alsocomplement each other.17 Systems were designed to cope with pressures from both the institutional andmarket environments (Powell, 1991; Scott, 1991). In our case company, there was the need to balancelegitimation with efficiency. For legitimation purposes, new organizational forms were adopted to meetthe requirement of the new SES legislation. For efficiency purposes, an integrated accounting and finan-cial information system was implemented to coordinate and improve organizational decision-making.Though the level of competition could be considered low, management did recognize the imminent threatfrom other electricity companies both within and outside Spain. At the time of our study, entry barriersprevented intense competition in the SES but increasing EU legislation could potentially change this. Asa result, other large European electricity companies may have full access to the Spanish market.
5.3. Intra-organizational power relations and changes in the accounting and financial informationsystem
Despite the efforts by those responsible for the SIE-2000 to manage the change, and the efforts bytop management to communicate the concept of ‘integration’ and ‘family’ to the employees, there wasresistance to the change. The majority of the interviewees were particularly concerned about Sevillana’sloss of autonomy. The interviewees noted that, in general, the resistance to the change was more visibleamong individual employees than when employees met together collectively. Furthermore, resistance washigher among older than younger employees. The resistance to change was mainly demonstrated throughabsenteeism at the training courses and at the presentations about the SIE-2000, and also the refusal ofsome employees to use the new system. One manager responsible for the change in the managementprocess affirmed that: “Because of the negative attitudes of some of the employees, we even allow themto stay in the company without working until they reach early retirement age”.
The problem of employee uncertainty was exacerbated by the limited information provided to themabout the different organizational changes. Any communication from top management only concentratedon the need to implement the new system and its technological aspects. Employees’ participation in theproject was thus limited to their training on the new system and its utilization. The computer specialistsand SAP consultants focused only on the technological aspects and used the process flowcharts andactivity analysis as the main tools to carry out the internal diagnosis. In a nutshell, top management failedto reveal information about the underlying organizational changes and their impact on employees, butinstead tried to promote the technical benefits of the new system.
The employees, on the other hand, were more interested in the impact of these changes on their workroles and future employment prospects. For example, employees of the TD of Sevillana knew that their
17 While Hoque and Hopper (1997) found in their study in Bangladesh that conflicts occurred between institutionally coerced andmarket driven management accounting systems, our case suggests that this could also be complementary. A possible explanationis that our study was conducted in a different environment with relatively stable political and industrial relations compared toBangladesh (characterized by high industrial relations and political turbulence), which was the focus of the Hoque and Hopper(1997) study.
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department was going to disappear, but they did not know when this would happen. Some intervieweessaid to us that information provided to them by the company was not relevant, as it was mainly publicitymaterial. In this respect, a member of the team responsible for the SIE-2000 implementation commentedthat the views of the users were not considered and therefore their knowledge and experience was notincorporated into the design of the new system. One interviewee commented that: “The Endesa headoffice imposed the new system on us without considering our views”. The interviewees noted that theywere happy with the accounting and financial information system they were using prior to the takeoverand therefore did not see the need for the new SAP R/3 module.
The SAP implementation, and the subsequent centralization of the accounting and financial informationsystem, also caused a reduction in job content and resulted in a loss of autonomy for the employees ofthe accounting and finance department. For example, in terms of the TD of Sevillana, which had eightemployees at the time of the change, four employees opted for “voluntary” retirement, since they wereover 50 years old, and the other four employees were relocated to the Collections and Billing Centre ofthe Group, where their roles were reduced to filing and data entry.
Errors in the SAP R/3 system, such as the duplication of data, problems with the codes assigned tothe data, and the loss of some data, which occurred in the first few months of the change, reinforcedthe concerns of the accounting and finance employees. However, the problems of the new systems weregradually resolved by the company’s computer specialists and the external consultants. For example,employees of the TD highlighted some specific improvements in the new SAP R/3 module with respectto the treasury function, such as: (1) increased efficiency of the cash management process; (2) a moreadvanced system of electronic banking; (3) the reduction of the process execution time; (4) the increasedautomation of transaction processing; (5) the introduction of new functionalities, such as the simulation ofbank funds movements. Furthermore, interviewees eventually recognized that SAP enabled the TD to havea higher level of integration with the rest of the organizational areas and the homogenization of its processesat Group level. This subsequently increased the influence of the SAP professionals in the organization.
Earlier in the paper, we adopted Giddens’ notion of power (Giddens, 1976, 1996), which conceptualizespower as both enabling and conflicting (Collier, 2001; Modell, 2002). In our case study, top managementwas able to mobilize power to implement the new integrated accounting and financial information system.To consolidate its power, we noted how the head office made changes to the key management team ofSevillana. The new management team endorsed head office decisions and facilitated the restructuringand the subsequent implementation of the integrated accounting and financial information system. Headoffice also appointed powerful and influential project leaders to promote the use of the new system.The result was the full integration of the activities of the group, which would not have been possiblewithout the mobilization of power through the new management team, given the level of resistance fromthe local employees at the time. In this case, the mobilization of power is argued to have facilitated theintegration and coordination of the activities of the various subsidiaries. It has been argued in the literaturethat centralization of decision-making authority shifts the balance of power away from operating levelsand enhances the implementation of new accounting technologies (Markus and Pfeffer, 1983; Gosselin,1997; Modell, 2002). Burns (2000) also observed that power mobilization by top management providesan impetus for implementing accounting change.
However, local power manifested in the form of resistance had negative impacts on the implementationof the integrated accounting and financial information system. For example, initial resistance by thelocal employees at Sevillana forced management to delay the introduction of the new system between1998 and 2001. This was different in the other subsidiaries, where the system was implemented as early
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as 1998 because of minimal resistance. Brignall and Modell (2000) argued that the more managers tryto affect change by exercising choice, the less likely it is that change might actually occur because ofresistance from other organizational actors with conflicting interests. In our case, local employees withvested interests attempted to thwart the implementation of the new integrated accounting and financialinformation system. Though the system was finally implemented in 2001, the process was again marredby employee resistance. The local employees opposed the SAP R/3 system because they perceived it asa head office imposition. Moreover, the integrated system created redundancies and relocations. Thus,while some of the accounting and finance employees were made redundant, others were transferred toother non-finance departments within Seville, or to other business units outside Seville. Some of thedisgruntled employees refused to be transferred and instead agreed to be made redundant. Some of theemployees that left the company even deliberately removed the hard drives from their computers. Fromthis perspective, power can be perceived as conflictual. As argued by Burns (2000, p. 588), “. . . powerrepresented in local settled ways of thinking can also work fundamentally against such change”.
Fig. 2. Overview of the changes in the accounting and financial information system.
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However, the employee resistance was ineffective, as management eventually went ahead with theimplementation of the new system. This is consistent with arguments presented in the literature thatemployee resistance to the implementation of institutionalized work practices, such as the integratedaccounting and financial information system, is likely to be limited unless they can mobilize sufficientpower to resist it (Covaleski and Dirsmith, 1988; Greenwood and Hinings, 1996; Modell, 2002). The powerof the local employees was curtailed through several channels, including the appointment of a new manage-ment team who shared the same vision as the head office and therefore was able to carry the change through,and the deliberate appointment of inexperienced accounting employees to the implementation committee.
The analysis presented above demonstrates the interplay between institutional forces and intra-organizational power relations in the implementation of the new accounting and financial informationsystem. The institutional pressures created the need for organizational change, including the new inte-grated accounting and financial information system that was in conflict with the values of local employees.The system eroded the paternalistic culture and autonomy of the local employees. This conflict in valuesmeant that top management had to mobilize power in order to undertake restructuring and the subse-quent implementation and diffusion of the new integrated accounting and financial information system.Management also used the very powerful SAP professional group to promote the new system, suggestingan interplay between normative isomorphism (professionalization) and intra-organizational power rela-tions (Brignall and Modell, 2000). The local employees, though they resisted the change, were unable tomobilize enough power to be effective.
Fig. 2 provides an overview of the changes in the accounting and financial information and how thesehave been shaped by the interplay between institutional forces, market forces and intra-organizationalpower relations.
6. Concluding comments
The relation between organizational change and accounting information system change has beendebated in the literature (Scapens and Jazayeri, 2003; Quattrone and Hopper, 2005). This paper soughtto add to this literature by examining how changes in the accounting and financial information systemin a large Spanish electricity company were shaped by the interplay between institutional and marketforces, and intra-organizational power relations. In terms of the interplay between institutional and marketforces, the deregulation of the SES introduced competition into the Spanish electricity market. Apartfrom designing structures to satisfy the regulatory environment (coercive isomorphism), the group alsoimplemented policies to promote efficiency because of the competition (market forces). For example, costcutting initiatives were introduced and the labour force was reduced by 44%. The integrated accountingand financial information system was designed to facilitate coordination and management of the neworganizational structure, which was driven by changes in the institutional environment.
We provided an illustration of the way in which an organization designed structures to respond to pres-sures from both the institutional and market environments. While both types of pressures may requiredifferent approaches (Hoque and Hopper, 1997), our analysis suggests that these can also be complemen-tary. The integrated accounting and financial information system, which was implemented to facilitatecoordination and decision-making, was necessary because of the new structure demanded by the institu-tional environment. This supports Powell’s (1991) call that institutional and market forces should not beviewed as two dichotomous forces.
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In terms of the interplay between institutional forces and intra-organizational power relations, we haveillustrated how the local employees attempted to mobilize power to resist the new accounting and financialinformation system imposed by the Head Office. Our analysis supports the articulation of power as bothenabling and conflicting (Giddens, 1976, 1996; Collier, 2001; Modell, 2002). Top management was ableto draw on the enabling character of power (see also Collier, 2001) to facilitate the implementation of thenew integrated accounting and financial information system. This was achieved through several means,such as replacing the local management, delegating responsibilities of the new system to senior executivesat the group level, appointing inexperienced local employees to serve on the implementation committee,using the powerful SAP professionals, and promoting the technical aspects of the new system over itssocial and organizational aspects. On the other hand, the conflicting character of power was demonstratedby the local employees in the form of resistance to the organizational restructuring and implementationof the new accounting and financial information system.
Apart from contributing to an understanding of accounting change, our analysis of the interplay betweenthe institutional factors, market forces and intra-organizational power relations also contributes to recentcalls to broaden the field of NIS analysis in general (Powell, 1991; Oliver, 1992; D’Aunno et al., 2000) andin management accounting research in specific (Brignall and Modell, 2000; Collier, 2001; Modell, 2002;Dillard et al., 2004). However, our analysis is limited, as it is a single company case study: the result maynot therefore be applicable to other organizations in the SES. Our aim was to explain and understand thedynamics of institutional change and its implications for accounting and financial information systemsrather than provide any generalization. Nevertheless, we believe the general regulatory changes will beequally applicable to other Spanish electricity and other utility companies, though these companies mayrespond differently to this isomorphic pressure. We see opportunities for future comparative empirical casestudies to further our understanding on how accounting is shaped by the interplay between institutionaland market forces, as well as the interplay between institutional forces and intra-organizational powerrelationships.
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