Accounting for Alcohol

An Accounting History of Brewing, Distilling and Viniculture

Martin Quinn, João Oliveira, Martin Quinn, João Oliveira

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9781138737334
• eBook ISBN: 9781351734219
• Edition: 1
• Topic: Business
• Subtopic: Accounting
• Index: Business

Consumption of alcohol is a globally ubiquitous, often controversial activity, and business organizations in this sector are of significant social and economic relevance. This book draws on accounting records from the sector to reveal fresh and unique insights into the historic development of the production of alcoholic beverages.

Offering a historic overview of the three major areas of the alcohol industry – brewing, distilling and wine – this book reveals the commonalities and differences which are present in the industry, while also highlighting its social impact. The editors bring together contributions from around the world, including Mexico, France, Japan and Ireland, to demonstrate how accounting has developed over time. Offering diverse geographical and historical perspectives, it explores multiple aspects of accounting within the industry, including internal control, earnings management, competition, and regulatory aspects. The fascinating insights into breweries, wineries, spirit distillers, vineyards and other related organizations provides a unique historic perspective of accounting systems, techniques and practices.

Drawing on an international range of examples and rich archival material, this valuable research collection will be of great interest to researchers and advanced students of accounting and business history.

Part 1
Accounting for beer and brewing

1
The introduction of accounting machines at Guinness

Carmen M. Martínez Franco and Martin R. W. Hiebl

Introduction

In contemporary research, the introduction of new technology is viewed as often leading to organisational improvements and advantages. To gain such benefits, it seems essential for organisations to adapt such technology and to adapt to such technology (Orlikowski, 1993; Szulanski, 2000). Such adaptation processes seem challenging, as organisations may have to develop new behaviours and organ-isational routines to reap the full benefits of new technology. In many cases, organisations have to go through a learning process that allows new technology-related routines to evolve or to change existing routines through an evolutionary process (Nelson and Winter, 1982). In such processes, collective participation of organisational actors is often required (Edmondson et al., 2001).

Historically, the most common goal of the introduction of new technologies has been cost reduction (Wilson, 1989). Since a significant share of management accountants’ daily work is described – both in the contemporary and the historical accounting literature (e.g., Granlund and Lukka, 1998; Hiebl et al., 2015; Johnson, 2002) – as being focused on accounting for and reducing costs, we can argue that management accountants should be very open to the introduction of new technologies. However, to an important degree, management accountants’ work routines can also be affected by new technologies. For instance, management accountants may benefit from new technology by gaining easier and faster access to data they need to analyse, which may enable them to speed up reporting processes. Besides such direct effects, there can also be indirect effects on management accountants. For example, new technology may lead to changes in management practices, organisational structure and business processes, which in turn affects the work of management accountants who have to reflect such broader organisational changes in their accounts and reports (Granlund and Malmi, 2002).

Thus, it may be argued that technology and technological change are of high importance for management accounting and management accountants. Nevertheless, there is a debate in the contemporary accounting literature on whether or not new technology has strong effects on management accountants and management accounting routines. In this context, most contemporary studies are focussed on the effects of Enterprise Resource Planning (ERP) systems on management accounting. Two main positions have emerged from this literature. While some studies conclude that new technology such as ERP systems has only a relatively moderate impact on management accounting (e.g., Granlund and Malmi, 2002), others find more significant changes in the role of management accountants following the introduction of new technology (e.g., Scapens and Jazayeri, 2003). Although we do not aim to resolve these opposing positions in this chapter, we argue that the literature on technological change in management accounting has been remarkably singular as to the form of technological change – that is, the introduction of ERP systems.¹ However, historically, other technological innovations have affected management accountants, and historical accounts offer a rich and more complete source for studying this topic. In this chapter, we study an early form of technological change: the introduction of typewriters in the first half of the 20th century. We do so by presenting a historical case study on the introduction of Smith Premier accounting machines at Arthur Guinness, Son & Company Limited (hereafter Guinness).

With this study, we aim to provide a historical answer to the question on the effects of new technology on management accounting and the work of management accountants. We also aim to provide a more complete picture on management accounting in the brewing industry during the first half of the 20th century. While a series of studies in this field have been published recently (e.g., Hiebl et al., 2015; Kristandl and Quinn, 2017; Martínez Franco et al., 2017; Quinn, 2014; Quinn and Jackson, 2014), such studies do not yet illuminate the role of technological change. Our chapter, however, shows that technological change was an important driver of management accounting change, even in the early 20th century. More specifically, this chapter paints a picture of the direct and indirect effects of new technology and the implications for management accountants at Guinness. This contributes to the extant historical literature but also provides some counterbalance to the contemporary literature, which sometimes suggests that new technology has only a relatively moderate impact on management accounting. Our findings reveal that the introduction of Smith Premier accounting machines facilitated and reinforced processes of management accounting change at Guinness.

The remainder of this chapter is organised as follows. In the next section, we review the extant literature on new technology and management accounting change, which is the background in which we position this chapter. The following section then describes our historical research methods, and afterwards we detail the introduction of Smith Premier accounting machines at Guinness. In the final section, we conclude the chapter with a discussion of our findings and we provide suggestions for future research.

New technology and management accounting change

Throughout history, the business environment has been changing constantly. Such change may have various effects on firms. It may increase the pressure to lower total costs, reduce inventories, shorten processing times, provide more reliable delivery dates and better customer services, expand the product range, improve quality and efficiently coordinate global demand, supply and production. If such pressures materialise, organisations are sometimes forced to reinvent themselves and ignite organisational change. One way to drive change is by adopting new technology in order to sustain competitiveness and to adapt to the changing environment (Edmondson et al., 2001; Umble et al., 2003).

Information technologies are thus often conceptualised as drivers of change that can transform organisational structures and social contexts. Such transformation can be observed both at the micro and at the macro level and is considered to have significant effects on individual actors and organisational structures (Applegate, 1996; Caglio, 2003; Hiltz and Johnson, 1990). At the same time, the social contexts of actors and organisations are known to be important factors in driving the adoption and use of new information technologies (Davis and Taylor, 1986; Noble, 1984; Wynne, 1988). Since actors’ behaviour is significantly shaped by organisational culture (e.g., Allaire and Firsirotu, 1984; Meek, 1988), we can follow that organisational culture plays an important role in the successful implementation of new technology. Schneider (2000) defines organisational culture as the character or the personality of an organisation and the ways things are done in an organisation. There is reason to believe that organisational culture is crucial for employees’ general acceptance and understanding of a technological change. Park et al. (2004) suggest some key cultural attributes which have moderate-to-high positive correlation with the success of new technology implementation. These attributes include team-oriented work, trust, working closely with others, sharing information freely, fairness and enthusiasm. However, there are also cultural attributes which are known to hinder successful adoption of new technology, such as stability, compliance, attention to detail and being calm.

Researchers such as Quinn and Jackson (2014) suggest that organisational change, in general, and management accounting change in particular, should be viewed as a process rather than a static event. Similarly, Scapens and Jazayeri (2003) find the process of introducing new technology to be evolutionary than rather revolutionary, implying that such change occurs slowly and in certain stages over time. Such slow change may be explained by the routine nature of accounting. Changing institutionalised accounting routines may only be possible over time since more abrupt change may face severe resistance. In this vein, new technology may again be an important factor. Edmondson et al. (2001) suggest the introduction of new technology to be a premier trigger for changing routines. In line with this notion, Granlund and Malmi (2002) found that organisational practices such as management accounting are typically changed to fit new technology, not vice versa.

As described earlier, changes in management accounting may be triggered and explained by technological innovation. The literature provides well-developed concepts and a large body of empirical results on the adoption and implementation of technology. For instance, Fichman (1992) defines an innovation as any idea, practice or object that is perceived as new by the adopter. The adoption of such innovations is contingent on factors which determine the ultimate rate and pattern of adoption. Amongst such factors are personal characteristics of adopters (e.g., their level of education and their level of cosmopolitanism), the stages of the adoption decision and the actions of certain individuals who can influence the adoption (e.g., to accelerate adoption). For technological innovation that affects organisational routines deeply ingrained in organisational structures, as is the case for many management accounting practices, further implementation characteristics are important factors for the adoption and diffusion of innovation. These implementation characteristics are organisational complexity (number of people and functions affected), divisibility (ability to divide implementations by stages or sub-populations) and transferab...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Editors’ acknowledgements
• Accounting for alcohol: an accounting history of brewing, distilling and viniculture
• PART 1 Accounting for beer and brewing
• PART 2 Accounting for spirits and distilling
• PART 3 Accounting for wine and viniculture
• Name index
• Subject index