Academic journal article The Accounting Historians Journal

Towards an Institutional Analysis of Accounting Change in the Royal Tobacco Factory of Seville

Academic journal article The Accounting Historians Journal

Towards an Institutional Analysis of Accounting Change in the Royal Tobacco Factory of Seville

Article excerpt

Abstract: This paper is initially informed by an institutional sociological framework to analyze changes in accounting practices that took place in the Royal Tobacco Factory (RTF) of Seville during the period 1760-1790. We argue that the significantly greater development and use of accounting practices during that period can be linked to the move to the much larger and more purposefully built new factories, the decline in total tobacco consumption, and the pressure to increase revenue for the Spanish Crown while reducing production cost and maintaining high product quality to deter entry. These new accounting practices were developed in part with the intent of improving factory efficiency, but importantly, they enhanced the external legitimacy of the RTF in the face of the events mentioned above and contributed to the long survival of the RTF as a monopolist.

Although all movements ebb and flow, the interest in institutions has, during the past two decades, swelled into a sizeable flood of work, both theoretical and empirical. And there is no sign of diminishing interest [Scott, 1995, p. 133].

The above quote, taken from a recent book written by a leading sociologist, neatly expresses the increasing interest shown by academics in utilizing institutional theory to gain an informed understanding of organizational practices. This increased interest in the institutional approach has spread across disciplines such as sociology, economics, political science, strategy, and international management [Scott, 1995, p. 134]. Accounting academics have been quick to adapt institutional frameworks to their research agendas. While some accounting researchers have focused on institutional economics [e.g., Scapens, 1994], many others have been keen to explore the relevance of institutional sociology to their analyses [for some recent examples, see Covaleski and Dirsmith, 1988; Covaleski et al., 1993; Hunt and Hogler, 1993; Carruthers, 1995; Edwards et al., 1996].

Several reasons account for this recent popularity of institutional sociology [see Fligstein, 1993 and Scott, 1995 for more detailed discussions]. First, institutional sociology focuses attention on knowledge and rule systems (such as accounting practices) constructed within organizations in addition to cultural and normative frameworks in organizational environments, rather than privileges the latter as earlier frameworks (such as resource dependence and contingency theory) have done. Second, institutional theory offers a bridge which links various disciplines that could benefit from focusing upon institutions; for example, economics, political science, and, indeed, accounting [see Fligstein and Freeland, 1995]. Third, institutional analysis permits an examination of interactions among the organizations belonging to a particular field (to be defined later), which is said to yield a better understanding of organizational action than previously [e.g., Fligstein, 1993]. These arguments led Scott [1995, p.136] to contend that:

All organizations are institutionalized organizations. This is true both in the narrower sense that all organizations are subject to important regulative processes and operate under the control of both local and more general governance structures, as well as in the broader sense that all organizations are socially constituted and are the subject of institutional processes that define what forms they can assume and how they may operate legitimately.

Also, more critically for this paper, interest in institutional analysis has engendered a greater awareness among organization theorists of the importance of history. Zald [1990] has argued that in considering interest in history from the perspective of institutional analysis, time matters for two reasons. First, historical analysis contributes to an understanding of institutional context by focusing on changes in organizational context over time which affect what organizations do and how they behave. …

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