Temporal orientation of small business owners and their choice of management accounting practices

Abstract

Management accounting research continues to cover ground on the small business spectrum. Despite the rise of research, the literature has not addressed how management accounting practices differ based on the temporal orientation of small business owners. Such an investigation seems pertinent as there is a controversy surrounding the benefits of management accounting practices for small businesses. A plausible source of this controversy can be attributed to the fact that small businesses are not a homogenous set of organizations. As such, what benefits one small business may not benefit another. One way in which small businesses differ is the temporal orientation of their owners. Some owners are short-term oriented, concentrating more on immediate results; others are long-term oriented, concentrating more on results beyond the current period. The information needs of owners should differ depending on this temporal orientation. Consistent with my prediction, the data indicate that the choice of management accounting practices differs depending on the business owners’ temporal orientation. More specifically, while both short-term and long-term-oriented small business owners accord the same importance to quantitative operational management accounting practices (computation of product cost, preparation of operating budgets) and qualitative information (customer satisfaction, employee satisfaction), long-term-oriented small business owners include more long-run accounting (use of discounted methods) measures in their accounting practices. This study has practical implications as it can be used to advise small business owners on the necessity of selecting management accounting practices that reflect their temporal orientation. The study also extends the management accounting literature by adding the temporal orientation of small business owners as antecedents of the choice of management accounting practices.