Management controls, heterarchy and innovation : a case study of a start-up company

Purpose: The purpose of this paper is to consider how organizations with diverse, interdependent functions with differing evaluative principles and differing ideas as to which behaviors are the most desirable, use management controls in their efforts to achieve innovation. Design/methodology/approach: The authors conducted a case study of TechCo, an Australian technology start-up company, over a 12 month period. Findings: The authors demonstrate how the clash of differing evaluative principles among interdependent teams led to the organization seeking new ways of organizing, which in turn, enabled the organization to better manage the interdependencies between the diverse functional areas. Additionally, the findings show how, through the use of management control systems, the organization was able to promote idea generation and “buy-in” across all functional areas, order competing priorities for innovation and set the agenda as to what constituted “acceptable” innovation for the organization to pursue. Originality/value: The authors find that management controls play an important role in managing the tensions between differing evaluative principles in diverse functional areas in a heterarchical organization, and in supporting innovation in such an environment. As such, the authors provide the first research evidence on how management controls are used within a heterarchy to generate and select innovative ideas.