Redefining Accounting Research and Education

1. Redefining Accounting Research and Education Andreas I Nicolaou Professor, BGSU Editor-in-Chief, IJAIS 2013 Conference Program 15th Annual Accounting Information Systems Educators Conference

2. Agenda • Pre-define Agenda • Consider Future Research/Professional Foci • Who we are (epistemologically) and what is AIS research? • Beyond the “what”, the “how” and “why” • More on the “why:” AIS research themes • AIS Research and Education

3. AIS and the Future • AIS critical nature for the future – both for students and faculty. • AISs critical nature have to consider their effects for event impacts.

4. Future Research Foci • Research questions of data assurance and control, and how these affect AIS intentions to use and success. • Use of integrated information systems and effects on management control system design. • Information quality and control transparency in "inter-organizational data exchange systems" and implications for the coordination and control of strategic inter-firm relationships. • Processes of trust/distrust creation and risk perceptions in the design, adoption and longitudinal use of inter-organizational information exchanges. • Enterprise Systems and AIS Design: performance, methods, real options.

5. Future Academic/Professionally Foci • Consider effects to both academic and professionals. • Effects very important to professionals. • Effects important to exercise technology, but also to better use IT.

6. What is AIS Research? Information technology implications of accounting; control and reporting implications of information systems. Research to enhance our understandings of the role of information technology in the substantive context of accounting and information systems problems. At the inter-relations of the above.

7. AIS Research Contributions Research not a unitary activity – must constantly question its assumptions so it expands its conceptual understandings and methodological bases. AIS is a specialty field, but its research contributions should not be isolated in a specific area. AIS research both draws from as well contributes to substantive knowledge in its primary cognate domains of accounting and information systems.

8. Research Space • Intellectual map of reality • Risk is in knowing where map is wrong and knowing consequences • “Platonic Fold” (Taleb 2007) • Key Parameters (Benthon et al 2002): Research Space = def (problem, theory, method, context)

9. Research Aims • Research Replication… • Significant sameness across studies • Focus should be on robustness to errors than improving predictions. • Not just taxonomic errors but errors that could have serious and cumulative consequences (errors of inclusion/exclusion – type I/II errors) • Research Extension… • Alter some parameters • Research (knowledge) Generation… • All parameters are changed relative to target study. • RESEARCH PROGRAMS

10. Unique AIS research opportunities? Over-arching framework of AIS Research (our uniqueness) • AIS and: • Strategy • Modeling • Design • Business Reporting • User behavior • Organizational sociology (trust, risk) • Individual beliefs • Economics • etc • AIS/IT and: • Assurance • Control systems design • Business value • Reporting • User behavior • Transparency • Relationship (risk) management • Economics • etc

11. AIS Research Lens Design of AIS (design science) Economic value of IT (economic theory) Individual, organizational, society impacts (behavioral theory, sociology) Individual and organizational adoption and use (organization theory) Strategic management, formulation, transformation

12. Multiple theories, multiple methods • Theories • Economic complementarity/ information processing/fit • Org. learning (knowledge management, absorptive capacity…) • Institutional (processes of legitimation & isomorphism) • Org. sociology (social cognition; social exchange) • Actor-Network • Agency • Real/digital options • Research Questions: • Design science • Economic • Behavioral • Methods • Experimental • Analytical • Archival (qualitative, quantitative) • Field research • Case / critical

13. Current Issues • IT Audit and Governance • Enterprise Systems, data and extended enterprise • Knowing-based decision aids • I-O Data Assurance • Business Value and effects on information environment.

14. IT Audit and Governance • Continuous audit research, methods and redesign of audit model. • Significant new work in continuous work & process mining in auditing -IT Governance and Controls/COBIT model • Significant instructional material • Information security and privacy (HCI research; GDSS)

15. Enterprise Systems, data, and extended enterprises - REA – modeling system design • Organizational Impacts of enterprise systems (business value) • Impacts on role of management accounting and audit professionals • Extended enterprise: I-O issues related to ERM, cost management, cooperative & coopetitive strategies, B2b links/risks and supply chain relationships.

16. Knowledge Management • XBRL/experimental research. • Knowledge-based aids in financial analysis. • Decision aids in controlling decision processes and work methods (Dowling; Dowling & Leech; Poh-Seow; etc).

17. I-O Data Assurance -Earlier work in information quality in accounting systems and effects on intention to use. - IQ models: MIT team; Nicolaou 1995 -IQ in B2B data exchange settings (N&M) – experimental research in IS but with sig. implications in AIS: • Model of trust and risk in inter-organizational exchange systems: adoption and individual user impacts (theory bases) • Longitudinal experiments • Theory base of social exchange and social cognition to study across-time stability of varying system design features - Data Assurance effects as substitute for third-party assurance (accounting profession largely unsuccessful as third-party assurance provider).

18. Business Value of IT and effect on a Firm’s Information Environment • ERP systems and effects on firms’ performance • Extensions to intermediate effects: information quality (analyst projections), organizational commitment to post-implementation continuous improvement and performance. • Organizational factors on adoption and assimilation of technology (Elbashir et al). • Post-implementation effectiveness(Nicolaou; Nicolaou and Bhattacharya; Nicolaou et al)

19. Research Interests and Implications

20. AIS Research Themes vs Findings Research Themes vs. Research Implications Integrated Information Systems, Management Control Systems Design, and Effects onAlliance Risks, Partner Trust, and Performance. Enterprise Systems Implementation, Use and Performance: Research Findings A Research Program on Inter-Organizational Data Exchanges: Issues of Assurance, Data Quality, Exchange Trust, Risk, and Performance. • IT/MCS Interactions: Bundles of Features in MCS design. • Enterprise Systems: individual and organizational impacts • ERM and SEM: conditions of use • Technology adoption/use: organization theory; inter-organizational relations • Continuous assurance/monitoring: technology-use mediation Theoretical Themes vs. Findings Empirical Research

21. Findings from Empirical ResearchIntegrated Information Systems, Management Control Systems Design, and Effects onAlliance Risks, Partner Trust, and Performance

22. Strategic Inter-Organizational Alliances • Prevalence of alliances: • Competition between organizations is increasingly driven by global alliances of firms as opposed to individual firms (Buhman et al. 2005; Chapman and Corso 2005; Langfield-Smith 2008). • Types: • Interorganizational exchanges include both business alliances (entity or non-entity) and joint ventures (Chalos and O’Connor 2004; Das and Teng 2000; Ireland, Hitt and Vaidyanath 2002). • Strategic Alliances • Strategic alliances as networks of interorganizational relationships (Chua and Mahama 2007).

23. Alliance Success and Failure • Past research shows a large number of alliances fail or break-up prematurely. Reasons for alliance failure include: • lack of partner cooperation (Harrigan 1988; Zaheer and Venkatraman 1995) • misfits in the adopted governance structure (Gulati 1995; Parkhe 1993;Young-Ybarra and Wiersema 1999; Zaheer and Venkatraman 1995). • deficiencies in management accounting and control systems (Chua and Mahama 2007) – specifically, lack of trust (an important informal control among exchange partners) • No adequate control of associated risks (Bensaou and Anderson 1999), including both relational and performance risks (Das and Teng).

24. Integrated Information Systems • Management Control Systems: • Efficient packages (portfolios) of formal and informal forms of control (Chenhall, 2003; Abernethy & Chua; Malmi & Brown; Dekker 2004) • Integrated Systems (ERPs) as formal means of control (Granlund & Malmi; Chapman & Kihn, etc.). • Information Systems Integration (ISI) • a form of information sharing that results from use of integrated systems in alliances (Nicolaou 2008)

25. Broad Research Questions • IIS, when used in tandem with efficient portfolio of controls, may enhance performance • A generalizable view of the interrelation between MCS and IIS still lacking (various authors). • Need to examine how ISI fits into alliance control environment: • Formal and informal controls used to mitigate relational and performance risks • ISI and Alliance Partner Trust • ISI  Trust  Alliance Performance (and survival) • ISI  Risks  Alliance Performance • Strategic ERM  ISI, Risks

26. Implications and Future Research • Fills an important gap about the effects of information systems integration on trust • Findings can help design better control systems—e.g. attributions can be influenced (control/coordination info uses are choice variables in I-O governance) • Need to further examine how ISI fits into overall alliance control environment • - controls used to mitigate both performance risk and risk of opportunistic behavior by the partner (relational risk) – Das and Teng 1999, 2001.

27. Implications • Formalized structures moderate extent and impact of both: • ISI: limit extent to which ISI can be exploited opportunistically or dictate cooperative uses of IIS • Risk Sharing: established reporting structures may either enhance communication of information about attainment of objectives or limit effectiveness of common objectives in reducing alliance risks. • How ISI and Risk Sharing fit into Alliance Control Environment and theoretical framework of their effects. • Unanswered Questions for Future Research: • Relations between Strategic and Executional Dimensions of ERM strategy at the I-O level.

29. Extended Network

30. Selected Publications Nicolaou & Christ. 2013. “Integrated Information Systems, Risk Sharing and Effects of Risk on Alliance Performance.” Review at Accounting, Organizations and Society (AOS). RP38. Nicolaou, A.I., Sedatole, K. and Lankton, N. 2011. “Integrated Information Systems and Alliance Partner Trust.” Contemporary Accounting Research. Vol. 28, Issue 3, Fall 2011, pp. 1018-1045. RP37. Nicolaou, A.I. 2011. “Integrated Information Systems and Interorganizational Performance: The Role of Management Accounting Systems Design.” Advances in Accounting Behavioral Research, Vol. 14, August 2011, pp. 117-141. RP36. Nicolaou, A.I. 2011. “Supply of Data Assurance in Electronic Exchanges and User Evaluation of Risk and Performance Outcomes.” Electronic Markets - The International Journal on Networked Business, Volume 21, 2011, pp. 113-127. “Information Sharing in Inter-Organizational Alliances: The Role of IT Capability and Risk Management Contingencies.” under review. RP33. Ibrahim, M. and Nicolaou, A.I. 2011. “An Examination of Familiarity, Risk and Trust in Inter-Organizational Data Exchange Relationships” (2011). Americas Conference on Information Systems (AMCIS) 2011 Proceedings – All Submissions, Paper 57, http://aisel.aisnet.org/amcis2011_submissions/57 (Detroit, Michigan), August 2011. 1. Nicolaou, A.I., P. Nagpal, and K. Lyytinen. “The Outsourcing Capability and Market Value Relevance: Toward a Comprehensive Model.” Intelligent Systems in Accounting, Finance and Management. - Conditionally accepted.

31. Enterprise Systems Implementation and Use: Research Findings

32. Initial Question • Financial performance effects due to adoption of ERP systems – a coarse question trying to determine IT value. • Sample: • 247 ERP adopting firms identified from Lexis/Nexis announcements and SEC Disclosure database. • One-by-one match (by industry and size) with non-adopting firms • Control for contemporaneous events

33. Early results Before ERP adoption, no differences in key performance indicators (ROA, ROS, TAX, #employees/sales, Inventory turns, COGS/sales) between adopt/match firms. In 2 years after ERP Adoption, adopting firms had shown some weak improvements (cogs/sales) vs non-adopting firms.

34. Motivation – Take 1 • Quite mixed results in prior studies examining ERP system performance effects. • Non-adopters may perform worse than adopters but this may depend on size and health prior to implementation. • Adopters do not outperform non-adopters or even performed worse. • SAP adopters had better average performance during implementation, but no results on a post-implementation basis. • Need for research on long-run impact, using more representative sample of ERP adopters. A.I. Nicolaou: Firm Performance Effects in ERP Implementation & Use

35. Motivation – Take 2 • ERP Systems serve as basis to develop information infrastructure and allow future expansion (CRM, SCM, e-bus): Performance benefits are long term. • Both recent case research and archival studies suggest that implementation process is critical to develop capabilities and transform such competencies into future economic returns. • Need to examine influence of ERP implementation management process on realized long-term returns. A.I. Nicolaou: Firm Performance Effects in ERP Implementation & Use

36. Overall Results Any significant ERP effect on a firm’s total return on investment does not occur for at least two years from the time the system is completed and put into operation. Implementation factors are quite significant in affecting an ERP adopting firm’s ability to realize performance outcomes. Implementing a system from a larger vendor, having system-led objectives, and implementing a specific type of module, all had a significant influence on a firm’s ability to generate enhanced returns in relation to other firms that followed a different implementation strategy. Suggest critical importance of managing a firm’s post-implementation process (case studies in Nicolaou 2004).

37. Post-Implementation Journey Quality of system development process affects outcomes after the implementation and use of the system. Post-implementation stage (system review, support, maintenance) critical for system effectiveness. Post-implementation review (PIR) evaluates system and quality of development process. Effectiveness of feedback depends on quality of development process, thus PIR construct cannot be considered independently of factors that affect initial system implementation.

38. Motivation - Objective • PIR: a summative evaluation process (vs. formative evaluation conducted during implementation). • PIR: have objectives been attained? • Stage models describe activities – helpful in planning future actions. • Need to explain issues that contribute to PIR process effectiveness: objective of this research. • Especially important in ERP systems (large investments, lagging benefits). • Outcomes of high quality PIR include cultural and organizational shifts, business transformation in post-ERP era.

39. Critical Factors of ERP Implementation Critical Dimensions of PIR -    Top management support and commitment to project; fit to business strategy. -  Evaluation of: - fit with strategic vision. -project planning effectiveness. -  - infrastructure development. -   Alignment of people, process, technology. -  Review of fit resolution strategies. -   Evaluation of system integration attainment and reporting flexibility. -   Anticipated Benefits from ERP implementation project. -  Evaluation of level of attainment of expected system benefits. -   Motivation behind ERP implementation (business- vs. system-led). -   Review of driving principles for project. -   Review of project justification practices. -  Scope of user training. -   Review of user learning. -   Evaluation of effective knowledge transfer (among project team members and other users). Critical Factors of ERP Implementation & Corresponding PIR Dimensions

40. PIR Quality • Defined by the extent to which an organization carries out a planned review that includes the set of activities implied by the five PIR dimensions. • PIR dimensions are complementary to one another; their cumulative effect should influence outcomes. • PIR Quality: an important condition for ERP implementation effectiveness. • PIR Quality an important construct that should be included in models examining ERP/IT effectiveness (e.g., outcome paradoxes). • Future research: Operationalize and measure PIR Quality concept.

41. Findings • Our results show that early post-implementation activities as defined by project planning, strategic definition and process integration have a positive financial performance differential effect on firms’ incremental ROI, ROS, the cost of goods sold over sales ratio, and the employee efficiency ratio. • Importance on PIR activities which contribute to better system implementation planning and business process effectiveness. • Activities that relate to system deployment effectiveness (system fit resolution, global reach, attaining benefits), however, do not exhibit similar effects. In fact this PIR factor significantly contributes to deterioration in differential financial performance relating to ROS and the employee efficiency ratio. • Efforts to effectively deploy the system and realize benefits necessitate additional investments which may have a negative impact on a firm’s short-run profitability.

42. PIR Activities and Managerial Flexibility • PIR activities: • only observable events post-implementation. • Not inherent in ERP adoption choices – but they are value adding, have effect on future success. • Management should anticipate future changes; active anticipation of needed changes builds in flexibility in future system enhancement actions.

43. Motivation • We conduct a longitudinal study of ERPS project decision-making from a real options perspective. • The real options logic applies as ERPS implementation and long-term use involve high risk of failure. • ERP project can be viewed as a portfolio of real options. • All real options are context-specific (no common-value instruments exist as in financing options) –have different value to different companies. • Initial adoption of ERPS as a strategic/growth option • ERPS provide new opportunities for future strategic initiatives • Post-implementation Decision Choices in ERPS: • In particular, enhancements (additions and upgrades), can increase (reduce) the potential for gains (losses) on the base project • We examine system enhancements in post-implementation period as operational options that can modify the business-value of the system

44. Contribution • Models ERPS adoption and enhancement as two separate and distinct, yet related, decisions on the exercise of real options in a continuous implementation process. • Various option types (defer, pilot, prototype, stage, abandon, contract, and outsource) presented in different IT projects. • Prior research offers little insights into the specific real options presented in large IT projects such as ERPS and their management. • Uniqueness of ERPS—Expensive, irreversible, modular, and long-term • We document systematic evidence that supports the adoption of the real options lens in real world ERPS project management, not in purely intuitive manner. • We find that the benefits obtained from the initial ERPS adoption and from well-planned high-quality PIR activities explain a significant portion of the variation in post-implementation enhancement choices.

45. Selected Publications “The Impact of Enterprise Resource Planning (ERP) Systems on the Audit Report Lag.” - Revised and Resubmit under JETA RP46. J. Chao, A. I. Nicolaou, and S. Bhattacharya. 2013. “A Longitudinal Study of Enterprise Resource Planning (ERP) Systems Adoption and Post-Implementation Enhancement Decisions.” Journal of Information Systems, Spring 2013. RP31. Nicolaou, A.I. 2008. “Research Issues on the Use of ERPS in Inter-Organizational Relationships.” International Journal of Accounting Information Systems, Vol. 9, No. 4, December 2008, pp. 216-226. RP29. Nicolaou, A.I. and S. Bhattacharya. 2008. “Sustainability in ERP Performance Impacts: The Role of Post-Implementation Review Quality.” International Journal of Accounting Information Systems, March 2008, 43-60. RP25. Nicolaou, A.I. and S. Bhattacharya. 2006. “Organizational Performance Effects of ERP Systems Usage: The Impact of Post-Implementation Changes.” International Journal of Accounting Information Systems, Volume 7, Number 1,Spring 2006, pp. 18-35. RP23. Nicolaou, A.I. 2004. “Firm Performance Effects in Relation to the Implementation and Use of Enterprise Resource Planning Systems.” Journal of Information Systems, Volume 18, No. 2, Fall 2004, pp. 79-105. RP21. Nicolaou, A.I. 2004. “Quality of Post-Implementation Review for Enterprise Resource Planning Systems.” International Journal of Accounting Information Systems, Volume 5, No. 1, May 2004, pp. 25-49.

46. A Research Program on Inter-Organizational Data Exchanges: Issues of Assurance, Data Quality, Exchange Trust, Risk, and Performance

47. Research Project Development • Begun in 2002 examining effects of “data assurance” in e-commerce settings – implications for system design, real-time controls as a form of assurance (substitute to 3rd party assurances), continuous monitoring. • Varied “control transparency” and “outcome feedback” manipulations in various versions of a simulated web exchange. • Spot transactions (I-O system design) • Ehub exchanges (3rd party continuous vs static assurances) • http://www.business.bgsu.edu/faculty_staff/Nicolaou/XMLproject/indexA.cfm

48. Issues in IORs • Relational/Information Sharing • Opportunism vs coordination-cooperation • Information sharing and trust • Uncertainty/sources of • Risk in exchange itself (e.g., outcome) or in structures surrounding use • Time/Embeddedness • Different issues at relationship inception and as relationship progresses. • Data Exchanges: role of IOS system design and data quality (PIQ) on IOS Adoption

49. I-O exchanges • Spot B2B exchanges – • Most notably, 2006 ISR study found that system design interventions affect users’ perceptions of information quality. Contributing to IOS literature, PIQ was found to affect use continuance intentions, but mediated by assessments of partner trust and perceptions of risk (outcome risk) in the exchange. • Other studies: decomposed trust/risk constructs, and transaction performance relationships

50. E-hubs and professional assurance services (IJAIS, 2006) • General vs Specific Assurance over reliability of exchange system (professional assurance report) • Users more likely to recommend use of the exchange when general assurance is present than when specific assurance over the reliability of transaction information is present. • Coordination vs motivation/appropriation costs in economic exchanges – implying importance of trust …. • Continuous vs Static Assurance Report • More likely to recommend using the exchange when the assurance report is continuous… • However, ….