Organization size, technology, and formalization in professional accounting organizations



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The issues addressed by this study were the relationships between routineness of technology and formalization at the micro level and organization size, routineness of technology, and formalization at the macro level in professional accounting firms. The basic objective was to determine whether previous studies of the role of organization size and technology in the description of variations in organization structure would replicate in highly professional organizations which ranged widely in terms of organization size. At the micro level of analysis, hypotheses were developed that predicted: 1) a positive association between routineness of technology and formalization for professional practitioners in CPA firms, and 2) differential strengths in this relationship as a consequence of the three major specialization areas within CPA firms. This relationship was expected to be strongest for audit specialists, weakest for management advisory services specialists, and between these two for tax services specialists. At the macro level of analysis an interactive model to describe formalization in CPA firms was developed. Organization size and routineness of technology were expected to influence jointly levels of formalization in CPA firms. However, these influences were expected to interact in opposing directions and thereby to mask any bivariate association between either independent variable and formalization. Data on routineness of technology, formalization, and a set of control variables were collected by means of a questionnaire instrument. These measures were gleaned from earlier studies concerned with similar phenomena. The sample was comprised of 196 practicing professionals drawn from 20 CPA firms. The micro level hypotheses were initially tested by correlation analysis. Support for the hypothesized positive relationship between routineness of technology and formalization was not forthcoming; in fact, the evidence tended to support a negative association between the two variables. The hypothesized differences in the technology/formalization relationship between the three functional areas were not supported either. Differences between the three functional areas in perceived routineness of technology and perceived formalization were explored with analysis of variance methods. These constructs were not found to be effective generally in detecting significant differences between functional areas. At the macro level, the interactive model describing formalization in CPA firms was tested with correlational analysis. The hypothesized relationship between organization size and technology was supported; larger CPA firms employ less routine technologies. However, the research expectation of an interactive relationship between organization size and technology in the description of formalization was not fulfilled. The association between formalization measures and either independent variable did not appear to be influenced by the values assumed by the other independent variable. An exploratory search for a linear model was executed with regression analysis. This exploration indicated that technology and organization size possessed moderate explanatory power for certain dimensions of formalization. The data suggested that formalization as a mechanism for control in CPA firms was applied with great selectivity. Taken together the research findings support a conclusion that CPA firms are anomolous organizations. The social structures of these organizations do not exhibit the interrelationships found in other types of complex organizations.