Seeds of Innovation in Accounting Scholarship
Greg Waymire
AAA Annual MeetingDenver, COWeds. August 10, 2011
Overview
1. The problem: Low innovation & stagnant evolution in accounting scholarship.
2. How did things get to be this way?3. How sticky is the problem?4. What’s the cost & why should we care?5. What can AAA (i.e., “we”) do?
• MAIN PROPOSITION– Innovation in accounting scholarship is too limited with the
result being that our discipline is prone to conformist thinking and intellectual indolence. In short, accounting scholarly evolution is stagnant.
• SYMPTOMS– Research is overly derivative.– Too much careerism.– Limited scholarly debate/discussion.– Too much reliance on standard-setters’ “needs” for
research topics.– We think we know more than we actually know.
The Challenge
Source: Hopwood, A. 2007. Whither Accounting Research? Accounting Review. (82: 5) 1367-1374.
EVOLUTIONARY CHANGE
• Evolution: Change in some population-wide characteristic through time from ancestral population to a descendant population
• Forces:– Selection: Disappearance of units in the ancestral
population due to non-survival into the descendant population.
– Transformation: Some units change their character over time.
– Migration: New units present in descendant population that were not in the ancestral population.
EVOLUTIONARY FORCES
Present Evolution of Accounting Scholarship
1. Some ideas are disappearing, either because they are selected against or because they transform to be more like the others (i.e., black to either gray or white).
2. One category is replicating itself at a high rate. 3. There is no migration into the population.
NET EFFECT: HOMOGENEITY IS A RECIPE FOR EXTINCTION!
How did things get to be this way?
• Increasing accounting faculty salaries led to contraction in the number of assistant professor hires.
• Fewer assistant professors coupled with higher teaching expectations from MBA rankings decreased resource allocations to research and PhD education.
• In response, accounting groups focused their research emphasis to sustain benefits from critical mass. The primary focus became “financial archival” research to better align with finance, emphasis of standard setters, and journals’ increasing focus.
• Quantified research quality assessment focused on citations and publication frequency in “A” journals has led to research focused more on “hot topics” and review articles rather than producing insights about fundamental issues.
Escalating Accounting Faculty Salaries
A Simple Back-of-the-Envelope Calculation:
Rookie CompensationYear Nominal $ Real $
1985 $55,000 $55,000
2007 $200,000 $104,000
Declining Investment in New Assistant Prof Hires
Table 3, Fogerty & Markarian (2007), “An Empirical Assessment of the Rise and Fall of Accounting as an Academic Discipline,” Issues in Accounting Education.
1982Assistants 497 (33%)Associates 357 (24%)Professors 453 (30%)Non-Tenure Track 201 (13%)TOTAL 1508 (100%)
Distribution of Ranks at Doctoral-Granting Accounting at Three Points in Time: 1982, 1992, 2002
1992501 (32%)364 (23%)500 (31%)224 (14%)
1589 (100%)
2002357 (24%)390 (26%)483 (32%)260 (18%)
1490 (100%)
Number of 1985 vs. 2008 Tenure Track Faculty at Big 10, Pac 10, SEC & Big 12 Schools
Decline in PhD Grads from 1990 to 2008
From Hasselback 2009 Directory of Accounting Faculty.
Increasing Focus on Financial Reporting Research
Table 4, Tuttle & Dillard (2007), “Beyond Competition: Institutional Isomorphism in U.S. Accounting Research,” Accounting Horizons.
U.S. Dissertations by Topic: 1995 versus 2005
YearFinancial
Topics
1995 692005 76
Nonfinancial Topics
11332
%
(38%)(70%)
%
(62%)(30%)
Quantified Scholarly Productivity
Accounting & Finance Journal Rankings Based on Impact Factors
Quantified Scholarly ProductivitySome Data on Reference per Article in TAR
April 1981
5 articles averaging 17.8 pages
# References
Mean 19.4
Min 13
Max 28
CITATION INFLATION!!!!!
May 2011
12 articles averaging 30.3 pages
49.8
26
78
Quantified Scholarly ProductivityA Benchmark from Science Magazine
• Research Articles (up to ~4500 words, including references, notes and captions, or ~5 printed pages) are expected to present a major advance. Research Articles include…. about 40 references.
• Reports (up to ~2500 words including references, notes and captions or ~3 printed pages) present important new research results of broad significance. Reports should include…. about 30 references.
NOTE: The shortest article in May 2011 TAR (21 pages) had about 8,100 words exclusive of tables, figures, subheadings, and references.
Limited Innovation in Accounting ScholarshipHow Sticky is this Problem?
• Very sticky, at least in the short-run.• Why?– People are tooled to produce a given type of research. Doctoral
programs are geared towards producing more of the same.– Risk aversion among junior scholars is “rationally” high.– Limited forums for debate, replication, and challenging the
status quo. – Departments will continue to hire what doctoral programs are
turning out, which is geared increasingly to producing incremental financial reporting research.
– Deans have strong financial incentive to hire non-tenure track faculty.
Limited innovation is an opportunity cost
• Is this anything more than a glib throwaway line in our textbooks?• If not, how is accounting a language?
– Function– Form– Mechanisms for evolution & adaptation
• Some encouraging signs – new work looking at the use of language in corporate disclosure.
• Still, we are only beginning to scratch the surface on this issue, and much more is needed.
Example 1: Is accounting the language of business?
Limited innovation is an opportunity cost (cont.)
Neuronal Activation in the Ventral Tegmental Cortex Reported by Fiorillo et al. (2003)Based on Single Cell Recording for Two Macaque Monkeys in Response to ProbabilisticSignals about Forthcoming Rewards
StimulusSale Made
StimulusSale Made
RewardCash Collected
RewardCash Collected
Firing at actual receipt of reward when probability low
Firing at signal of future reward when probability high
Example 2: Are we homo accounticus?
Limited innovation is an opportunity cost (cont.)?Example 3: Why is accounting present at the emergence of complex
human civilizations?
Innovation in Accounting Scholarship
Heterogeneity via new ideas generated through transformation or reproduction of different types.
IS THIS POSSIBLE?
The Aspiration
Source: Hopwood, A. 2007. Whither Accounting Research? Accounting Review. (82: 5) 1367-1374.
Can We Change Matters in the Long-Run?Planting Seeds of Innovation with Excellence.
• 2011 AAA Strategic Retreat was focused on encouraging innovation in accounting scholarship
• Several promising (preliminary) ideas surfaced at the Strategic Retreat
• The Current Challenge: Continuing the Conversation– Publishing the output– Conversation with broad membership online and at
meetings– Concrete proposals directed at issues that resonate
with membership
AAA Strategic Retreat of May 2011: Focus
• Assertion: Accounting research as of 2011 is stagnant and lacking in significant innovation that introduces fresh ideas and insights into our scholarly discipline.
• Question: Is this a correct statement? If not, why? If so, what factors have led to this state of affairs, what can be done to reverse it, and what role, if any, should AAA play in this process?
Organization of AAA Strategic Retreat• Who was involved?– Four Speakers: Sudipta Basu (for Shyam Sunder),
Chris Chapman, Bill McCarthy, & Don Moser– AAA Executive Committee & persons responsible
for organizing 2012 Annual Meeting, Doctoral Consortium, and New Faculty Consortium
• Format– Initial presentations by speakers followed by
breakouts where participants moved between groups and tangible suggestions were put forth
Early Ideas from the Strategic Retreat in 7 AreasScholarly Retreats: (1) experienced faculty akin to doctoral consortium, (2) scholars and practitioners, or (3) organized around innovative questions posed by AAA members.
AAA White Paper/Monograph: Define challenges in improving scholarly innovation and means for improvement.
Doctoral Education: (1) archive of AAA presentations on different methods and approaches, (2) data repository about PhD programs, & (3) awards for doctoral education excellence
Journals: (1) Leverage potential for online content, (2) TAR section on research innovation, (3) sessions on how to be a good reviewer at doctoral & new faculty Consortia
Big issues Initiative: once every two-three years identify a big issue, put money into prizes that would then be awarded 2 or 3 years hence.
Building Historical Awareness: Vehicles to showcase the highest impact contributions of accounting research published by AAA. Best papers in TAR by decade back to 1920s.
Engagement with Practice: (1) Interactive sessions at doctoral & new faculty consortia. (2) Internships to facilitate research within firms.
Where to Next?Continuing the Conversation
• Putting Strategic Retreat output into the public domain (posting presentations, write-ups on SSRN, and journals)
• Establishing online venue in AAA Commons for discussion and debate by AAA members
• Implementation for proposals that have broad support from AAA members.