Management Control Systems in Innovative, Technology-Based Start-Ups and Small Businesses -A Study of Seven of the Most Promising Swedish Start-Ups of 2011, from a Business and Venture Capitalist's Perspective

Abstract

Background and problem: During the last decades, know-how and innovations have become critical factors, enhancing the interest for entrepreneurial activities. Nevertheless, it is hard to survive as a recently started business, making it crucial to adopt a well-functioning MCS. There is, however, a paradox that hardly goes unremarked. MCSs are described as hampering creativity and harming the process of innovation, creating a complex situation for innovative businesses. This thesis will explore MCSs in the context of innovation with the following research question: To what extent and in what form are management control systems applied in innovative, technology-based start-ups and small businesses? Purpose: The purpose of this thesis is to analyze to what extent and in what form MCSs are applied in innovative, technology-based start-ups and small businesses that have been recognized for their potential on the Swedish market and to explore their implementation of control. Method: This study was conducted using a qualitative approach consisting of semi-structured interviews in order to obtain in-depth information from a business and venture capitalist’s perspective. The method was considered suitable since the study is of a descriptive and explanatory character. Results and conclusions: The visions, strategies, and a creative environment are of high importance in innovative, technology-based start-ups and small businesses. Therefore, results control is advocated, and the employees are expected to perform at their best, motivated by the devotion to the companies’ innovations. Budgets, cash flows and contribution- and profit margins are commonly used as control elements. Furthermore, the implementation of MCSs appears to be primarily related to growth or organizational imbalances. The study also shows that the implementation of MCSs depends on the CEOs’ perception of control and the influence by the venture capitalists.