Control and Creativity in Small and Medium-sized Enterprises: formal vs. informal controls in two comparative case studies


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The purpose of this paper is to shed light on management control systems (MCS) within small- and medium-sized enterprises (SMEs) operating in a highly creative setting. To achieve this goal, we focus on the interplays between the formal and informal (social) components of MCS, as well as on their evolution over time. In particular, we define formal controls as purposefully designed, information based, and explicit set of structures, routines, procedures and processes to ensure that organizations’ strategies and plans are carried out or modified. Differently, informal controls (also referred to as social controls) are based on fewer rules and less standardized procedures to encompass more subtle and informal mechanisms. Aiming to contribute to the understanding of formal and informal controls in SME, this research combines the insights offered by the literature on SME with key studies on MCS and creativity, as well as with the empirical findings of comparative case studies of two Italian, owner-managed, medium-sized enterprises in the fashion industry.

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