From Business Success to Failure - A study of Swedish gazelle companies and their use of management accounting

Background and Problem: Up to now, researchers and economists have been focusing on successful entrepreneurship and its success factors and not on business failure, with respect to the influence of management accounting. Earlier research has proven management accounting to be of importance, but its connection to, and importance for, entrepreneurship is still not established. Furthermore, with regard to Sweden’s future development and well-being, it is desirable to see increased numbers and efficient growth in small and medium size enterprises. Purpose: The intention of this paper is to demonstrate possible reasons to why once successful businesses go bankrupt and the role of management accounting in this process. Our focus will be on previously very successful companies, namely gazelle companies, that subsequently been misfortunate and gone bankrupt. Method: An analysis of rapidly growing companies will be conducted, by Dagens Industri called gazelle companies. In our search for companies that have gone bankrupt, we concentrate on companies being gazelles during the years 2001 and 2002, the two “oldest” gazelle lists on DI’s homepage. The study is of a qualitative character based on twelve questionnaire respondents. We believe that an electronic questionnaire method would be the most suitable in this case. Moreover, because of a limited survey group, the outcome can not be statistically secured. Conclusion: In line with our thesis purpose, and our negative assumption/hypothesis that most companies have limited or no knowledge/ability/will to construct and use management accounting information, our findings show that no significant signs can be seen of that management accounting has played a conclusive role for the greater majority of the companies in their business failures. However, the survey shows that the main internal factors of business failure are connected to financial aspects and the external factors show a shortage in company funds. It seems like they can not afford losing customers or handle a recession very well. This strengthens the fact, and also our belief, that management accounting is needed when a company grows. Suggestions for further research: A more detailed examination of the companies’ business strategy, business plan and business concept is also sought. To see if these specific companies have used measurements, budgets and so forth in similar ways and how these tools are created and used would be interesting to read about. Lastly, we sought how management accounting could be of help in foreseeing a bankruptcy, especially in rapidly growing companies such as the gazelles