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Accounting in Europe ISSN: 1744-9480 (Print) 1744-9499 (Online) Journal homepage: http://www.tandfonline.com/loi/raie20

Accounting in Europe

Accounting in Europe ISSN: 1744-9480 (Print) 1744-9499 (Online) Journal homepage: http://www.tandfonline.com/loi/raie20

ISSN: 1744-9480 (Print) 1744-9499 (Online) Journal homepage: http://www.tandfonline.com/loi/raie20

Back to the Origins of Positive Theories: A Contribution to an Analysis of Paradigm Changes in Accounting Research

Thomas Jeanjean & Carlos Ramirez

To cite this article: Thomas Jeanjean & Carlos Ramirez (2009) Back to the Origins of Positive Theories: A Contribution to an Analysis of Paradigm Changes in Accounting Research, Accounting in Europe, 6:1, 107-126, DOI: 10.1080/17449480902896510

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Accounting Accounting in in Europe Europe

Vol. Vol. 6, 6, No. No. 1, 1, 107–126, 107–126, 2009 2009

Back to the Origins of Positive Theories: A Contribution to an Analysis of Paradigm Changes in Accounting Research

THOMAS JEANJEAN & CARLOS RAMIREZ

HEC Paris, Department of Accounting and Management Control, 1, rue de la Libe´ration, 78351 Jouy-en-Josas, France

ABSTRACT In this article, we analyse factors that explain the success of the empirical methodology of ‘positive accounting theory’ (PA) in accounting research. In fewer than ten years, between 1960 and 1967–1968, PA became dominant in the main accounting journals, and normative theories disappeared from academic publishing. The reasons for this success are not clearly established. The propagators of PA (Ball and Brown, 1968; Watts and Zimmerman, 1986) advocate the fertility of their approach, while others (e.g. Mattessich, 1995; Mouck, 1988; Whittington, 1987; Williams, 1989) denounce their ostracism and systematic denigration of rival approaches. Both proponents and opponents of PA consider the emergence of positive theories as a radical severance; however, we suggest that the move from normative to positive theories occurred gradually. Even if they took advantage of the reform that took place in US business schools during the 1950s, the proponents of PA also benefited from a decoupling between the academic world and accounting practice initiated by their predecessors.

Introduction

In any research touching the sociology of sciences, one work quickly emerges as central: The Structure of Scientific Revolutions by Thomas Kuhn (1962). In this book, which was praised to the point of being called a ‘historical turning point’ in the study of sciences, Kuhn does not see knowledge as following a linear progress. Instead he considers that it advances sporadically, through cyclical

Correspondence Address: Thomas Jeanjean, HEC Paris, Department of Accounting and Management Control, 1, rue de la Libe´ration, 78351 Jouy-en-Josas, France. Email: jeanjean@hec.fr

1744-9480 Print/ 1744-9499 Online/09/010107–20 # 2009 European Accounting Association DOI: 10.1080/17449480902896510 Published by Routledge Journals, Taylor & Francis Ltd on behalf of the EAA

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revolutions followed by periods of stability. The reasoning for these revolutions is now well-known, and is founded on the concept of the scientific paradigm. In the pre-paradigmatic phase, science is marked by conflicting interpretations, none of which is predominant. The emergence of a single paradigm marks the start of the ‘normal’ phase, which itself contains the seeds of its own demise, as it allows certain unresolved questions to remain. The persistence, further examination, or multiplication of such questions, finally bring about a renewal of scientific knowledge. In the ensuing crisis phase, alternative paradigms to the dominant paradigm enter the fray, and factors external to science (individual and collective persuasion strategies, institutional changes) join forces with internal factors until one of the paradigms emerges triumphant. This paradigm forms a new normal science until, like its predecessors, it reaches a crisis point. Analysis of the paradigm shift necessarily combines ‘internal’ or epistemologi- cal factors specific to the methodology of each science, and sociological or ‘exter- nal’ factors. Kuhn, paving the way for a sociology of science that integrates research practices and the process of establishing scientific proof into its expla- natory schemas, refused to come down on the side of internal or external aspects of the change that leads to scientific ‘progress’ (Dubois, 1999, pp. 38– 39). The very concept of a paradigm, taken in the broad sense of ‘disciplinary matrix’ conferred by Kuhn, i.e. a set of rules for generalisation, models, values and ‘standard examples’ of solutions to certain problems, contains the idea that social factors can model not only researcher behaviour, by defining the situation of their science and the organisation of their scientific community, but also the science itself, by influencing methodological choices and conceptions of scienti- fic practice. We propose to show that in the specific field of knowledge that is accounting, the logic of a paradigm shift does not depend either on an epistemological break- down or a social change. This shift is only possible because the dominant para- digm carries the conditions for its own demise in favour of a new paradigm, and these conditions can arise when an institutional change comes about. The paradigm shift that is the subject of this article is the change that brought the empirical approach to supplant the normative tradition in accounting research (see Hoarau, 1997, for an overview of these traditions). This change essentially took place in the US, a country that occupied (and continues to occupy) an essen- tial role in accounting research (see Nikitin, 2003, for a ‘French’ history of man- agement sciences). In less than ten years, between 1960 and 1967–1968, research analysing accounting choices and/ or the effect of accounting information on financial markets using economic models and statistical processing supplanted work in the normative tradition in the major research journals. This type of research can be classified as an empirical approach, or positive theory /theories. The empirical approach in its broad sense encompasses three major coexisting currents. The first current examines the impact of accounting information on financial markets (Capital Market Research, see Kothari, 2001, for a literature review). The behavioural approach (Behavioural Accounting Research) analyses

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relationships between accounting information and human behaviour. This current makes considerable reference to research by psychologists (see Bloomfield et al., 2002, for a literature review). The third current is the politico-contractual theory, which examines the organisational, economic and political determinants of accounting policy choices made by preparers of accounts (Fields et al., 2001). However, there is some confusion between positive theory and politico- contractual theory, and this confusion is maintained by Watts and Zimmerman, who called their 1986 book Positive Accounting Theory. The rest of this article concerns the success of the empirical approach in the broad sense. The reasons for this success do not appear to be clearly established. Proponents of the new approach naturally argue that it is very fertile (Watts and Zimmerman, 1986). Their critics stress their desire for power, developed by ostracizing and systematically denigrating rival approaches (Laughlin, 1995; Mattessich, 1995; Mouck, 1988; Whittington, 1987; Williams, 1989). While the explanations supplied by various commentators tend to see positive research 1 as a break with the past, combining new knowledge and new actors, we propose to show that the move from normative theory to positive theory was in fact much more gradual. Our research has led us to dismiss ideological explanations of the transition from the normative approach to the positive approach. The supporters of positive theory, in order to challenge the normative theorists’ legitimacy as researchers, argued that they took an idealised view of reality and were more preoccupied by how things should be than how they are. Positive theory, based on the intention to explain and predict accounting practices rather than improve them, is a scien- tific theory in the sense that it is consistent with the ‘view of theory in science’ (Watts and Zimmermann, 1986, p. 2). To follow these arguments is to acknowledge the intrinsic superiority of the positive approach as a truly scientific theory, and to treat it as a break with the normative approach. This reasoning suggests that the only thing positivists needed to triumph over their predecessors was recognition of their scientific rigour, for instance through a sweeping reform of management teaching and research. The idea we defend in this article is that the positive approach in accounting proceeds much more from normative theory than authors like Watts and Zimmermann (1986) were willing to acknowledge. The revolution that propelled empirical research to the forefront was not only the fruit of an internal epistemological evolution, nor was it exclusively the consequence of an external ‘institutional’ shock. Empirical research undeniably needed human and financial resources to fulfil its promise. Those resources were supplied when American business schools moved towards a more research-oriented devel- opment in the 1960s, but this move is not sufficient to explain the triumph of the new accounting research paradigm. The representatives of that paradigm also benefited from a change – both epistemological and institutional in nature – that is attributable to supporters of the normative approach. While there appears to be a clear break between them, from the standpoint of their defenders’

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ambitions as theorists, normative theory and positive theory in fact form a continuity.

The first part of this article shows that normative theory progressively defined itself as a set of knowledge which, while remaining in touch with the possible uses of that knowledge, was nevertheless detached from those uses to exist as

a system of knowledge. We then show that this shift created a distance

between the normative theorists and the professional accounting world from which many of them originally came. The second section explains how the tran- sition from one theory to the other came about socially through a shock that resulted in legitimisation of the decoupling between theory and accounting prac- tice initiated by representatives of the normative school. In the late 1950s, two reports were published, one by Robert Gordon and James Howell, and one by Frank Pierson. They called for a radical overhaul of Business Studies, emphasis- ing the value of economic and organisational analysis of management decisions and harshly criticising the lack of academic training among teaching staff in business schools and university business courses. Not only did these reports contain an aspiration for methodological renewal, they also called for a complete rethink of the way researchers’ work is produced and legitimised. Consequently, we see how the rise of the advocates of the positive approach was supported by the new hiring and tenure conditions for business school faculty members, and the greater importance placed on publication of research in scientific journals.

Normative Theory or the Beginnings of the Decoupling of Theory and Practice

Normative theory progressively defined itself as a set of knowledge which, while remaining in touch with the possible uses of that knowledge, was nevertheless detached from those uses to exist as a system of knowledge. This shift created

a distance between the normative theorists and the professional accounting world from which many of them originally came.

Normative Theory: Analysis of the Link between Theory and Practice

Dyckman and Zeff (1984, p. 227) describe the normative research published up to the end of the 1950s by dividing it into two categories: policy prescription articles, in which the authors take a position for or against an accounting treat- ment, and framework building articles (about one third of the articles published) attempting to establish the bases for policy prescription. This type of research, which was part of a teleological view of progress in the sciences, initially covered two approaches (Colasse et al., 2001). The inductive approach was rep- resented by authors such as A.C. Littleton, who considered that theory develop- ment must derive from prior observation of practices. Theory emerges from a process of rationalising the observations made over a sufficiently long period:

the logic that links objectives and means thus gradually brings out accounting

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principles. The deductive approach, illustrated by Paton, starts from abstract ideas and draws on fields of accounting-related knowledge to formulate the axioms underlying production of the rules that will guide the behaviour of accounting technique users. However, both ‘ex post rationalisation’ and ‘ex ante theorisation’ (Colasse, 2005, p. 201) aimed to shape the demands emerging from practice, and guide practice in order to supply an effective response to those demands. The natural outcome of the normative approach was thus the production of standards. These standards were not to be simply rules; they had to arise from a conceptu- alisation of accounting and its environment. As early as 1940, Paton and Littleton (1940) attempted to set up the first corpus of coherent doctrine. Their work was spread from the mid-1950s by authors such as Raymond Chambers and Richard Mattessich. In 1955, Chambers insisted that the search for accounting axioms should free itself from the trend of producing rule systems rather than theories. The theorist’s position should not be that of a mere supplier of rules to the practitioner, as that should be the role of the standard-setter. The link between the theoretical and practical dimensions was thus asserted:

theory was a response to the needs of practice (Littleton, 1948; Ross, 1967). The theorist’s position naturally stimulated debate among university teachers, in a new reflection of the opposition between the inductive approach and the deductive approach, leading notably to a divergence of views between Mattessich and Chambers: Mattessich believed that accounting concepts should be induced from observation of ‘accounting micro and macro-systems’ while Chambers wished to see more focus on production of a general theory of accounting. Chambers’ idea was that separating accounting systems from their specific interpretations would make it possible to construct several interpretations on the basis of a single theory. Depending on the empirical objectives, specific standards could be deduced from the same series of general principles. The accounting practitioner could thus be seen as an acrobat, juggling with these general principles to find a suitable response to his problem. In the normative approach to accounting research, economic reality at least appeared to exist independently of its accounting representation. The researcher’s task was to determine the general laws of accounting nature. Once those laws had been discovered, it would be possible to use them to improve production of accounting standards. Normative theory can thus be envisaged as assisting the accounting profession in production of solutions to the problems encountered by practitioners. Accordingly, progress in accounting would consist of inventing responses that provide the most satisfactory translation of constantly changing reality into accounting terms (Hopwood, 1983; Robson, 1988). 2 It can be con- cluded that this theory established a connection running from the theorist to the practitioner: the former influences the latter, but is also supplied with food for thought by the ‘research questions’ inevitably thrown up by changing prac- tices. By virtue of the very principle of the activity of theorisation, this connec- tion from the grass-roots practitioner up to the ‘high priest’ of accounting covers

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several levels. Higher education faculty members are at the top, the opposite end to practitioners, while the accounting standard-setter is a kind of applied researcher acting as a cog in the machinery for conveying the theorist’s work. We shall see later how this theoretical posture acquires meaning in relation to its social context. Normative theory, which paradoxically distances its authors from accounting practitioners in attempting to incorporate their practices into an abstract system, simultaneously helps to bring accounting theorists closer to other theory-makers.

Influence of Academic Structures and Strategies for Distinction between Theorists and Practitioners

Business schools go back a long way in the United States. The first such school was founded in 1881 thanks to a donation by Joseph Wharton to the University of Pennsylvania. The Universities of Chicago and California set up their Schools of Commerce in 1889, followed by Dartmouth with its Amos Tuck School in 1890. In the ensuing half-century, many American universities introduced business courses. They were so popular that business students accounted for 3% of Bache- lor’s degrees awarded in 1909–1910, 10% in 1939–1940 and 17% in 1949–1950 (Jeuck, 1986). The number of Masters’ degrees in business awarded followed a similar trend: under 100 in 1914, 20,000 in 1945, and 60,000 in 1950 (15% of all Master’s degrees). These figures should not be allowed to mislead our perception of the role attrib- uted to business education in the US university system. 3 Business studies had to earn recognition not only in the world of business, where it was initially con- sidered that being a manager was primarily something learned through practice, but also in the Universities, where introduction of business courses was perceived as inappropriate. Engwall and Zamagni (1998) point out that many staff on arts and science faculties had little esteem for Business Schools, and some were of the opinion that their courses were out of place in the academic world. ‘Should we let Chaucer and Shakespeare be sullied by gold-diggers?’ asked a Harvard professor (Daniel, 1999, p. 123). The attitude was, in practice, ambiguous, since those same business schools were bringing the universities extra resources, all the more so after the Second World War when the numbers of students registering for business school programmes saw much greater increases than the numbers regis- tering for other courses. 4 This paradox is illustrated by the relationships between economists and Business School faculty. In the US, the birth of a Business School had often been preceded by business courses offered by economics departments or economists. Some such business schools became independent before very long, while others remained attached to the economics department that had created them. It was not until 1940, for instance, that the business studies and research programme at Berkeley (University of California), which had opened in 1898, became independent (Engwall and Zamagni, 1998). The accounting tea- chers from these institutions were thus often in contact with their economics

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colleagues, who had a definite influence on development of their thinking. William Paton, whose work is built on the analysis of the concepts of profit and wealth developed in economics, received his PhD in economics in 1917. He was appointed assistant professor in the University of Minnesota department of economics in 1916, and moved one year later to the economics department at the University of Michigan, where he remained until 1958, when he retired with the title of Professor Emeritus of Accounting and of Economics (Degos and Previts, 2005). 5 Nonetheless, although Business Schools were able to grow in the bosom of the Universities, they were still (at least symbolically) ‘poor relations’. The disdain shown by a certain intellectual elite for the material aspects of existence, especially in the field of business (Burrage, 1993) did not help to raise the prestige of business education by enabling it to establish its pedigree. It would later be underlined by Gordon and Howell and the Pierson report (see below) that there was an impression of great confusion in the late 1950s over both the courses and the faculty membership of Business Schools. There was no overall strategy to the definition of curricula, and too many courses (the New York University Business School offered no less than 50 specialisations), with secretarial courses sometimes running alongside courses in the theory of finance. The teach- ing faculty consisted of a miscellaneous assortment of graduates of the business schools themselves, without doctoral degrees, keen to earn some symbolic capital from their status as teachers, and members of other departments ‘whose interest in business was not always evident’ (Engwall and Zamagni, 1998, p. 157). The crushing workload left little time for research, described in the reports as ‘more descriptive than analytical’. Accounting as a discipline occupies a special place in the history of Business Schools. From the outset, it was part of the core curriculum for aspiring business- men (and later businesswomen), and this was never challenged. Accounting was already taught in the private business colleges that had flourished in the second half of the 19th century in the US to train employees for trade and industry, and sons of the business bourgeoisie for whom university was not accessible (Daniel, 1999, pp. 20–21). While these institutions considered accounting first and foremost as bookkeeping, as seen earlier it had acquired legitimacy else- where in the economics departments of certain universities. Accounting was therefore a fundamental discipline in Business Schools, but also a ‘basic’ disci- pline, often very similar to accounting as it was taught outside the university system. The need to raise the intellectual level of the discipline became increas- ingly clear as the business school curriculum began to attribute more importance to subjects with better-established theoretical content: finance in the interwar period, and the organization sciences after 1945 (Daniel, 1999, pp. 210–211). 6 The environment in which thinkers such as Paton, Littleton and Mattessich flourished was marked by this ambiguity over the status of their knowledge. The careers of these academics often consisted of a struggle for recognition as intellectuals – a struggle that posterity was pleased to consider exemplary.

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Littleton, who was born in 1886, only gained his degree in business adminis- tration from the University of Illinois in 1912, and after a short spell in an audit firm he joined the university’s teaching faculty in 1915 as an instructor. Until his retirement in 1952, Littleton worked hard to carve out a position as uncontested leader in his discipline, both in terms of his intellectual contribution and his capacity to devise and manage courses. He was the first to offer account- ing theory courses, in the 1920s. After obtaining his PhD in 1931, he was also the driving force behind the creation of the world’s first PhD in accounting. Between 1938 and 1952, he supervised 24 of the 26 students who registered for this PhD (Degos and Previts, 2005). Whatever the merits of men like Littleton, Paton and Mattessich, they were representatives of a discipline considered of secondary importance, taught in institutions that were themselves considered of secondary importance within the universities. The theory-building vocation of the normative current of research thus appears to lie at the origins of a dual movement that raised the status of accounting academics. First of all, this movement introduced a hierarchy in the accounting world, from the small practitioner to the great theorist. Then, in the academic world, the research programme that would give accounting science a robust epistemological substratum set the accounting research elite apart from their colleagues in the Business Schools, specialists of accounting or other fields, who remained practitioners in practice or in their outlook. This movement also brought the elite accounting academics closer to academics in other more presti- gious disciplines, the highest-ranking being the economists. Normative theorists thus helped to extract accounting theory from the contingencies of practice (see also Bricker and Previts, 1990; and Jensen, 1982). Development of this theory was based sometimes on the definition of axioms from which solutions applicable to each concrete case could be deduced (inductive approach), and sometimes on rationalisation of practices (deductive approach), inducing general rules from observation of specific cases (see Degos and Previts, 2005, for a review). Both of these conceptions of research contributed to a movement that set up the theorist as a guide for the practitioner, and thereby introduced an ongoing power distance between members of the accounting world. The theorist would henceforth devote himself, in the same way as colleagues in other disciplines, to production of pure knowledge. We shall now see how this movement was used by the initiators of empirical research and how, helped by the circumstances, they were able to turn it to their advantage.

Exogenous Shock and Use of Endogenous Trends: Emergence of the Positive Paradigm in Accounting Research

The ‘normative’ theorists successfully decoupled accounting practice from accounting research. However, the resulting distance was considered insufficient in two reports commissioned by the Ford and Carnegie Foundations and pub- lished in the late 1950s, which criticised management teaching for its excessive

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focus on practice, and called for development of original management thinking broadly influenced by the economic sciences. Both these reports, and the gener- ous grants awarded by the Ford and Carnegie Foundations, contributed signifi- cantly to promotion of a new approach to accounting research represented by ‘positive’ research. However, the emergence of the positive approach did not reflect a total break with ‘normative’ theories, and several links between the two approaches can be established.

The Gordon and Howell Report (1959) and the Pierson Report (1959)

In 1959, two reports were published on business education. Robert A. Gordon and James E. Howell published Higher Education for Business, commissioned by the Ford Foundation. 7 Franck C. Pierson edited The Education of American Business- men for the Carnegie Foundation for the Advancement of Education. 8 Both reports were published the same year, but the authors had hardly consulted each other at all, although they were aware of each others’ work (Canning et al., 1961). Concern that had grown during the 1950s lay behind commissioning of the reports. Despite success in the number of degrees awarded, Business Schools did not enjoy a good reputation in the academic and business communities (Jeuck, 1986; Nelson, 1961). Canning et al. (1961), for example, pointed out that the cleverest students opted for degrees in engineering, law, medicine or science and that the universities’ business schools had to make do with the ‘lower half of those entering college’ (Canning et al., 1961, p. 192). The Pierson report is clear on the subject: ‘the question was raised with increasing insistence on whether business programmes were attracting students of inferior academic ability and [it was charged] that academically superior students found little satisfaction to challenge [these courses]’ (Pierson, 1959, p. 53). The reports also observed that although business graduates found their first job fairly easily, they did not develop. The two reports in fact formed an indictment of business education in the US. Their authors pointed out that 60% of teaching staff in Business Schools did not have a PhD. They were concerned about the over-technical nature of the classes taught, the lack of critical thinking by students and the absence of applied research in management departments. In short, they highlighted the low quality of management graduates and their inability to develop. Gordon, Howell and Pierson called for development of cross-functional teach- ing in statistics, psychology, economics, and operational research. They believed that business courses should be reformulated around three focal points: applied mathematics, economics and behavioural sciences. As an illustration, the reports recommended that an undergraduate student should devote 16–20% of his time to mathematics, 16–17% to the social sciences (excluding economics), 11–12% to economics, 6–10% to quantitative methods (including accounting and statistics), 3–6% to organisation theory, 3–6% to business policy, and 3%

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to law and the social environment. This combination would be rounded off by courses in specialist areas (finance, marketing, accounting, etc) and general (liberal arts) courses. This proposed general structure was in stark contrast to the courses on offer in the late 1950s. The study reforms had a twofold, even threefold, aim. One of those aims was to attract quality students by broadening the field of teaching. In addition, according to Gordon, Howell and Pierson, more conceptual teaching should enable the graduates not only to find their first job, but also and above all to change within the enterprise. Incidentally, such a reform of the curriculum would require the emergence and promotion of a new faculty. Both reports recommended setting up an excellence-based faculty whose members would hold PhDs and be assessed on the quality of publications. The central idea of these reports was to guide business research towards a system in which theoretical research would come before applied research. MBA

holders would thus be ‘enlisted’ to test the results of their professors’ investi- gations and spread them in enterprises. Talking of his work on the report in a

1984 interview, Howell declared he had acquired the conviction that Business

School managers should not let themselves be influenced by the demands of firm managers, because managers represent the business world as it currently exists. On the contrary, the accent should be placed on research which, in his

opinion, determined the face of the business world to come. In short, researchers needed to be in contact with other researchers in priority, rather than business managers (reported in Zimmerman, 2001). This accent on research was to make academic journals highly important in hiring and promotion decisions affecting American professors /researchers. Gordon, Howell and Pierson stressed the need to develop research based on the formulation and testing of hypotheses. This was nothing more than an adoption of the concept of scientific activity described by Friedman (1953), or by the founders of Management Science in

1954 and Administrative Science Quarterly in 1956. It should be remembered

that Gordon, Howell and Pierson were all University professors of economics. The reports’ recommendations had resounding repercussions in the academic world in general, and accounting research in particular. In terms of content, Daniel (1999) considers that the reports simply crystallised the terms of the debate on the primacy of research over practice in the operating strategy of Business Schools, which had been running since the end of the Second World War. Their originality lies instead in defining the resources needed to pull business studies up to a level of academic excellence that would enable them to bear comparison with other university disciplines. Regarding financial resources, the fact that one of the two reports was commissioned by the Ford Foundation is not insignificant. The Ford Foundation was already giving research grants to universities to improve the quality of doctoral programmes in business management. 9 The number of business management PhDs awarded each year rose very significantly: from 148 in 1960 (for all 31 institutions awarding this type of PhD), the total reached 287 (for 41 institutions) in 1965, 584 (64) in

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1970, and 787 (79) in 1975 (AACSB, 2003). In 1961, the Ford Foundation even financed a seminar at the University of Chicago which discussed the application of behavioural theories and quantitative methods by researchers in accounting (Dyckman and Zeff, 1984). 10 What reasons lay behind the emergence and success of the empirical approach, all achieved in the space of a few years? The very generous grants given out by the Ford Foundation ($35 million to 1964, Schlossman et al., 1998) partly explain the success of the Gordon /Howell /Pierson recommendations. But they are not the only explanation. The report authors proposed a change in strategy for Business Schools that would turn them from simple schools of application into places of intellectual training. A broader conceptualisation and the introduction of behav- ioural and economic theories into business course curricula were needed. In the accounting world, these recommendations were widely taken up. A special com- mission of the American Accounting Association was set up to analyse the reports and their effects on accounting education (Canning et al., 1961). The changes would not be created out of nothing, nor by ‘importation’ of researchers trained in other disciplines with higher theoretical content. On the contrary, a favourable breeding ground needed to be developed within accounting research itself. Para- doxically, this was to be achieved through further pursuit of the decoupling between the academic world and the world of practitioners, which had begun with the development of normative theory (Sundem, 1999). As seen, there was already a separation between practice and normative research in the world of accounting. Although their work had been built on the premise that theory should continue to guide practice, their normative theorists had taken sufficient distance from practitioners to assert their status as producers of pure knowledge, principally in respect of university academics in other disci- plines. In positive theory, explanation and prediction of accounting practices, to borrow the expression of Watts and Zimmerman (1986), have few links with determination of the practices themselves, and require a high degree of decou- pling between research and development of accounting techniques. But this high degree of decoupling, although necessary at an epistemological level, does not at institutional level necessarily represent a radical break from the position of the normative theory researcher. Distance from the world of the practitioners was already necessary for normative theorists, in order to assert themselves as such. Therefore, paradoxically, the success of positive theory (in the broad sense) could be considered to derive from the success of normative theory. This conclusion appears to be confirmed by examination of the careers of the earliest representatives of the positive school and the histories of the journals in which they were to publish their key findings.

The Research Community: Between Continuity and a Break with the Past

The Pierson and Gordon /Howell reports called for a change in the strategy of the American universities’ Business Schools. Generous grants from the Ford

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Foundation helped to put their recommendations into practice. The vectors of this change were clearly the teaching staff, and it is implicit in the reports that improvement of business courses would involve renewal of faculty. In account- ing, business PhDs developed and contributed to the emergence of a new gener- ation of accounting teacher /researchers trained according to the principles set forth in the Pierson and Gordon /Howell reports. They applied methods and tech- niques from neighbouring disciplines (econometrics and micro-economics) to accounting and financial issues (see Bricker and Previts, 1990, for a summary of the changes to the make-up of accounting teaching faculty). Ross Watts and Jerold Zimmerman, for example, gained their PhDs, respectively, in 1971 from the University of Chicago and in 1974 from the University of California (Berkeley). These two universities (particularly Chicago) were among the principal beneficiaries of Ford Foundation grants. In his thesis, Ross Watts used econometric methods, applied to accounting and finance questions (dividend policies, earnings forecasts); Jerold Zimmerman drew on the micro-economics of uncertainty to solve resource allocation and budget process problems. 11 Gerald Feltham was awarded his PhD by Berkeley in 1967, for a thesis on the economics of information applied to financial reporting. William Beaver earned his 1965 PhD from the University of Chicago with a thesis on the relationship between accounting information and stock market prices (financed by a grant from the Ford Foundation). This new generation was supported by experienced researchers, who appreci- ated the ‘principles’ of the Pierson and Gordon/ Howell reports although they had not been educated under those principles. The University of Chicago hired a large proportion of these teachers who were in favour of the approach developed by the reports. Sidney Davidson, for example, was professor of economics and later accounting at the University of Michigan before he joined Chicago. Charles Horngren and George Soter, although they did not directly contribute to the empirical approach, also attracted and taught doctoral students who would later become proponents of the approach; Nicholas Dopuch, one of the leading lights of the empirical approach, acknowledged his intellectual indebtedness to these two professors upon his induction to the Accounting Hall of Fame. Charles Honrgren was on the panel of examiners that awarded William Beaver 12 his PhD. Stephen Zeff 13 advanced recognition of the empirical approach by accepting Watts and Zimmerman’s 1978 and 1979 articles when he was editor of The Accounting Review, despite the mixed reception of those articles (Puxty and Tinker. 1995). As already noted, Paton and Littleton had taught economics before becoming professors of accounting. It thus appears that a large portion of normative approach supporters used the tools of economic theory in their research, or at least that they were in favour of the theoretical and conceptual framework of the economic sciences. Furthermore, several professors of economics and/ or finance published work in accounting in the 1960s. Myron Gordon, for instance, published articles as early as 1950 in journals focusing on both research in accounting (Accounting Research and The Accounting Review)

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and economics (American Economic Review). In other words, in the 1950s– 1970s there was some permeability between the worlds of accounting researchers (who often held PhDs in economics) and financial economics researchers (who occasionally published in accounting journals). This made it possible to ‘pass on’ the bases of the ‘positive’ approach developed in the 1950s by Milton Fried- man to accounting research. Another important factor for development and durability of this ‘new’ teaching faculty was the establishment of academic journals. The number of journals pub- lishing business research increased from 1600 in 1959 to 5000 in 1984 (Daniel, 1999, p. 169). Wells (2000) tells us that only two journals were publishing accounting research at the beginning of the 1960s: The Accounting Review in the US and the British Accounting Research, which was published under the patronage of the Society of Incorporated Accountants and ceased publication when that organisation merged with the Institute of Chartered Accountants in England and Wales. Several more journals began publication in the 1960s: the Journal of Accounting Research in 1963, Abacus and The International Journal of Accounting in 1965, the Journal of Business Finance and Accounting in 1969. Zeff (1996) counts a total of 77 English-language journals for accounting research. While the initial aims of some of these publications, such as Abacus, remained relatively ‘ecumenical’ in outlook, targeting a readership of both researchers and practitioners (Wells, 2000), others had a clear orientation from the outset towards a solely scholarly readership. The foundation of the Journal of Accounting Research (JAR) in 1963 (see Dyckman and Zeff, 1984, for a history of the journal) is a particularly good example of this orientation. The JAR was created at the initiative of Sir Sydney Caine of the London School of Economics and George Shultz of the University of Chicago. In the inaugural editorial, both founders stated that the new journal ‘will be devoted to reporting the results of research activities in all areas of accounting’. They also emphasised their intent to devote the content of the journal exclusively to reports on accounting research, unlike the benchmark academic journal, The Accounting Review, which at the time had a section entirely devoted to teaching issues (The Teacher’s Clinic). There can be no doubt that success came rapidly to the JAR: in 1974, Benjamin and Brenner ranked it first among academic journals, and that ranking was subsequently confirmed by Weber and Stevenson (1981) and Howard and Nikolai (1983). While Caine and Shultz only wanted to publish research articles, the published research was not exclusively positive, at least for the first five years of the JAR’s existence. Dyckman and Zeff (1984) note that between 1963 and 1968, the journal published articles that can be considered as normative: over those five years, economic modelling and/or empirical articles represented only 20% of content as measured in pages. It may seem paradoxical that the JAR published normative ‘research’ given the journal’s future methodological positioning and its founders’ declared ambitions. Two (non-mutually exclusive) reasons explain this editorial policy. First, it is clear that the ‘stock’ of research classified

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as empirical was very small, and that only work related to the normative approach could be published. 14 Next, by publishing ‘normative’ research, i.e. with a well- established scientific status at the time, the JAR helped to legitimate the ‘positive’ articles published alongside normative research. Although the JAR originally vaunted a fairly open-minded methodological outlook, it still wanted to play a role as a stimulus in development of new approaches to accounting research. The JAR’s first editor, Sydney Davidson, observed that ‘The emergence of the computer indicated that large new data bases of financial information would be

] aspects of behavioral science were devel-

oping. Research in accounting was beginning to capitalize in these advances in the related fields. A more scientific approach to accounting research was clearly on the horizon’ (Dycklman and Zeff, 1984, p. 282). Disputation of norma- tive theory as a cutting-edge research programme emerged shortly after the cre- ation of the JAR; Gaffikin (2003, p. 300) dates it to 1964 with the publication in The Accounting Review of an article by Myron Gordon, at the time a professor at the University of Rochester, entitled ‘Postulates, principles and research in accounting’. In that article, Gordon stressed the need for the researcher to con- front reality, particularly with the help of statistical methods. To encourage pro- duction of research using databases and a hypothetical-deductive approach, the JAR organised an annual Conference on Empirical Research in Accounting from 1966 onwards. Initially these conferences were sponsored by the Ford Foun- dation, and it was later joined by the AICPA, the Ernst & Young foundation and the American Accounting Association (AAA). They were very successful, attended by several editors of The Accounting Review (Robert Mautz, Lawrence Vance and Robert Trueblood) and well-known figures in the profession (Ray Ball, Robert Jensen, and Anthony Hopwood, to name just three). From 1974 onwards, the word ‘empirical’ was dropped from the conference title. Nicholas Dopuch declared that ‘Our reason was simply that it no longer seemed necessary to promote empirical research per se since the methodology has now achieved the status and influence among accounting researchers that we had in mind at the time of our first conference’. The papers presented were subsequently published by the JAR in issues called ‘supplements’. These conferences had a ratchet effect, to such an extent that no later than the end of the 1960s the ‘empirical’ current was well-established in the JAR, which stopped publishing ‘normative’ articles from 1968. From 1971, the editor of the JAR supplements on the empirical conferences was also the editor of the regular journal issues, whereas in the 1960s the two functions had been sep- arate. The discontinuation of publication of normative or historical research was in fact one of the causes of the London School of Economics’ withdrawal from the JAR editorial board in 1974 (Dyckman and Zeff, 1984). In keeping with the spirit of the Gordon /Howell and Pierson reports, the JAR had become an instrument for the development of accounting research, and a journal publishing nothing but research. Then, throughout the 1960s and early 1970s the JAR editorial board progressively sought to promote a particular

readily accessible to researchers [

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type of research perceived by board members as cutting-edge research. The success of the JAR and its capacity to legitimise ‘empirical’ research derived from its strategy of publishing normative research, at least in its first five years of existence. Even as this strategy was in action, links were established with the period’s main accounting research journal, The Accounting Review. William Paton, for instance, the founder and first editor of The Accounting Review (TAR) from 1926 to 1929, published an article in the first issue of the JAR in 1963. Two other members of TAR editorial board, Gordon Shillinglaw and Raymond Chambers, were also contributors to the first issue of the JAR. In a two-way process, five JAR founders (Nicholas Dopuch, Harold Edey, Charles Horngren, David Green and George Sorter) had articles accepted for The Accounting Review in 1962 and 1963. This resulted in strong convergence between the two journals: right from the start of the 1960s, TAR also published empirical articles. There was in fact no sudden break between the two types of research. What we observe instead, with the JAR considered as the instrument of this shift, is a gradual change: first the JAR achieved recognition as a research journal to the exclusion of all other concerns, then it became the leading vehicle for empirical research.

Conclusion

Normative research was not killed off by the rise of positive research; articles and books in the normative tradition are still being published today. The successors to the figureheads of the 1950s and 1960s no longer dominated the academic world, and abandoned their plans to construct an axiom of accounting in order to address the needs of practitioners. The growth in activity by national and international standard-setting bodies from the 1970s undeniably kept these researchers busy. 15 Empirical research, which supplanted ‘ex post’ research, 16 did not owe its success to a break from the past brought about by new men with new ideas. Paradoxically, the success of the normative theorists appears to have paved the way for the success of ‘positive’ theory. It was the normative school that trained the proponents of the empirical approach. Moreover, by formulating abstract conceptual frameworks for accounting practice, the normative theorists helped to legitimise the decoupling between the academic world and prac- titioners. Paradoxically, normative and positive theories, which epistemologi- cally are at odds, thus seem to share a relative continuity in terms of the academic field’s growing independence of accounting practice. To borrow Kuhn’s analysis and speak in terms of paradigms, this shift to positive theory was only possible because normative theorists had already dis- tanced themselves from accounting practice, thereby opening up the possibility for legitimisation of research completely detached from practice, in that it con- siders this practice and its governing rules as a sign of specific interests that are not convergent with the researcher’s scientific interests. We have attempted to connect the epistemological and the social in this article, showing that the

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revolution that handed power to representatives of the empirical approach was not solely dependent on a change in the context in which researchers work. That revolution was possible because normative theory positioned itself as theory as opposed to practice, and this brought about a change in mindsets which the supporters of the empirical approaches were able to build on in a new institutional context. This reflection leads us to assert that contrary to the claims of certain suppor- ters of the positive approach, their scientific approach did not constitute ‘pro- gress’ from what had gone before. To adopt the pragmatic stance of Kuhn, who doubted that modern theories of physics were any better at describing the world than Aristotle’s theories, it would indeed be possible to reject this idea of progress in a discipline whose changes, as we have shown, present the observer with social and epistemological factors intertwined. On the contrary, the empiri- cal turn taken by accounting research appears to be accompanied by a loss of independence. With the emergence of the positive approach, soon joined by social studies of accounting that were to develop with the creation of the Account- ing Organizations and Society journal in 1975, accounting in fact became a subject of study. Researchers in the discipline of accounting were characterised by the use not only of concepts, but also methods developed in other disciplines (economics and econometrics for the positive current, sociology and anthropol- ogy for social studies of accounting). Maybe this transition from research in accounting to research on accounting is the real revolution induced by replace- ment of the normative paradigm.

Notes

1 In the rest of this article we shall use the (neutral) expressions of ‘empirical’ current or ‘posi- tive’ current to designate the school of thought that aims to explain and predict accounting choices. Note that several ‘positive’ publications predate the articles of Watts and Zimmerman (e.g. Ball and Brown, 1968). 2 According to Galbraith (1961) and Zeff (1972), the US is the country that took use of account- ing theory furthest to justify certain choices in preparation of standards in the period 1945–

1970.

3 Most of the history presented here is American. Our close focus on the US given the country’s central importance in analysis of paradigm shifts in accounting research is not an indication that we believe it was the only country to have researchers. Among the authors mentioned earlier is Raymond Chambers, whose university career was in Australia, not the US, but whose career path shows similarities with that of the American normative theorists (of native or foreign origins). Chambers often worked in collaboration with economists as, before becoming the first head of the department of accounting in his university, he occupied the chair of accounting within the economics department (Colasse, 2005). 4 This high growth in numbers is largely explained by the homecoming of draftee soldiers. Many of them had grants for their university studies and a large number (750,000 between 1945 and 1950) chose to study business.

5 As Gaffikin (2003, p. 294) points out, Chambers was influenced by Hayek and Von Mises, and Mattessich by Debreu.

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6 One interesting episode described by Daniel (1999, pp. 212–213), historically outside the period covered here but nevertheless a telling indicator of accounting’s role in business edu- cation in the US, is the movement in the second half of the 1970s for the foundation of Account- ing Schools independent of Business Schools. This initiative, which had the support of the American Institute of Certified Public Accountants and some of the leading firms in the pro- fession, was short-lived. Among the reasons for the movement reported by Daniel were the desire to strengthen professionalisation of accounting activity, but also the fear that accounting, which formed the core of Business School curricula, would be supplanted by other disciplines that were better suited to the new demands for research affecting the operation of those schools. 7 The Ford Foundation is a charitable organisation set up in 1936 by Edsel and Henry Ford. Its mission is to ‘strengthen democratic values, reduce poverty and injustice, promote inter- national cooperation, and advance human achievement’ (see www.fordfoundation.org). Jerold Zimmerman (2001) reports that the work of the Ford Foundation that led to the Gordon/Howell report began in fact in the early 1950s against the background of fear of com- munism and a dread that higher education would not produce executives for businesses and administration of sufficient quality to assure US supremacy over the Soviet rival. The Ford Foundation’s role in ‘holding back the flow’ of communism extended beyond the US, since it contributed to US aid to allies. For more on the action of the Ford Foundation in Europe between 1950 and 1970, see Gemelli and MacLeod (2003). 8 The Carnegie foundation was set up by Andrew Carnegie and Henry Pritchett in 1905. Orig- inally, the aim was to create a fund to pay a pension to retired university professors. Under the influence of its first president Henri Pritchett, the Carnegie foundation published many reports intended to guide developments in higher education (the Flexner report on medical studies, the Reed report on law studies, etc). The Carnegie foundation was also a founder member of the National Bureau for Economic Research (Lagemann, 1989). 9 The Carnegie foundation participated relatively little in the reform of business studies, for, in the early 1960s, the foundation was in a difficult financial situation, as it had to cover the deficit on the university professors’ complementary pension fund it had helped to set up. 10 While all business disciplines benefited from the accent on research, it should be noted that accounting is one of the disciplines for which the effect of the Gordon/ Howell and Pierson reports took the longest to be established. Accounting benefited from no intervention other than those associated with the reports, whereas other disciplines such as operational research (Singhal et al., 2007) and human resources (Somers, 1966) were the targets of government- financed incentive programmes. 11 Anthony Hopwood, although he does not belong to the positivist stream, was also educated at the University of Chicago. 12 Source: http://fisher.osu.edu/Departments / Accounting-and-MIS /Hall-of-Fame/Membership- in-Hall/ William-Henry-Beaver/ 13 Stephen Zeff gained his PhD at the University of Michigan in 1962 for a thesis on a typically ‘normative’ problem (‘A Critical Examination of the Orientation Postulate in Accounting, with Particular Attention to Its Historical Development’), source: http://fisher.osu.edu/Departments/ Accounting-and-MIS/Hall-of-Fame/Membership-in-Hall/Stephen-Addam-Zeff. 14 We are indebted to one of our reviewers for this suggestion. 15 The increasing influence in the US of ex ante theorisation on accounting standardisation is visible from the 1970s, when the normative current underway was eclipsed in the university galaxy. Some academics found a way to retain intellectual influence through participation in the work of the Financial Accounting Standards Board, founded in 1973: the desire to develop a theoretical basis for standards was to be illustrated in the development of conceptual frameworks used to define the quality of accounting information, in accordance with the objec- tives of its users. Accounting standards would result from objectives set for this reporting, and guide the establishment of accounting practices with them.

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16 It should be pointed out (Gaffikin, 2003, p. 300) that this term was invented by empirical researchers who were critical of the normative approach, particularly Dopuch and Revsine

(1973).

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