Modern Costing Innovations and Legitimation: A Health Care Study

This article is a study of the introduction of a modern costing technology —activity based costing (ABC)—into a health care organization which is undergoing change. The transformation of this organization is of particular interest as it focused on the experience of a service which had always existed by collecting blood, which is given as a free donation (the gift), and which is then converted into a variety of health care products. Typically, accounting innovations in the U.K.’s National Health Service are at the behest of central government: In this case, the adoption of ABC is on the initiative of the health care organization itself. The attractiveness of the specific costing approach from the perspective of the management of this health care organization is as an ingredient in legitimation—the portrayal of this entity as a ‘complete organization’. The implementation of new management accounting systems within health care organizations has attracted the attention of many researchers (Coombs, 1987; Preston et al., 1992; Jacobs, 1995; Jones and Dewing, 1997; Doolin, 1999; Lapsley, 2001a). This research added to our understanding of the use of management accounting in health care settings. These studies share the distinction of being impact studies which have examined the implementation of government initiatives for new costing and budgeting systems in hospitals. The present study contrasts with the above articles: It examines a health care organization which has sought to implement a specific costing technology, activity based costing—ABC—in the absence of central government guidance. This research reveals the adoption, rather than the deployment, of this costing technology. Adoption of ABC is shown to be a legitimating exercise, as the organization seeks to portray itself as modern. The organization studied has distinctive attributes, notably its basic raw material is donated blood (which has been described as ‘the gift relationship’) which has had a fundamental impact on this entity, as discussed below. Moreover, this study emphasizes the importance of the language of accounting in the social construction of what Brunsson and

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