"Dynamics of budgetary control: industrial growth or financialization? A neo-institutionalist analysis of the Central Control Department establishment at PSA in 1973"

Some functionalist analysis has sometimes considered the budgetary control as a 'mechanical' result from organizational growth. In contrast, contemporary financial management instruments are frequently associated with the financialization of the economy which occurs in the last decades of the 20th century. Using the case of the Central Control Department within the PSA group in 1973 setting up of the, we highlight the ambivalent nature of management control instruments: on the one hand, they are central for the management of large organizations ; on the other, they involve a form of financialization for industrial management from the early 1970s.
Based on PSA archives and also interviews with former financial executives of the group, this paper emphasizes that this new management control system is paradoxically oriented towards short-term financial profit maximization from the early 1970s. We show that the group’s external and internal context converged in the early 1970s to shape this ambivalence of the PSA control system. This control is simultaneously inscribed in the long industrial firm history, and connected to the recent financialization at the turn of the 1970s.
From a neo-institutionalist framework, we show that this budgetary control system is fully in line with the uncertainty and growth context of PSA. In this respect, the group's managers were searching legitimacy within the organizational field. They find in this budgetary control oriented towards the maximization of short-term financial profit an adapted response. Management control is essential to bring in financial revenues from all the subsidiaries, allowing to appear as a powerful group in the organizational field.
A detailed analysis of the firm’s immediate environment, the movements of its financial managers, and the internal strategic problems of the PSA group, explain the roots of this crutial acounting device.