The enabling role of institutional entrepreneurs in the adoption of IPSAS within a transitional economy: The case of Estonia

Published date01 February 2018
AuthorPeeter Peda,Giuseppe Grossi,Daniela Argento
Date01 February 2018
The enabling role of institutional entrepreneurs in the adoption
of IPSAS within a transitional economy: The case of Estonia
Daniela Argento
|Peeter Peda
|Giuseppe Grossi
Kristianstad University, Sweden
University of Turku, Finland
Nord University, Norway
Giuseppe Grossi, Department of Business
Administration and Work Science, Kristianstad
University, Elmetorpsvägen 15, Kristianstad
291 88, Sweden.
Email:; giuseppe.
In the light of neoinstitutional theory and by adopting case study research methodology, this
article explains the adoption of International Public Sector Accounting Standards for modernizing
public sector accounting in Estonia. This article reveals that the smoothyet gradualadoption of
International Public Sector Accounting Standardscompliant accounting systems was enabled by
the involvement of powerful actors (i.e., institutional entrepreneurs) with foreign and/or business
backgrounds. In addition, the change in public sector accounting in Estonia was facilitated by the
developments in its international positioning, characterized by the transition from a Soviet
communist to a market economy and subsequent European Union membership and by the
absence of past accounting practices, which could potentially hinder the change.
accounting change, Estonia, institutional entrepreneur, institutional logics, IPSAS, isomorphism
The International Federation of Accountants (IFAC), which leads the
harmonization of public sector financial reporting internationally, has
promoted accrual accounting for the public sector (IFAC, 2000). For
this reason, its special standardssetting board, the International Public
Sector Accounting Standards Board (IPSASB), has released 40
accounting standards for public sector entities such as governments
and local authorities/municipalitiesthe International Public Sector
Accounting Standards (IPSAS; Deloitte, 2017; IPSASB, 2015; Navarro
Galera & Rodríguez Bolívar, 2007)and also approved a Conceptual
Framework in 2014 (IPSASB, 2014).
The IPSAS are mainly defined on the basis of the relevant
International Accounting Standards for the private sector, that is, the
International Financial Reporting Standards (IAS/IFRS) issued by the
International Accounting Standards Board (IASB; Benito, Brusca, &
Montesinos, 2007; Budding, Grossi, & Tagesson, 2015; Chan, 2003;
Cordery & Simpkins, 2016; Jones, 2007), to the extent that the
requirements of those IFRS are also relevant to the public sector
(IFAC, 2013).
Harmonization and the adoption of IPSAS can lead to several
advantages, particularly in the context of the European Union (EU),
in terms of increased accountability and transparency, better
decision making, improved efficiency and effectiveness in financial
reporting, sound financial management, data consistency, and better
international comparability of public sector financial data (Association
of Chartered Certified Accountants [ACCA], 2017; Ball, 2015; Navarro
Galera & Rodríguez Bolívar, 2011). At the same time, however, the
adoption of harmonized standards may cause several challenges when
considering diverging national traditions, implementation costs, or
sovereignty ambitions (Brusca, Caperchione, Cohen, & Manes Rossi,
2015; Manes Rossi, Cohen, Caperchione, & Brusca, 2016).
Recent research shows a diversity of opinion on the value of the
adoption of IPSASbased accrual accounting and advanced reporting
practices (such as consolidated financial statements [CFSs]), which
are widespread in the private sector. An increasing body of literature
has highlighted that private sector practices and techniques are not
necessarily well suited to the public sector (Grossi & Soverchia,
2011; Oulasvirta, 2014). The public sector differs from the private sec-
tor in goals, organizational aspects, financing, ownership, users of
accounting information, assets, and so forth, which may impede a
proper and effective adoption of the IPSAS (Grossi & Steccolini,
2015; Lapsley, Mussari, & Paulsson, 2009).
Brusca et al. (2015) compared the government accounting systems
in 14 European countries and showed that five countries (i.e., Austria,
France, Portugal, Spain, and Switzerland) already started or are going
to start a reform process to move towards IPSAS. Research revealed
that even if there has been an important global move to IPSAS accrual
accounting (Christiaens, Vanhee, ManesRossi, Aversano, & van
Cauwenberge, 2015), there still remains a level of reluctance, mainly
in central governments in continental as well as in Nordic countries
(Aggestam Pontoppidan & Brusca, 2016; Ekonomistyrninsverket
Received: 4 December 2016 Revised: 8 December 2017 Accepted: 11 December 2017
DOI: 10.1002/pad.1819
Public Admin Dev. 2018;38:3949. Copyright © 2018 John Wiley & Sons, 39

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