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University of Wollongong Thesis Collections

University of Wollongong Thesis Collection

University of Wollongong

Year 

The role of accounting systems in decision making, planning and control in a developing country: the case of Libya

Bubaker Shareia

University of Wollongong

Shareia, Bubaker, The role of accounting systems in decision making, planning and control in a developing country: the case of Libya, PhD thesis, School of Accounting and Finance, University of Wollongong, 2006. http://ro.uow.edu.au/theses/240

This paper is posted at Research Online.

http://ro.uow.edu.au/theses/240

The Role of Accounting Systems in Decision Making, Planning

and Control in a Developing Country: The Case of Libya

A thesis submitted in fulfilment of the requirements for the award of the degree

Doctor of Philosophy

from

University of Wollongong

by

Bubaker F. Shareia

BA in Accounting from University of Garyounis, Benghazi,Libya MA in Accounting from University of Garyounis, Benghazi,Libya

School of Accounting and Finance

November 2006

CERTIFICATION

I, Bubaker F. Shareia, declare that this thesis, submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy, in the School of Accounting and Finance, University of Wollongong, is wholly my own work unless otherwise referenced or acknowledged. The document has not been submitted for qualifications at any other academic institution.

Signature

Bubaker F. Shareia

3 November 2006

ii

ACKNOWLEDGEMENT

First and foremost, thanks are indeed due to Allah Almighty; worthy of all praise, without whose help none of this study would have been successfully completed. I would like to acknowledge my indebtedness to many people for their contribution and support in undertaking this study. I am profoundly grateful to my supervisor, Dr Helen Irvine for her continued interest, support and advice throughout the writing of this thesis, and for the effort and constructive supervision she has provided. I owe an immeasurable debt, and it is impossible to convey fully the extent of her patience, guidance and encouragement throughout the preparation of my thesis. I also wish to thank my previous supervisor, Professor Warwick Funnell, for his support and advice which have been a great help. His belief that I could do this has been a great encouragement. Without the guidance of these two supervisors this study would probably never have come to completion. I am also very grateful to the Accounting Department, Faculty of Economics at Garyounis University for providing the chance and support to undertake my study in Australia. I am thankful to Mrs Kim Draisma, Senior Lecturer at Learning Development Centre for the considerable efforts she exerted in editing and proofreading the earlier drafts and final draft of this thesis. She was always helpful, understanding, and did an excellent job. I am also grateful to the School of Accounting and Finance at the University of Wollongong for giving me the opportunity to attend many conferences during my study. My gratitude is also due to many people in Libya, especially employees at the Industry Secretariat and General Company for Pipelines for their patient co-operation and participation in the study. To my wife, Fathia, I express my deepest and sincerest gratitude for her help, support, patience, understanding and encouragement during the entire PhD program. She shared with me many moments of frustration, disappointment, and rejoicing. Without her support, this study could have never been possible. My daughters, Dania, Salma and little Sara provided me with all the moral support I needed for completing my studies in Australia. To them I am greatly indebted because without their support, the completion of this thesis would not have been possible.

To my brother, sisters and my parents, I owe a lot. They always showed great interest in my education and encouraged me at all times to get the best education possible. I wish them a happy and long life.

iii

ABSTRACT

This study examines the present and potential role of accounting information systems in meeting the development needs of developing countries, with a special focus on Libya and its unique legal, economic, religious, political and social context.

A contextualised study, it uses the economic development Theory of

Globalisation in order to interpret the data, with particular emphasis on social and cultural factors determine economic condition, communication and its significance in global world and greater technological unification, including globalised accounting. Within the Libyan context, an ideographic methodology

is used to develop two case studies. One organisation is examined as a provider

of information (General Company for Pipelines), and another, the Industry Secretariat, as a user/ stakeholder organisation. A variety of data collection

methods is used, including semi-structured interviews, observations, a small structured questionnaire and document analysis in order to make data triangulation possible.

Libya is a developing country with significant differences from developed

countries, including the way it makes use of accounting information. At present the accounting profession does not play a vital role in the economic development of the country and current accounting practices are based mainly

on government legislation rather than planning and decision-making. This

study illustrates the possibility, and even the necessity, for accounting to play a

significant role in the development of Libya and other developing countries.

Whilst this study demonstrates the importance of an awareness of cultural context in the role of accounting systems, it has focused only on one country, Libya, and two organisations within that country. Consequently, even though developing countries have many similarities, the generalisibility of this study is limited. Wider research of other contexts within Libya and beyond is needed to illuminate further the influence of social and cultural factors, communication and greater technological unification on the practice of accounting. It would be useful to replicate the study in other organisations within Libya and in other

developing countries. The use of an economic development theory, while revelatory at one level, limits the interpretation of data. A different theoretical approach, or different research methods, for example, a larger style of survey or

a different kind of qualitative study, could provide different or additional insights.

This study helps to increase awareness of the role of accounting and its potential contribution to economic development at the macro and micro levels and is a starting point for making a difference in developing countries. It

iv

provides a contribution to practical knowledge of the role of accounting in developing countries with special reference to Libya, by identifying issues in the Libyan environment, acknowledging the present of powerful global influences, and pointing the way forward to use accounting in a more significant way.

Most previous research in this area has focussed on the suitability of accounting systems in meeting development needs, with little attention being paid to addressing how these systems can be made more useful in decision-making, planning and control. This study acknowledges that the challenge for developing countries, such as Libya, in adopting globalised accounting systems, is to adapt them successfully to their own regulatory, legal, political, cultural and religious setting. This has to be accomplished while still achieving the production and effective use of timely, relevant and accurate accounting information in order to serve the country’s development needs. An assessment of the factors influencing the development and use of accounting systems in developing countries such as Libya is a necessary starting point for achieving these goals. This study provides such an assessment.

Key words: accounting systems, Developing Countries, Qualitative case study, Libya, Globalisation Theory.

v

TABLE OF CONTENTS

CERTIFICATION

ii

ACKNOWLEDGEMENT

iii

ABSTRACT

iv

TABLE OF CONTENTS

vi

LIST OF FIGURES

xi

LIST OF TABLES

xii

Part I- Methodological and Accounting Foundations

1

Chapter 1

The Rationale And Purpose Of The Study

2

1.1 Introduction

Chapter 2

2

1.2 The Study’s Aims and Objectives

3

1.3 Accounting in Libya, a Developing Country

6

1.4 The Structure of the Study

12

Research Methodology

18

2.1 Introduction

18

2.2 Qualitative Research Methods

18

2.2.1 A Case for Qualitative Research Method

19

2.2.2 Case Studies

25

2.2.3 Use of Theory in Qualitative Research

27

2.3

The Conduct of the Studies

32

2.3.1 Data

collection from IS

36

2.3.2 Data Collection from GCP

37

2.3.3 Data

Analysis

42

2.4 Producing Generalisations

Chapter 3

43

2.5 Drawing Conclusions

44

Theories Of Development

47

3.1 Introduction

47

3.2 Three Theories of Economic Development

48

3.2.1 Modernisation Theory

49

3.2.2 Dependency Theory

56

3.2.3 World Systems Theory

59

3.3

Globalisation Theory

62

vi

3.3.1 Globalisation Theory Defined

3.3.8

3.4

3.5

3.6

Chapter 4

62

3.3.2 Background

64

3.3.3 Features of Globalisation

66

3.3.4 Globalisation and Culture

69

3.3.5 Globalisation and Communication

70

3.3.6 Globalisation and Unity (technology and accounting)

71

3.3.7 Effects of Globalisation

73

A critique of Globalisation

75

Globalisation and Other Theories of Development

78

Integrating Accounting into a Global Economic Development Framework

82

Summary

84

The Role Of Accounting Systems In Developing Countries

87

4.1 Introduction

87

4.2 The Characteristics of Developing Countries

88

4.3 Accounting and Environmental Factors

89

4.3.1 Economic Factors

91

4.3.2 Legal and Political Factors

93

4.4 Adoption of Accounting Systems from Developed Countries

94

4.5 Problems in the Development of Accounting Systems in Developing Countries 96

4.6 The Role of Accounting Systems in Meeting Development Needs

98

4.7 A Survey of Studies on the Role of Accounting in Developing Countries

101

4.7.1 Theoretical Studies

108

4.7.2 Empirical

Studies

110

4.8

Accounting Development Patterns

113

4.8.1 The Macroeconomic Pattern

114

4.8.2 The Microeconomic Pattern

115

4.8.3 Accounting as an Independent Discipline

116

4.8.4 The Uniform Accounting Pattern

116

4.9 Regulations

117

4.10 Summary

118

Part II- The Libyan Context

120

Chapter 5

The Political And Social Context Of Libya

121

5.1 Introduction

121

5.2 Recent History of Libya

122

5.3 Arab Socialism

127

vii

5.4

Libya’s Political System

129

5.5 The Structure of the Libyan Government

132

5.6 Libyan Economy

136

5.7 Social and Economic Development Plans

140

5.7.1 The Period of Setting Plans (1973- 1985)

141

5.7.2 The Action Period with No Plans (1986-2003)

144

5.8 Role of the Government in Libya’s Economic Development

147

5.9 Lockerbie Crisis and its Impact on the Economy of Libya

152

5.10 Social Obstacles in Libya

154

5.11 The Impact of Legal Factors

159

5.11.1 Libyan Commercial Law

159

5.11.2 The Financial System Law

163

5.11.3 Income Tax Law

164

5.12 The Impact of Environmental Factors on the Plans and Objectives of the IS

Chapter 6

166

5.13 Summary

168

The Current Role Of Accounting Information Systems In Libya

171

6.1 Introduction

171

6.2 The Nature and Role of Information

172

6.3 The Significance of Accounting Information, and How It Can Be Developed to

Serve Economic Development

173

6.4 The Importance of Accounting Information in the Development Process

177

6.5 Accounting and National Economic Planning

182

6.6 Relevance of Western Accounting Information Systems to Economic

Development

185

6.7 Accountants, Economists and Economic Development

187

6.8 The Accounting Profession in Libya

189

6.8.1 Libyan Certified and Public Accountants Union

192

6.8.2 Accounting Education

195

6.9 Accounting Education and Academic Research

195

6.10 Summary

202

Part III- Case Study- Accounting in Practice

204

Chapter 7

The Use Of Accounting Information: The Case Of The Industry Secretariat205

7.1 Introduction

205

7.2 Background to the Industry Sector in Libya

206

7.3 The IS Management

207

viii

7.4

The IS’s Companies and Institutions

213

7.5

IS Objectives and Plans

218

7.5.1 The Policies and Strategies of Industry in Libya

218

7.5.2 Evaluation of Industry Sector Plans and Objectives

220

7.5.3 Investment Growth within the Industry Sector

224

7.6 Data Analysis: The Structural Change of IS

229

7.7 Summary

240

Chapter 8 The Production Of Accounting Information: The Case Of The General Company For Pipelines

242

8.1 Introduction

242

8.2 GCP Background

243

8.3 Management of the GCP

246

8.4 The GCP Financial System

251

8.5 The Role of Accounting Systems in GCP: Qualitative Analysis

253

8.6 The Role of GCP’s Accounting Systems in fulfilling development needs:

Quantitative Analysis

258

8.7

Summary

260

Chapter 9

Discussion And Conclusions

262

9.1 Introduction

262

9.2 Economic Development Theory

265

9.3 The Present Role of Accounting in Libya

268

9.3.1 State Authorities

268

9.3.2 Development Plans at Secretariat Level

269

9.3.3 Standards of Planning at Organisational Level

270

9.3.4 Views of Providers of Information

272

9.3.5 Views of Users of Information

273

9.3.6 Suitability of Accounting Information

274

9.4

The Potential Role of Accounting Systems

275

9.4.1 Training

275

9.4.2 Communication Technology

276

9.4.3 Cultural Issues

278

9.5 The Contributions of this Study

280

9.6 Limitations of the Study

282

9.7 Further Research

284

References

287

ix

Appendix I.

The GCP questionnaire

303

Appendix II.

The GCP Interview Schedule

307

Appendix III.

The IS Interview Schedule

308

Appendix IV.

Fieldwork Plan

309

Appendix V.

List Of Interviewees, Identifying Position In The IS And GCP

310

Appendix VI.

Final Approval

311

x

LIST OF FIGURES

Figure 1-1 The Present and Potential Role of Accounting Systems in the Libyan Context

5

Figure 2-1 Four Paradigms for The Analysis of Social Theory 30 Figure 2-2 The Process of Data Collection, Organisation and Analysis 45

Figure 5-1 The Authority of the People in Libya

131

Figure 6-1 The Role of Accounting Information in Economic Development

177

Figure 6-2 The Importance of Accounting Information in Specific Development

Decisions

178

Figure 7-1 The IS's Organisation Chart

212

Figure 8-1 GCP’S Performance from 1993 to 2003

246

Figure 8-2 Financial Affairs of GCP

249

Figure 8-3 The GCP's Organisation Chart

250

Figure 8-4 GCP Information flows

251

Figure 9-1 The Interaction between the Role of Accounting Systems and Libyan

Environmental Factors

xi

263

LIST OF TABLES

13

Table 2-1 Some Differences Between Quantitative and Qualitative Research 20

Table 3-1 Comparison between four main Theories of Development 54

Table 1-1 Summary of the Structure of the Study

Table 3-2 Major Aspects of Globalisation

84

Table 4-1 Summary of Studies of the Role of Accounting in Developing Countries

102

Table 5-1 Values of indices for Arab countries, Great Britain and the US (with rank

numbers)

155

Table 5-2 Comparison between Old and New Libyan Income Tax Law

165

Table 7-1 The IS Companies and their Ownership Structure

215

Table 7-2 Actual Expenditure and Investment Allocations for IS 1969- 2003 225 Table 7-3 The Share of the Industrial Sector in Gross Domestic Product in Libya 1970-

227

Table 7-4 The Structural Change of the Industry Sector Secretariats 230

Table 8-1 GCP Performance from 1993 to 2003

245

2003

xii

PART I- METHODOLOGICAL AND

ACCOUNTING FOUNDATIONS

1

Chapter 1: The Rationale and Purpose of the Study

CHAPTER 1

THE RATIONALE AND PURPOSE

OF THE STUDY

1.1

Introduction

Economic development in a developing country is based on a successful and

monitored planning process (Belkaoui 1994, p. 69). A well-established planning

process is mainly dependent upon the availability of timely and reliable micro

and macro information for measuring, allocating, utilizing and controlling

economic activities and economic resources. The absence of such information

makes the achievement of successful economic development difficult, if not

impossible, in a developing country like Libya (Bakar and Russell 2003, p. 202).

Accounting can play a vital role in the provision of such information (Samuels

1990, p. 67; Kieso and Weygandt 1995, p. 2). Furthermore, accountability for

economic activities through the preparation of relevant accounting reports will

give reassurance to both the Libyan state and to foreign investors. In the light of

the above discussion, it seems reasonable to believe that accounting objectives

and

practices

in

Libya

have

the

potential

to

affect

Libya’s

economic

development. Thus, the identification and resolution of accounting objectives

and problems of accounting practice will increase Libyan awareness of the

strengths and weaknesses of its accounting systems and will be useful for the

2

Chapter 1: The Rationale and Purpose of the Study

meeting of Libyan economic development needs.

Several researchers (Bait El-Mal et al. 1973; El-Sharif 1978; Kilani 1988; Bakar

1998) have provided information on the status of accounting systems in Libya.

However, the focus of these researchers has generally been a description of

those

accounting

systems

and

not

an

identification

of

the

cultural

and

institutional individuality of the country, the resultant problems faced in

developing accounting systems or the strategies available to resolve these

problems. For instance, Kilani (1988, p. 229) wrote that “accounting practices of

Libyan public enterprises have been highly influenced by accounting practices

in the U.K. and U.S.”. He argued (Kilani 1988, p. 229) that the accounting

system

in

Libya

had

emanated

from

the

U.K.

and

the

U.S.

and

was

unquestioned and uncritiqued, with no attention given to its potential to

advance the particular economic interests of Libya.

1.2 The Study’s Aims and Objectives

The principal aim of this study is to offer an informed understanding of the role

of accounting information systems at present and their potential role in the

future in meeting the development needs of Libya. Thus its aim is to make a

contribution to the development of accounting systems in Libya, specifically

focusing on accounting systems in the public sector, in order to assist the

ongoing economic development of the country.

3

Chapter 1: The Rationale and Purpose of the Study

This study achieves this aim by answering the following research questions:

1. How significant are AIS in developing countries in a global economy?

2. What role do AIS play in developing countries at present?

3. How have Libya’s legal, economic, political, social and cultural systems

shaped its development?

4. What is the present role of AIS in assisting Libya’s development needs?

5. How could AIS assist Libya in its economic development in the future?

These questions will be examined within the context of two case studies of

organisations operating within Libya’s Industrial Sector. The first, the Industrial

Secretariat (IS) is a government body responsible for oversight of all Libyan

industrial companies. The second, General Company for Pipelines (GCP) is one

of those industrial companies. By focusing on these two different, but inter-

related

organisations,

insights

will

be

gained

about

how

information

is

provided (in the case of GCP) and how it is used (in the case if IS).

Figure

1-1

illustrates

these

development

environmental

aims

and

context.

their

interaction

As can

be

seen

within

the

Libyan

from

the

diagram,

cultural, social, political, religious, economic and legal aspects of the Libyan

environment have a profound effect on Libyan development policy, its national

information systems (NIS) and its industrial sector. All of these aspects interact

in

a

globalised

economy

being

influenced

4

by

external,

global

factors.

Chapter 1: The Rationale and Purpose of the Study

Accounting information systems (AIS) are integral to these functions, both

affecting and being affected by factors internal and external to the Libyan

context.

Figure 1-1 The Present and Potential Role of Accounting Systems in the Libyan Context

Potential Role of Accounting Systems in the Libyan Context This chapter first provides a brief introduction

This

chapter

first

provides

a

brief

introduction

to

the

present

state

of

accounting in Libya. It then describes how the study was conducted, identifying

this study as qualitative research, exploring what is distinctive about qualitative

5

Chapter 1: The Rationale and Purpose of the Study

research, and in particular, a case study. Data collection methods are then

outlined, as are the role of theory, issues of generalisability and the drawing of

conclusions. The chapter concludes with an overview of the structure of the

thesis.

1.3 Accounting in Libya, a Developing Country

Several studies have observed that in developing countries relatively little use is

made of accounting information as an aid to managerial decision-making and

control (Jones and Sefiane 1992, p. 71). For instance, Seiler (1966) noted that the

internal accounting systems of most companies in such countries provided

inadequate assistance to management and that

this had adverse consequences

for the economies of the countries concerned.

In a number of the less developed countries, information systems which provide reliable financial data are few in number …. Each time a production, pricing or investment decision is made without adequate knowledge of its consequences, the probability of misdirected efforts wasted resources and economic loss is increased (Seiler 1966, p. 653).

Bengharbia (1989, p. 125) claimed that none of the studies on the accounting

profession in Libya reported the use of accounting information in decision-

making, planning and control. Thus accounting and auditing, as a profession,

still do not play a vital role in the economic development of Libya. Abdalaziz’s

(1992, p. 1) study of accounting information in Libya found that there was no

6

Chapter 1: The Rationale and Purpose of the Study

decision-making benefit being derived from the accounting information created

by accounting systems in the public industrial sector. The study focused on

companies in the public sector in Libya, all of which were supervised by the

Libyan government. Its finding revealed that although accounting reports were

prepared by these enterprises, they were orientated towards the requirements

of external agencies and played little,

if

any, part in either

planning or

operational decision-making and control at an organisational level. The study

did not investigate the reasons for the phenomenon that there were no decision-

making benefits being derived from accounting information in the industrial

sector, even though the information that was revealed had significance for

organizational decision-making and the economic future of the country. This

study addresses the reasons why this is the case, taking into consideration the

Libyan context in which accounting is practised.

There are some characteristics that make Libya different from other developing

countries. The term “developing” is not used in the strict sense of the word, but

rather reflects Libya’s emergence into the global economy. Libya has oil

reserves yet a small population of only 5.5 million (Libya State 2006b). As such,

it has some resources to call upon in implementing accounting systems. Many

developing

countries

were

previously

colonized,

and

still

carry

a

strong

influence

from

their

colonizers,

including

their

accounting

systems,

professional training and education. Although Libya was previously colonized

7

Chapter 1: The Rationale and Purpose of the Study

by Italy, little Italian influence is discernible now because of the continuation of

conflict until the end of World War II. After this, Libya remained under the

supervision of the United Nations until 1951, when it became independent.

Since

then,

Libya

has

had

a

planned

economy,

unlike

most

developing

countries, with its accounting systems reflecting compliance with government

requirements rather than the measurement of profit.

Further, Libya, as a developing country, has special characteristics that differ

significantly from those of developed countries,

in particular its religion,

culture and economic conditions (see Figure 1-1). Most importantly, Islam, the

dominant religion of Libya, does not accept the accrual or payment of interest

(Riba) nor does it involve itself with economic activities (Taheri 2000, p. 1).

Whatever the precise scope of interest, in the Hadith 1 the prophet Muhammad

condemns the one who takes it, the one who pays it, the one who writes the

agreement for it and the witnesses to the agreement. It is also clear that the

Qur’an 2 requires Riba to be given up in all its forms and in its entirety: “O ye

who believe! Fear Allah, and give up what remains of your demand for usury,

if you are indeed believers. If you do it not, Take notice of war from Allah and

His Messenger: But if you repent Ye shall have your capital sums: Deal not

1 The Sunnah (Hadith) reflects what Prophet Mohammad (pbuh) said, did, and agreed to as preserved by his companions (Zaid 2000, p. 75).

2

The Qur'an (Arabic: ن ا al-qur'ān, literally "the recitation"; also called Al Qur'ān Al Karīm or "The Noble Qur'an"; or transliterated Quran, Koran, and less commonly Alcoran) is the holy book of Islam, the culmination of God's revelation to mankind, revealed to Muhammad, the final prophet, over a period of 23 years through the angel Jibril (Gabriel).

8

Chapter 1: The Rationale and Purpose of the Study

unjustly, And ye shall not Be dealt with unjustly” (Qur'an 2: 278 to 279; The

Presidency of Islamic Research 1992, p. 127-128).

A heated debate is now occurring within the world of Islamic finance because,

in practice, Islamic financing has come to rely for its legal form much more

heavily upon contracts of exchange than contracts of investment 3 . For this

reason, the state has a responsibility to create a suitable environment to

implement Shari’ah Islami’iah (Islamic Teaching) in society.

This is acceptable

for Libyan citizens because the legal system is intertwined with religious law.

Also, the influence of religion upon accounting is not an issue that has been

explored to any great extent in the conventional literature 4 , although it is easy

to see how the two might be connected in the Libyan context. Traditionally,

religion has had a role in shaping and enforcing ethical behaviour such as

truthfulness, honesty, and justice. A community in which such values are

paramount may be marked by a high degree of trust in business dealings and

financial affairs, creating a distinct culture.

Culture has been defined in a variety of ways. Gray (1988, p. 14) determined

four cultural hypotheses based on the relationship between identified cultural

characteristics

and

the

development

of

accounting

systems.

These

were

professionalism, uniformity, conservatism and secrecy. Perera

(1989b, p. 43)

3 With a contract of exchange both parties receive a countervalue. With a contract of investment assets (or effort) are invested into a project on a profit-sharing basis (Diwany 2003, p. 145).

4 See for example, Mohammed’s (2003) paper on "Institutionalization and Promotion of Saving Habits through Bai-Muajjal Mode of Financing".

9

Chapter 1: The Rationale and Purpose of the Study

argued that culture is usually viewed as an expression of norms, values and

customs that show distinctive behavioral characteristics. Culture has been

defined by Hofstede (1994, p. 5) as the collective programming of the mind,

which distinguishes the members of one group from another and governs how

individuals perceive their responsibilities and carry out their duties. Given the

pervasive nature of cultural factors, culture inevitably influences accounting, as

does religion, if only because religion affects cultural values (Hamid et al. 1993,

p. 132).

Another important issue is that Libya, a centrally planned economy, has an

Islamic

accounting

accounting

model

model,

based

is

based

on

on

macroeconomics,

while

the

microeconomics

(Taheri

2000,

p.

western

8).

A

macroeconomic model emanates from a central holistic plan, whose focus is on

national objectives. In a microeconomic model, the focus is on the enterprise as

an economic entity that affects the economy through its operations in the

market.

There

are

many

other

countries

whose

economy

is

based

on

macroeconomics concerns but opinions about an Islamic economy, even among

Muslim scholars, vary. Therefore, general macroeconomic issues are not the

only consideration in the development of an Islamic accounting model, which

must incorporate Shari’ah Islami’a, or Islamic laws.

In addition, economic

conditions in Libya are quite distinct because Libya depends on oil as a major

source of income and this source is non-renewable and being depleted. Much of

10

Chapter 1: The Rationale and Purpose of the Study

the economic decision-making related to the industrial sector has been made on

an ad hoc political basis rather than an accounting information basis. Due to

these

special

characteristics,

Libya

has

made

little

use

of

accounting

information.

Current

accounting

practices

in

Libya

are

based

mainly

on

government

legislation. For example, by government requirement every industrial company

should prepare a budget for the following year. This procedure is necessary to

gain access to foreign currency in order to import raw materials from another

country. All companies, therefore, prepare a budget statement, not for the

purposes of accounting information, but to provide a justification document to

obtain foreign currency. In addition, according to the report of the General

People’s Committee for Auditing and Control, which is responsible for auditing

the public sector, most companies in the public sector, if not all, have delayed

for several years the preparation of financial statements (Shareia 2004).

Publicly available information is limited. Like many developing countries,

Libya

is

moving

towards

privatisation

of

its

industrial

sector

and

the

establishment a stock market. A Code of resolution 56/2006 was passed by

Libya’s Central Bank in June 2006, indicating that a Libyan stock exchange

would be commenced soon, this has not yet commenced. This resolution was in

response to World Bank calls for privatization

(Central Bank of Libya 2006).

There is an encouragement to countries to move from a public sector to a

11

Chapter 1: The Rationale and Purpose of the Study

private sector resolution of economic problems (Libya State 2006a).

This creates difficulties for efficiency when accounting information is required

at each stage of decision-making. Moreover, this situation makes the private

sector very small and less important than the public sector, which the Libyan

government has supported for the last three decades. The Libyan government

during this time has invested in several business enterprises in major industrial

sectors of the economy, which since their inception have been entrusted with

ensuring that professional management is operating efficiently and profitably

with the aim that these enterprises will eventually become self-supporting.

However, more than twenty years after the establishment of these enterprises

none is self-supporting and most are operating at substantial losses, supported

by huge government subsidies. In 2003, the government mooted the sale of

these enterprises and raised for discussion a move to privatization as a solution

to the problem (General People's Congress 2003). The need for useful and

timely accounting information has thus been heightened.

The next section of this chapter describes the way in which this qualitative

study was conducted.

1.4 The Structure of the Study

A summary of this study is presented in Table 1-2, which identifies the major

purpose of each part of the thesis, and of each chapter.

12

Chapter 1: The Rationale and Purpose of the Study

Table 1-1 Summary of the Structure of the Study

Part

Chapter

Chapter purpose

Research questions addressed

PART I Methodological and Accounting Foundation

One

To introduce the concept of the role of AIS in developing countries. To introduce Libya as the subject of the study. To identify IS and GCP as case studies. To introduce the use of Globalisation Theory.

Research questions defined.

Two

To establish the applicability of qualitative case study research and outline the way the study was conducted.

Setting the parameters within which the study is conducted.

Three

To introduce alternative Theories of Development. To assess their relative applicability to the study of AIS in developing countries. To select the theory most suitable for this study

What is the significance of AIS in developing countries in a global economy? (Question 1)

 

Four

To define “developing countries” and explore their economic and non-economic characteristics. To discuss the influence of cultural factors on accounting.

What role do AIS play in developing countries at present? (Question 2).

 

Five

To explore the historical, political, economic, legal, religious and cultural background of Libya.

How have Libya’s legal, economic, political, social, and cultural systems shaped its development? (Question

PART II The Libyan Context

3).

Six

To discuss the meaning of information. To identify the objectives of accounting systems in Liberal Market Economies (LMEs). To identify the role of the accounting profession and accounting education in Libya’s context.

What is the present role of AIS in assisting Libya’s development needs? (Question 4).

13

Chapter 1: The Rationale and Purpose of the Study

PART III Libyan Case Studies and Conclusions

Seven

To present data collected from the Industry Secretariat (IS). To assess the way in which accounting information is used and its contribution to Libya’s development.

What is the present role of AIS in assisting Libya’s development needs? (Question 4).

Eight

To present data collected from the General Company for Pipelines (GCP). To assess the way in which accounting information is used by GCP and IS.

What is the present role of AIS in assisting Libya’s development needs? (Question 4).

Nine

To provide an assessment of the present role of AIS in Libya. To outline the potential role of AIS in Libya. To reinforce the contributions and limitations of this study. To suggest possibilities for further research.

How could AIS assist Libya in its economic development in the future? (Question 5).

The

first

part

of this thesis provides the

methodological

and

accounting

foundation of the study, and is presented in Chapters One, Two, Three, and

four as shown in Table 1-1. Chapter One, the introduction, has identified the

research issue at the heart of this thesis and has provided an introduction to the

study's main concern, the role of accounting information systems in Libya’s

economic development. Chapter Two presents the research method. It outlines

the method conducting fieldwork and collecting empirical data which involves

choosing and designing the qualitative research methodology and the specific

methods. The study's purpose, methodology and method(s) are the focus of the

chapter

Two.

The

differences

between

14

qualitative

and

quantitative

Chapter 1: The Rationale and Purpose of the Study

methodologies are explored. The study's methodology and method are then

discussed. Case study is adopted as the study's methodology and method

respectively. Two organisations, the General Company for Pipelines (GCP) and

the Industry Secretariat (IS), were chosen to represent two case studies. The

chapter

explains how data

from

these two

cases and

other sources was

collected. Interviews and documentary analysis were the main data collection

instruments. The data collection process and the fieldwork plan are outlined in

this chapter.

Chapter Three explores the methodological choice made for achieving the

research objectives, and further establishes the theoretical assumptions of this

thesis, including a more detailed explanation of development theory and the

choice of a theory appropriate for this study. Consequently, the discussion in

this chapter is mainly concerned with theories of development, which provide

the theoretical basis for this thesis. This chapter also provides discussion of the

importance given to accounting in development theories. Chapter Four explores

the role of accounting systems in developing countries and the influence of

developed countries' accounting systems on this role. The chapter begins by

defining what is meant by developing countries and explores their economic

and non-economic characteristics. The influence of culture on accounting in

developing countries, and hence the role of accounting, is discussed with

reference to Hofstede's (1984a; 1984b) culture dimensions and Gray's (1988)

15

Chapter 1: The Rationale and Purpose of the Study

accounting values.

The second part of the thesis includes Chapters Five and Six, and addresses the

Libyan context. Chapter Five provides a historical, political, economic and

cultural background of Libya. This background is important as it provides a

contextual framework, informed by Globalisation Theory, within which the

observations of this study are to be interpreted and understood. The chapter

explores accounting and economic development in Libya and the role of

accounting systems in these developments. Chapter Six focuses on the role of

accounting information systems in development in liberal market economies,

by discussing the meanings of information and the objectives of the accounting

systems. The importance of accounting information in the decision-making

process

is

also

explored,

and

the

influences

of

market

mechanisms

and

regulation on the role of accounting are explained, including their effect on the

Libyan context.

The third part of the thesis is divided into three chapters. The data collected

from the IS and the GCP are presented as two case studies in Chapter Seven

and Chapter Eight, respectively. These two chapters describe the data collected

from each case study and apply Globalisation Theory as a lens to examine the

role of accounting systems in Libya as a developing country. Chapter Nine is

devoted to drawing together these observations, reinforcing the contributions

of this research, its limitations, and potential for future study, and fulfilling the

16

Chapter 1: The Rationale and Purpose of the Study

purpose of the study, which is to identify:

the importance of accounting systems in developing countries in a global

economy;

the present role of accounting systems in decision-making, planning and

control in the Libyan context; and

the

potential

role

of accounting

in

Libya

to

enhance

its

economic

development, given its legal, economic, political and social, cultural

dynamics.

17

Chapter 2: Research Methodology

CHAPTER 2

2.1 Introduction

RESEARCH METHODOLOGY

The main aim of this chapter is to set the parameters within which the study is

to be conducted, specifically justifying the use of qualitative research, informed

by theory. This chapter argues that the social world is subjective in nature and

may be accessed through the interpretive approach provided by the people

involved in the context of the study. The chapter defines and distinguishes

between qualitative and quantitative research methodologies, explores Burrell

and Morgan's (1979) framework for social research, and presents the study's

adopted methodology and methods, with the rationale for these choices. The

data collection process and the fieldwork plan for the case studies in IS and

GCP are also outlined. The IS and other secretariats, such as Libya’s Economy

Secretariat and Planning and the Treasury Secretariat, are members of the

General People's Committee (See Chapter 5). The IS's responsibilities include

supervising industrial companies, one of which is GCP. IS has been chosen as a

user of information and GCP as a provider of information.

2.2 Qualitative Research Methods

A qualitative approach was adopted for this study, which was conducted over a

three year period. Qualitative research is a powerful method by which to

18

Chapter 2: Research Methodology

understand issues in social sciences.

2.2.1 A Case for Qualitative Research Method

Qualitative research is "an approach to the study of the social world which

seeks to describe and analyse the culture and behaviour of humans and their

groups from the point of view of those being studied" (Bryman 1995, p. 46).

Quantitative

researchers

have

tended

to

view

qualitative

research

as

an

exploratory way of conducting social investigations. They see it as a useful tool

at the preparatory stage of a research project (Bryman 1995, p. 94) and yet there

are significant differences between the two methodologies. Stake (1995, p. 37)

divided the differences between qualitative and quantitative methodologies

into three areas. The first was related to the distinction between explanation

and understanding as the purpose of the inquiry. Qualitative research, he

suggested,

was

concerned

mainly

with

understanding

the

complex

interrelationships between different variables, while quantitative researchers

were interested in explanation and control. The second area of divergence he

identified was related to the distinction between knowledge discovered and

knowledge

constructed.

Qualitative

researchers

believe

that

knowledge

is

constructed rather than discovered (Stake 1995, p. 99). Proponents of qualitative

research see this methodology as a useful tool to expose actors' meanings and

interpretations. The distinction between the personal and impersonal role for

the

researcher

was

the

third

major

19

difference

between

qualitative

and

Chapter 2: Research Methodology

quantitative studies highlighted by Stake (1995, p. 41). The personal influence of

researchers

on

the

research

setting

is

not

acknowledged

in

quantitative

research, but is recognised in qualitative research.

Several

authors (Creswell 1994; Bryman 1995; Neuman 2000, p. 20) have

provided a summary of the important dimensions on which qualitative and

quantitative research diverge. Table 1-1 summarises these differences according

to their view points.

Table 2-1 Some Differences Between Quantitative and Qualitative Research

The table shows that the relationship between the qualitative researcher and the

subject

is close

and

the

researcher

is seen

as

an

insider.

Bryman

(1995)

suggested that qualitative researchers can better view the world by getting close

to their subjects and becoming an insider within the research setting. In

20

Chapter 2: Research Methodology

contrast, the relationship between the quantitative researcher and the subject is

usually brief or non-existent, with the researcher seen as an outsider (Creswell

1994, p. 5; Bryman 1995, p. 94; Neuman 2000, p. 123).

With regards to the reality dimension, quantitative researchers tend to convey a

static view that exists independently of the researcher. It is based on the notion

that there is only one social reality. On the other hand, qualitative researchers

believe that social reality is constructed by the actor and can be changed.

Qualitative researchers try to preserve the multiple realities that may exist

(Cavana et al. 2001, p. 34; Creswell 2003, p. 18).

The role of theory and concepts within the two approaches is different. Theories

are the starting point for investigations within the quantitative approach

whereas developing or refining a theory is the concern of qualitative research

(Bryman 1995, p. 97). Qualitative data may suggest a theory to explain the

phenomena being studied, which can then be strengthened by quantitative

support (Eisenhardt 1989, p. 538).

Research methods adopted in quantitative

research tend to be more structured than those adopted in qualitative research.

Quantitative research is structured in the sense that sampling determination

and data collection instruments, for instance, are designed prior to the data

collection

process

(Bryman

1995;

Denzin

and

Lincoln

2003),

whereas

in

qualitative research project the subject being studied often evolves as the

21

Chapter 2: Research Methodology

research is undertaken.

In relation to research findings, a distinction is made between quantitative and

qualitative methodologies in terms of nomothetic and ideographic modes of

reasoning. The collection of large-scale quantitative data lends itself to a

nomothetic approach. While a qualitative study usually takes an ideographic

approach:

anomothetic approach seeks to establish general law-like findings which can be deemed to hold irrespective of time and place; an ideographic approach locates its findings in specific time-periods and locales (Bryman 1995, p. 100).

Thus understanding the reality of the practice of accounting objectives from the

participant’s perspective may better be achieved by collecting data through

ideographic methods. An ideographic approach is one where the researcher

obtains insights using techniques that take the researcher inside the subject of

interest,

for

example

via

personal

encounter

with

the

subject

and/or

involvement with the subject’s “everyday flow of life” (Burrell and Morgan

1979, p. 6). Since this study acknowledges the Libyan context, qualitative

methods are more appropriate to achieve its objectives, through a case study

approach.

There

are

many

valid

reasons for

doing

qualitative

research

rather

than

quantitative. The important one, and probably the most valid one, is the nature

22

Chapter 2: Research Methodology

of the research problem (Silverman 2006, p. 34). For example, research that

attempts to understand the meaning or nature of the role of accounting

information systems, with problems such as decision making, planning and

control and finding out what people are doing and thinking, can only be

conducted by using qualitative methods. Qualitative methods can be used to

explore substantive areas about which little is known, such as in Libya, or in a

situation in which much is already known, in order to gain a fresh and deeper

understanding. In addition, qualitative methods can be used to obtain intricate

details about phenomena such as beliefs, thought processes, and emotions that

are difficult to extract or learn about through more conventional research

methods (Strauss and Corbin 1998, p. 11). Qualitative researchers seek to make

sense of personal stories and the ways in which they intersect (Glesne and

Peshkin 1992, p. 1). Qualitative research is of specific relevance to the study of

social relations, owing to the pluralization of life worlds (Flick 2002, p. 2), and

hence is appropriate to this study, which investigates the role of AIS in meeting

the development needs of Libya.

Qualitative research is therefore most appropriate for this study of the Libyan

context. The accounting profession in Libya, for example, has a short historical

background (Kilani 1988). As a result, very little is known about its accounting

practices and the profession generally (Bakar and Russell 2003). Where studies

of Libyan accounting do exist (Bait-El-Mall et al., 1973; El-Sherif, 1978; Kilani

23

Chapter 2: Research Methodology

1988; Bakar, 1998),

accounting

system

they have mostly provided general descriptions of the

in

Libya,

not

the

problems

faced

by

the

accounting

profession nor the strategies available to resolve these problems (Bakar and

Russell 2003). Libya has funded many students to study overseas (Kilani 1988)

and whilst these students have undertaken many research projects, most have

focused on

research about other countries rather than

Libya, because of the

difficulties of the availability of data in Libya.

Access to data in Libya is

restricted,

and

governed

by

time-consuming

and

bureaucratic

rules.

The

opportunity to gain first hand knowledge of the way Libya’s accounting

systems work, can best be grasped by using a qualitative approach, with

interviews of people actually involved in accounting.

This study places an emphasis on a consistency between the purpose of

research and the theoretical, methodological and methodical choices. Thus, the

approach is mainly qualitatively based, and as such, relates to the interpretive

tradition. It seeks to collect data based on case studies, and to interpret that data

in the light of the economic development theory of globalisation. This is in

keeping

with

social

science

researchers

who

employ

qualitative

research

methods

and

who

espouse

an

approach

in

which

theory

and

empirical

investigation are interwoven (Silverman 1985).

24

Chapter 2: Research Methodology

2.2.2 Case Studies

Case studies include a variety of data collection methods including document

analysis and interviews, as well as the technique of data triangulation to

establish the validity of data. Data triangulation involves “using multiple

sources of evidence”(Yin 2003, p. 97). These are adopted in this study, for they

permit a greater understanding of the particularities of accounting objectives

and

development

needs

in

the

Libyan

research

setting

than

do

research

methods limited to surveys and questionnaires.

The

term

“case

study”

has

been

defined

as

"an

empirical

inquiry

that

investigates a contemporary phenomena within its real-life context; when

boundaries between phenomenon and context are not clearly evident; and in

which multiple sources of evidence are used" (Yin 2003, p. 13). A case study is

therefore contextualised, "a detailed investigation, often with data collected

over

a

period

of

time,

of

one

or

more

organisations,

or

groups

within

organisations, with a view to providing an analysis of the context and processes

involved in the phenomena under study" (Hartley 1994, pp. 208-9; Hartley 2004,

p. 26). Hartley (1994) further argued that a case study approach is not a method

but rather a research strategy. Eisenhardt (1989, p. 534) described a case study

as a research strategy which focuses on understanding the dynamics present

within single settings. The terms case study method and case study strategy

have been used interchangeably.

25

Chapter 2: Research Methodology

Stake (1995, p.3) distinguished three purposes of a case study. First, a case study

can be employed to understand and learn more about a particular case. This

type of case study is called an intrinsic case study. Secondly, a case study can

assist in understanding something through studying something else. The aim in

this case is to accomplish something other than understanding just a particular

case. This type of inquiry is called an instrumental case study. Finally, a collective

case study refers to conduct of a detailed investigation where more than one case

is chosen. Case studies can involve either a single or multiple cases. Yin (2003,

p. 3) distinguished between three types of case studies: descriptive, exploratory

and explanatory. Scapens (1990, p. 265) added illustrative and experimental

case studies. In undertaking case studies, different methods can be used in

collecting and analysing data. These methods may be either quantitative,

qualitative or a combination of both (Hartley 1994).

The selection of a case study relies on theoretical sampling as cases are chosen

for theoretical rather than statistical reasons. Cases may be chosen to replicate

previous

cases,

extend

emergent

theory,

or

to

fill

theoretical

categories

(Eisenhardt 1989, p. 537). Case study research will be used to explore and

understand

the

role

of

accounting

information

systems

and

relationships

between the Industry Secretariat (IS) and the General Company for Pipelines

(GCP) in Libya. These two organisations have been chosen since GCP is a

26

Chapter 2: Research Methodology

provider

of

information

and

IS

is

a

user

of

information 5 .

Thus

both

perspectives, the provision and use of accounting information, can be explored.

The current role of accounting systems was examined through the use of an

explanatory

qualitative

case

study,

a

most

effective

way

of

gaining

an

understanding of specific cases. The opposite side of this specificity, however, is

the difficulty of generalising the insights gained from the study. This will be

discussed further later in this chapter.

2.2.3 Use of Theory in Qualitative Research

The use of theory in qualitative research has been a problematic issue. In

quantitative research, the hypotheses and research questions are often based on

theories that the researcher seeks to test. In qualitative research, in contrast,

theory is often adapted or refined throughout the research process in an

attempt to link diverse and unrelated facts in logical way (Irvine and Gaffikin

2006, p. 134). Researchers will face many problems when they incorporate

theory

into

their

research,

for

instance,

clarifying

the

role

of

theory

in

qualitative case studies, the relationship between theory and data, and how to

apply theory in their research (Llewellyn 2003). Llewellyn (2003) identified five

different

levels

context-bound

of

theorizing:

metaphor,

theorizing

of

settings,

and

5 The IS owns 100 per cent of GCP’s capital.

27

differentiation,

conceptualization,

context-free

“grand”

theorizing.

Chapter 2: Research Methodology

According to the first level, peoples’ experience of the world is grounded in

metaphor. The use of metaphor is a way in which human beings make sense of

the world, by grounding their image of reality and experience in a familiar

picture (Llewellyn 2003, p. 668). Theories of differentiation highlight contrasts

in the study (Llewellyn 2003, p. 667). On this level, the researcher’s lens will

enable him or her to sift the qualitative data gathered into distinctive categories

that are set in opposition to each other. At the third level, concepts are theorised

by linking theory and structure to practice. The fourth level of theorising refers

to making sense of relationships between theory and data within a particular

context. It shows the setting for activity are important in understanding data.

Accounting as a human activity takes place within a social context, and

demonstrates the way social and organizational structures are intertwined.

Level five of theories according to Llewellyn (2003) refer to “grand” theory that

is theorisation by explaining impersonal, large scale and enduring aspects of

social life, at a society-wide level (Irvine and Deo 2006). This type of research is

concerned with ideas, philosophical underpinnings, or a meta-theory that

explains the world. Research outcomes are formed when a societal view is

projected onto the world scene.

In the present study, the third and fourth theoretical levels are applied to the

Libyan context by using an economic theory of development. The study argues

that there is a close connection between the environment of the country and its

28

Chapter 2: Research Methodology

accounting practices as represented in Figure 1-1.

In

any

study,

the

application

of

a

theory

to

accounting

represents

the

outworking of the researcher’s philosophical beliefs. Four paradigms have been

identified as being available to researchers studying a phenomenon. Burrell and

Morgan (1979) combined the objective-subjective and regulation-radical change

dimensions and produced a matrix defining four key sociological paradigms.

These four paradigms are labeled as functionalist (acknowledging an objective

reality

and

concerned

with

regulation),

interpretive

(seeing

reality

as

subjectively constructed and concerned with regulation), radical structuralist

(objectivist

and

concerned

with

radical

change)

and

radical

humanist

(subjectivist

and

concerned

with

radical

change).

These

paradigms

are

portrayed in Figure 1-2, and according to Burrell and Morgan (1979, p x), are

founded upon mutually exclusive views of the social world. Each stands in its

own right and generates its own distinctive analyses of social life.

The radical humanist paradigm is defined by its concern to develop a sociology

of radical change from a subjectivist standpoint. It emphasizes individual

perceptions and interpretation, it views the social world from a perspective

which

tends

to

be

nominalist,

anti-positivist,

voluntarist

and

ideographic

(Burrell and Morgan 1979, p. 32). The radical structuralist paradigm treats the

social

world

as

being

composed

of

external

objects

and

relationships

independent of any particular person. It approaches these general concerns

29

Chapter 2: Research Methodology

from

a

standpoint

which

tends

to

be

realist,

positivist,

determinist

and

nomothetic. Theorists located within this paradigm advocate a sociology of

radical change from an objectivist standpoint (Burrell and Morgan 1979, p. 34).

From a functionalist viewpoint, the social world is composed of relatively

concrete empirical phenomena which exist independently of particular human

beings.

Thus,

functionalists apply

the

methodologies used

in

the

natural

sciences to analyse the way accounting systems work. By doing this they

assume they are neutral, objective, and value-free observers of the role of

accounting systems under investigation (Burrell and Morgan 1979, p. 26).

Functionalists also accept power and political arrangements as given and so

consider the existing power structure as unproblematic. Their concern is to

search for workable solutions to practical problems which will help accountants

and

managers

achieve

better

alignments

organizational elements and forces.

of

these

systems

with

other

Figure 2-1 Four Paradigms for The Analysis of Social Theory

   

30

Chapter 2: Research Methodology

The interpretive paradigm was useful for this study because it produces rich

and deep understandings of how managers and employees in organizations

understand, think about, interact with, and use accounting information in

decision making, planning and control. The interpretive paradigm is informed

by a concern to understand the world as it is; that is, to understand the

fundamental nature of the social world at the level of subjective human

experience. The focus is an individual meaning and people’s perceptions of

reality rather than any independent reality that might exist external to human

perception. The social world is perceived as an emergent social process which is

created by the human individuals concerned (Burrell and Morgan 1979, p. 28).

According to the interpretivist paradigm the role of accounting systems does

not stem predominantly from social structures which exist independently from

accountants and managers, but is reflexively developed. This study takes an

interpretive approach at the level of collecting and studying data, but moves to

more

functionalist

systems.

approach

in

proposing

changes

in

Libya’s

accounting

To sum up this section, qualitative methods are often more useful for the study

of how language and meaning evolve and are modified, and therefore to study

how accounting meaning is socially generated and sustained. Indeed it is

because there are so many ways of conceptualising the role of accounting that a

certain degree of prior theorization,

in the

31

form of a theoretical lens, is

Chapter 2: Research Methodology

considered necessary, in order to limit the complexity and make sense of the

results. For the present study, theories of economic development have been

chosen as a theoretical lens, considered against a backdrop of accounting in

developing countries, public sector reform and state control. The study does not

intend to test or validate theory; rather it uses theory to assist in organizing

ideas and identifying themes, while remaining open to the possibility that new

theory may emerge from the data. The next section will discuss the way in

which the IS and GCP studies were conducted.

2.3 The Conduct of the Studies

Archives,

observations,

questionnaires

and

interviews

are

among

data

collection methods which may be adopted when undertaking case study

research (Eisenhardt 1989, p. 534). The benefit of using documents is to

corroborate and augment evidence from other sources (Yin 2003, p. 87). The use

of multiple sources of evidence in case studies allows an investigator to address

a broader range of historical, attitudinal, and behavioural issues. However, the

most important advantage presented by using multiple sources of evidence is

the development of converging lines of inquiry, a process of triangulation

mentioned in the earlier section of this chapter.

Gathering data by studying

documents follows the same line of thinking as observing or interviewing. The

potential usefulness of different documents should be estimated in advance and

32

Chapter 2: Research Methodology

time allocated so that it is judiciously spent (Stake 1995, p. 68).

Participant

observation

is

probably

the

collection

method

with

which

qualitative case study research is most closely associated (Bryman 1995, p. 46).

Through participant observation it is possible to describe what goes on, who or

what is involved, when and where things happen and how they occur (Stake

1995). Participant observation is especially appropriate for exploratory studies,

descriptive studies and studies aimed at providing a theoretical interpretation.

The main advantage of this method is that it enables the researcher to collect

first-hand data in a natural setting. Moreover, researchers can understand and

interpret the observed behaviour, attitude and situation more deeply than by

using only questionnaires or interviews.

However, one of the disadvantages of being an observer is the inability to

observe and record all actions in a setting. The main disadvantage is that

individuals

who

may

find

it

difficult

to

translate

the

events into

useful

information make most of the observations. Other problems are concerned with

ethics, confidentiality, objectivity, visibility and the impact of the researcher on

those being observed (Neuman 2000, p. 363). Observer bias may arise due to

different interpretations of an action, event or behaviour. Due to the above

limitations, time and cost constraints, participant observation were not adopted

as

the

main

data

collection

method

in

this

study.

Data

collection

was

accomplished through archival information, interviews, meeting attend and the

33

Chapter 2: Research Methodology

distribution of questionnaires.

Questionnaires

have

already

been

identified

as

a

technique

primarily

of

quantitative research. They allow the researcher to collect data from a large

sample. It is considered to be cheaper than other methods such as telephone

questionnaires

or

interviews.

However,

in

spite

of

the

advantages

of

questionnaires as a tool for data collection, there are some disadvantages of this

method, one of the main ones being the misinterpretation of questions by

participants. Low rates of response and unanswered questions are the most

common problems with posted questionnaires. Furthermore, questionnaires are

criticised for not allowing respondents to express freely their views due to the

limited and pre-determined answers of the questionnaires. Consequently while

the questionnaire method is not the main data collection method used for this

study, the use of questionnaires which are administered by the researcher to

interviewees in person has many advantages as a data collection method. For

this reason, a relatively small questionnaire was used to support the data

collected

using

the

major

data

collection

method

of

the

study

(that

is,

interviews),

and

was

administered

to

participants

within

the

GCP

(see

Appendix VI).

The interview method of data collection has three main features that distinguish

it from other methods: it is a highly flexible method; it can be used almost

anywhere; and it produces data of great depth (King 1994; King 2004; Van der

34

Chapter 2: Research Methodology

Velde et al. 2004). The interview has a wide variety of forms and a multiplicity

of uses. The danger of using this method is that researchers may feel that it is

too familiar, straightforward and even boring. If the goal of a qualitative

research

project

is

to

see

the

phenomena

from

the

perspective

of

the

interviewee, and to understand how and why he or she comes to have this

particular perspective, then an interview is a most useful and appropriate data-

gathering technique. The most common type of interviewing is an individual,

face-to-face verbal interchange, which can be structured, semi-structured or

unstructured.

Interviews were conducted because it is acknowledged that the interview is a

powerful method of data collection. It provides an opportunity to ask for

clarification if an answer to a questionnaire question is vague (Tashakkori and

Teddlie 1998). Interviewing was thus a vital source of data from employees

within the organisations. A key feature of the qualitative research interview

method is the nature of the relationship between the interviewer and the

interviewee. This view is based on seeing the interviewee as a participant in the

research, actively shaping the course of the interview rather than passively

responding to the interviewer’s pre-set questions (King 1994, p. 15; Jones and

Gratton 2003, p. 142).

There are several sources of bias or error arising from carrying out an interview.

Saunders et al (2003, p. 252) described three types of bias to be considered when

35

Chapter 2: Research Methodology

conducting interviews. These were interviewer bias, interviewee or response

bias and sample bias. Interviewer bias is related to the interviewer's comments,

tone or verbal behaviour during the interview that may affect the interviewee

response. Interviewee bias occurs when an interviewee gives biased answers

either to conceal some facts or to please the interviewer. Sample bias may occur

as a result of bias in the individuals or organisational participants who agree to

be interviewed. These may not have the information the researcher is looking

for to answer the research question(s) and to achieve the research objective(s).

2.3.1 Data collection from IS

Data were collected mainly through semi-structured interviews with senior

managers and officials within the IS (see Appendix V). Although gaining access

and obtaining data were difficult, social and personal relationships played an

important role in supporting the formal request to collect the data from the

research setting. The IS interviewees were all male, except one, and their place

on the IS organisation chart is shown in Figure 7-1. In addition to these seven

interviews

conducted

within

the

IS,

the

Director

of

Companies

and

the

Investment

Department

in

the

General

Board

for

Companies

and

Public

Economic Units Ownership were interviewed. This Board was a newly created

Board whose purpose was to evaluate all IS companies’ fitness for privatisation.

The interviews, which were held in July, August and September 2004, lasted

36

Chapter 2: Research Methodology

from forty-five to ninety minutes duration, and were sometimes conducted in

two stages. Using the tape recorder allows a researcher to concentrate fully on

the respective interviewees’ answers and thoroughly observe their non-verbal

behaviour. However, none of the seven interviewees agreed to their interviews

being tape-recorded. This was because of the sensitivity of the issues being

discussed. An outline of the main issues contained in the interviews was given

to interviewees prior to starting the interview (see Appendix III). Notes were

taken

during

interviews,

and

manual

analysis

of

the

interviews

was

undertaken, summarising the main points and issues raised.

The

researcher

was

given

access

to

review

some

IS

documents

such

as

productions

annual

reports

and

budgets.

This

data

was

reinforced

by

observations and informal discussions made in the IS context.

2.3.2 Data Collection from GCP

The researcher has relied primarily on interviewing a number of prominent

people from the Finance Department in the GCP and examining relevant

documents which are related to the role of data and financial information. A

total of fourteen interviews (see Appendix V and Figure 8-3) were conducted

within the GCP.

At the start of each interview, the researcher acquainted the interviewee with

guidelines that clarified the subject of the research (Stake 1995, p. 65; Jones and

37

Chapter 2: Research Methodology

Gratton 2003), and then sought permission to use a tape-recorder to record the

interview. The option was provided to have the details of the interview

recorded in writing. From the fourteen interviews conducted, only one person

agreed to the use of audio-taping, while all the rest refused (Shareia et al. 2005).

Some expressed the view that they would be more relaxed without the use of

audio-taping, and could provide more realistic answers to the questions. This

encouraged the researcher to set aside tape-recording in the interest of the main

objective of acquiring data and information (Stake 1995; Jones and Gratton

2003).

All participants except one were male, and the duration of the interviews

varied. The interview with the Director of Financial Affairs lasted five hours

and 10 minutes; the interview with the Internal Auditor lasted one hour and 15

minutes, and the remainder of the interviews lasted an average of ninety

minutes. The interviews were conducted during July, August and September

2004, and on some occasions the interviews with some of the people were

undertaken over two consecutive days, as in the case of the Production

Manager. This occurred when pre-organised schedules intervened. At the start

of each interview, the researcher asked participants a simple and conventional

question, to describe the nature of their job and its significance to the company

(King 1994; Jones and Gratton 2003; King 2004). The questions sought to

determine information about the nature of the relationship between GCP and

38

Chapter 2: Research Methodology

the

IS,

in the

past,

on

a

state

level, or in the present, on the Sha`biya

(Municipality) of Benghazi level. The questions also sought information on the

relationship with other bodies that required information, such as the Treasury

Secretariat, the Board of Inspection and Control, the Inland Revenue (The Tax

Office) and others (see Appendix II). The researcher also conducted discussions

with the workers in the company regarding many various measures relevant to

the subject of the study.

An

individually

administered

questionnaire

was

used

to

supplement

information

from

interviewees

in

GCP,

the

site

of

the

present

study.

Questionnaire forms were distributed to ascertain workers` views on the role of

accounting systems in the development plans in Libya. 28 questionnaire forms

(see Appendix I) were distributed in the GCP Finance Department to survey

accountants’ views on the role of the accounting system within the company in

strategic decision-making associated with development plans. 22 of those forms

were

returned,

completed,

a

response

rate

of

78.6%

The

questions

were

specifically focused on the role of the accounting systems in the company, the

information produced by the accounting systems and their significance and

advantages in decision-making, control, planning and supervision.

The accounting literature shows that the type of data that needs to be collected

are those specified to serve the study objectives. In this case, these data were

39

Chapter 2: Research Methodology

divided into the following:

information associated with the extent of the significance of accounting

information in decision-making;

information

associated

with

the

reasons

regarding

why

accounting

information was not so important in decision-making;

information related to factors that hinder the development of accounting

applications

in

Libya

(educational

factors,

professional

factors

and

others); and

information that shows in whose interest accounting is carried out.

Following the definition of the type of questions in the questionnaire form, the

questions were then formulated into four areas as outlined above. Many

considerations were taken into account when setting up the questions contained

in the questionnaire. Among these were (Hussey and Hussey 1997, p. 165):

the questions had to be formed in series and associated with one another,

questions started from simple and general questions and moved to

specific questions;

there must be a specified objective for each question related to the

research problem;

clarity and simplicity must be observed as well as avoiding- where

possible- the use of technical terms, which have more than one meaning,

40

Chapter 2: Research Methodology

when setting up the questions;

the questions were to be as short as possible to give required meanings;

questions were not be exaggerated so as to avoid the questionnaire form

being neglected or ignored so that respondents would read meticulously;

the questions were not to be formulated in a way that might bring

embarrassment or prejudice, or impel participants to resort to a certain

way of answering the questions;

questions were not to deal with sensitive subjects such as security, or

military or religious issues;

questions that required professional answers were limited to the lowest

possible level;

insignificant, provocative and scornful questions were to be avoided; and

questions were to be earnestly formulated without any obscurity, and

were to be common questions, seeking common sense answers.

After defining an appropriate questionnaire, and formulating the questions, a

method and a standard for the answers were defined. A Likert Scale was

adopted, in this case a five-point scale, to extend the anticipated answers of the

questions,

and

for

the

answers

to

be

a

more

realistic

measure

of

the

participants’ approaches and stances (Sekaran 1992) ( see Appendix I).

A copy of the financial reports of the company from 1993 to 2003, a copy of the

production report for the years 2002, 2003 and the first half of 2004, in addition

41

Chapter 2: Research Methodology

to the sales reports for the same period, a copy of the company’s organizational

chart and its statute, were provided. This information and data were used to

better understand the role played by accounting systems in

the GCP in

decision-making, supervision, control and planning.

2.3.3 Data Analysis

More information about the background of the IS and GCP and a brief

description of the administration, organizational charts and the financial system

will provided in chapters 7 and 8. Analysis of the data collected from the two

cases studies was undertaken manually by using spreadsheets.

Principally, the analysis process was applied to the fundamental data acquired

through personal interviews with the participants in the study, and from

documents and observations made in meetings. Qualitative analysis of these

data includes comment on them with a focus on observing some matters that

arose during the researcher’s presence in the company. Regarding quantitative

data,

due

to

the

small

size

of

the

respondent

population

(less

than

30

participants),

and

because

of the

contrast

in

the

unknown

population,

a

descriptive statistics test was employed and the result of it was determined

(Witte and Witte 1997). Discovering and understanding the role of accounting

systems in providing useful data for the development plans, and the extent of

the feasibility of these systems primarily in providing data and information,

42

Chapter 2: Research Methodology

were the key objectives in gathering and analysing data.

2.4 Producing Generalisations

Case studies seem a poor basis for generalisation, particularly for quantitative

researchers, who typically deal with large sample populations (Ezzamel et al.

2004, p. 299). In this study only two cases will be studied, but these will be

studied in depth and at length. Certain activities, problems or responses will be

shown to have come up again and again. As a result, the researcher may

become convinced that certain generalisations can be drawn. On the other hand,

the ability to generalise from case studies is not usually the main concern for

researchers adopting this method. Scapens (1991) and Yin (2003) distinguished

between theoretical generalisations and statistical generalisations. A case study

“does not represent a 'sample,' and the investigator's goal is to expand and

generalise theories (analytic generalisation) and not to enumerate frequencies

(statistical generalisation)” (Yin 2003, p. 10). The unique circumstances of each

case study make generalisation a difficult task. Scapens (1990) argued that

statistical generalisations, as opposed to theoretical generalisations, do not

explain; rather they only indicate the statistical regularities. The aim of the case

study is not to understand other cases but to understand a particular case (Stake

1995, p. 8) and any researcher bias that might affect the result of the study.

The two case studies adopted here did not attempt to locate universal truths or

43

Chapter 2: Research Methodology

generalisable theories in order to explain the role of accounting systems and

processes. Therefore, the objective of using the case study method in the current

study was to provide limited generalisations about the role of accounting by

understanding

the

role

of

accounting

objectives

within

the

GCP

and

accountability relationships within and between the IS and the GCP. However,

the final result of this study may reflect the situation of the industrial sector in

Libya. This is because of the similarity of the Libyan environment and the

public ownership of all enterprises. Theoretical generalisations from this case

study

show

how

and

why

the

GCP

provides

its

private