To Örebro University

The debate about the use of formal control in innovative climate such as research and development departments has been going on for several years. Some researchers argue that the use of formal control is necessary to keep control, while other researchers argue that it inhibits the employees' innovativeness. However, the latest research in this area shows that organizations do use formal control in innovate climates, and they have found positive correlations between formal control and innovation. What these researchers thus request further research in is to describe more in detail what this formal control can consist of and how it affects the employees. The purpose of this study is therefore to describe how the case company uses budgetary control in their research and development department, and thereby create an understanding on the effect which the budgetary control have on employees' value internalization. In order to conduct this study a qualitative research method were used in form of personal interviews, where eleven employees with different position in the case company participated.  The main findings in this paper show that the budgetary control is divided in three different hierarchical levels, which are master budget, capital budget and operational budget. This structure has shown to have different impact on the employees´ value internalization, depending on in which hierarchical level of the budget the employees find themselves.