Can Capital Constraints Restrain Creativity? The Spillover Effect of Budget Constraints on Employee Creativity

29 Pages Posted: 13 Jul 2017 Last revised: 9 Nov 2017

See all articles by Francis de Vericourt

Francis de Vericourt

Independent

Jeffrey Hales

University of Texas at Austin - Department of Accounting

Gilles Hilary

Georgetown University - Department of Accounting and Business Law

Jordan Samet

University of Illinois at Urbana-Champaign; Georgia Institute of Technology - Scheller College of Business

Date Written: July 6, 2017

Abstract

When setting budgets, managers may place constraints on how resources can be used in an effort to mitigate opportunistic behavior by subordinates. These restrictions can affect the ability of the subordinate to succeed in the budgeted task, but may also have an unintended spillover effect on the ability to innovate. Using an experiment, we find that individuals working under higher budgetary constraints are more efficient in their use of budgeted resources, but are less successful in the budgeted tasks, than their counterparts working under lower budgetary constraints. Importantly, we find that imposing budgetary constraints also causes employees to subsequently generate fewer highly original and creative ideas in an unrelated activity. These findings suggest that budget structures can have unintended consequences on the innovative capabilities of organizations. This paper contributes to the expansive budgeting literature by showing budgetary control design has organizational performance implications beyond the specified budgeted activity.

Keywords: budgetary controls, budgets, creativity, capital constraints, originality

Suggested Citation

de Vericourt, Francis and Hales, Jeffrey and Hilary, Gilles and Samet, Jordan, Can Capital Constraints Restrain Creativity? The Spillover Effect of Budget Constraints on Employee Creativity (July 6, 2017). AAA 2018 Management Accounting Section (MAS) Meeting, Available at SSRN: https://ssrn.com/abstract=2998114 or http://dx.doi.org/10.2139/ssrn.2998114

Francis De Vericourt

Independent

Jeffrey Hales (Contact Author)

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States
512-471-2163 (Phone)
512-471-3907 (Fax)

Gilles Hilary

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Jordan Samet

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St., NW
Atlanta, GA 30308-1149
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
132
Abstract Views
1,686
rank
244,213
PlumX Metrics