Information, Incentives, and Attention: A Field Experiment on the Interaction of Management Controls
58 Pages Posted: 10 Mar 2023
Date Written: June 1, 2022
Abstract
We study the profit effects and interplay of two core accounting practices in a field experiment in a large retail chain. In a 2 × 2 factorial design, we vary (i) whether store managers obtain decision-facilitating information on a profit metric and (ii) whether they receive performance pay based on the same metric. We find that both practices increase profits significantly. In contrast to reasoning based on standard economic theory, we do not find complementarity between both interventions. Rather, we detect evidence in line with an attention-directing role of both practices: the introduction of each raises attention to the underlying objective, which induces a countervailing substitution effect.
Keywords: management controls, performance pay, decision-facilitating, decision-influencing, accounting information, field experiment, complementarity, attention direction
JEL Classification: J33, M52, C93
Suggested Citation: Suggested Citation