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Performance Measures and Intra-Firm Spillovers: Theory and Evidence

Autoren/Herausgeber: Bouwens, Jan
Hofmann, Christian
van Lent, Laurence
Erschienen: 2018
Publikationsart: Articles in Refereed Journals (International)
erschienen in: Journal of Management Accounting Research
Weitere Quellenangabe: 30. Jg., Nr. 3, S. 117-144

Abstract

We revisit the question of how performance measures are used to evaluate business unit managers in response to intra-firm spillovers. Specifically, we are interested in variation in the relative incentive weightings of aggregated "above-level" measures (e.g., firm-wide net income), "own-level" business unit measures (e.g., business unit profit), and specific "below-level" measures (e.g., R&D expenses) in response to spillover arising from either the focal unit's effect on other business units or the other units' effect on the focal unit. Our theory highlights complementarity between above- and below-level measures and the existence of an interaction between the two directions of spillovers. Based on a survey of 122 business unit managers, we report evidence consistent with an interaction effect and with complementarity between above- and below-level measures. In particular, we show that firms increase the weighting on both of above- and below-levels measures when they are coping simultaneously with high levels of spillovers on other units and spillovers from other units.