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A theory of management control packages and organizational identity

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  • Toshiaki Wakabayashi

    (Sophia University)

Abstract

This study aims to present the conditions under which an organization should use effort standards in addition to performance evaluations for management control. This study uses a mathematical model and focuses on the identities of organizational members and standard-setting cost. This study obtains the following results: First, when an organization uses the effort standard in addition to performance evaluations for management control, it must set relatively high standards at a sufficient cost. Second, the relationship between identity and the principal’s expected utility is U-shaped; in some cases, the principal’s expected utility decreases as identity increases. Third, setting the standard only controls are never optimal. This study contributes additional findings to previous research regarding the role of identity in management control. Moreover, this study has implications for management control packages. From the perspective of increasing the expected utility of the principal, the base of the control package may be accounting control using performance evaluations, and social control using identity may be additional and extended rather than parallel to it.

Suggested Citation

  • Toshiaki Wakabayashi, 2023. "A theory of management control packages and organizational identity," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 34(4), pages 463-488, December.
    • Handle: RePEc:spr:jmgtco:v:34:y:2023:i:4:d:10.1007_s00187-024-00366-5
    DOI: 10.1007/s00187-024-00366-5
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    More about this item

    Keywords

    Management control packages; Performance evaluation; Identity; Behavioral contract theory;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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