Accounting and Finance

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Browsing Accounting and Finance by Author "Libby, Theresa"

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    The Effect of Group Identity on Sabotage Induced by Relative Performance Information
    (University of Waterloo, 2017-08-29) Liu, Weiming; Libby, Theresa; Kelly, Khim
    Organizations commonly provide relative performance information (RPI) as part of their management control systems to motivate employees. Despite the benefits of RPI that have been well-documented in the literature, RPI can lead to unhealthy competition where employees sabotage their co-workers’ performance so as to outperform, and thus be ranked higher than their co-workers. Organizations could strengthen group identity, an informal management control, to reduce sabotage. However, there is limited previous evidence that strengthening group identity actually reduces sabotage. This study aims to fill that gap. Additionally, this study investigates whether the effect of strengthening group identity depends on the type of compensation contract assigned. I used an experiment in a laboratory setting because it is difficult to observe incidences of employee sabotage behavior in real organizations since sabotage is often conducted covertly and concealed carefully. I manipulate compensation type at two levels (piece rate versus flat wage), and group identity at two levels (strong versus moderate). Both sabotage and effort are measured as dependent variables. I find evidence that strengthening group identity increase sabotage. In addition, I predict and find that employees sabotage co-workers to a greater extent under a piece-rate contract than under a flat wage contract. However, my results do not support the arguments that the effect of strengthening group identity on sabotage depends on compensation type. In addition, although I find that suspicion of having been sabotaged by others increases the frequency at which employees sabotage others, I find mixed evidence on whether the suspicion of having been sabotaged affects employees’ effort.
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    The Effects of Narcissism and Perspective-taking on Managers’ Escalation of Commitment
    (University of Waterloo, 2020-02-19) Stapleton, Andrea; Libby, Theresa; Fiolleau, Krista
    Companies often have the opportunity to invest in capital assets. Unfortunately, the benefits of such investments are not always realized and managers are challenged with deciding whether they should withdraw their support for a failing endeavour. Termed “escalation of commitment”, this phenomenon describes situations in which managers continue to fund a failing course of action despite having an opportunity to withdraw (Staw 1976). While management accounting research has largely focused on designing controls to influence the behavior of employees, more recently, researchers have begun exploring how managers’ personalities impacts their decision-making and their response to management control systems (for a brief review, see Young et al. 2016). In this dissertation, I examine the effect of an individual difference, specifically narcissism, on managers’ escalation of commitment. I also investigate the effect of prompting individuals to consider the perspective of an outside manager to reduce individuals’ support for an underperforming project and whether this prompt interacts with managers’ narcissism. Based on prior research, I predict that narcissistic managers are less likely to reinvest in an underperforming project when they can withdraw and invest in an alternative project that offers the potential for higher returns. I also predict that managers who view negative investment feedback from the perspective of an outside manager will be less likely to reinvest. Based on my expectation that narcissistic managers exhibit reduced escalation tendencies, I predict that perspective-taking will be less effective in mitigating their commitment to an underperforming project relative to managers with low narcissism. Results of an experiment completed by 228 managers do not provide support for an effect of either narcissism or perspective-taking on managers’ support for an underperforming project. Interestingly, results indicate that perspective-taking increases the escalation tendencies of narcissistic managers while having no statistically significant effect on less narcissistic managers. Given these results, I propose a theory-based explanation for narcissistic managers’ response and suggest future research opportunities. Overall, this dissertation contributes to the growing literature examining how manager’s narcissism influences decision-making in organizations and is a first step in understanding how individual differences may influence the success of management control systems.
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    The Effects of Performance Incentives and Creativity Training on Creative Problem Solving Performance
    (University of Waterloo, 2015-11-09) Huo, Kun; Libby, Theresa; Kelly, Khim
    I investigate the effect of different incentive schemes on employees’ effort and performance in a creative problem-solving task because current literature is divided on the effect of performance-based incentives on creative problem solving. Using an experiment, I compare two types of performance-based incentives (piece-rate pay and fixed wage plus recognition) with fixed wage alone and examine whether creativity training can moderate the relationship between performance-based incentives and creative problem-solving performance. Extending the theoretical predictions from Bonner and Sprinkle’s (2002) incentive-effort-performance model to creative tasks, I predict that the effect of performance-based incentives on creative problem-solving performance will be more positive in the presence of creativity training than in its absence. One hundred and twenty participants attempted to solve six creative insight problems under time constraint. Creative problem-solving performance is measured as the number of insight problems solved. As predicted, significant performance incentive by creativity training interactions are found for both the piece-rate pay and the fixed wage plus recognition. Without training, piece-rate pay produces lower performance than fixed wage alone. With training, however, performance is higher under piece-rate pay than under fixed wage alone. Relative to fixed wage alone, fixed wage plus recognition has no effect on performance without training, but fixed wage plus recognition generates higher performance with training. Supplemental analysis reveals that individuals receiving performance-based incentives (piece-rate pay or fixed wage plus recognition) and training spent less time solving each problem than those receiving performance-based incentives and no training, suggesting that the combination of performance-based incentives and training increases individual efficiency. Further, regardless of incentive scheme, individuals display a similarly high level of interest in the task, suggesting that intrinsic motivation was not negatively affected by tying incentives to task performance. Findings from this study have implications for organizations that seek to motivate creative performance using either monetary or non-monetary incentives.