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4.2. DEVELOPMENT OF THE MODEL 93 Sprinkle 2002). Based on Wathne & Heide (2000), the current study considers information asymmetry as the first antecedent to room for opportunism. This expectation is formalized as follows: information asymmetry has a positive effect on the room for managerial opportunism. Following the hypotheses described in chapter 2 of this thesis, I also expect information asymmetry to increase organizational reliance on RPE 4 , because RPE can partially reduce the room for managerial opportunism resulting from information asymmetries. If the superior has limited knowledge of the factors that influence performance because of high levels of information asymmetry, he can observe the effects of these factors through changes in peer performance by using RPE. Accordingly, I expect the following: information asymmetry has a positive effect on the use of RPE. Figure 4.1 summarizes the relations among RPE use, information asymmetry, and the room for managerial opportunism. RPE use ✻ Positive Information Asymmetry Figure 4.1: Conceptual Model Negative (H1) Positive ❄ Room for Managerial Opportunism Goal Ambiguity The second antecedent to the room for managerial opportunism is goal ambiguity. Goal ambiguity refers to the degree to which the organization is able to formulate the ultimate goals of the business unit to the business unit manager. Whereas specific goals are a clear statement of the firm’s expectations from the business unit, ambiguous goals leave room for interpretation and discussion from the side of the business 4 Whereas chapter 2 assesses the relation between RPE and information asymmetry, which interacts with the level of comparability between the business unit and its peers, the current chapter refrains from using interaction effects. This interaction effect is not required here because information asymmetry increases the room for managerial opportunism regardless of the business unit’s comparability to its peers. ✻
94 CHAPTER 4. OPPORTUNISM MITIGATION EFFECTIVENESS unit manager. A situation characterised by high goal ambiguity can be exploited by a selfinterested manager. Ambiguous goals provide the manager with room to argue for his own preferred course of action, which may not be aligned with the goals of the firm. Therefore, this study considers goal ambiguity as the second facilitator of managerial opportunism. I formalize this expectation as follows: goal ambiguity has a positive effect on the room for managerial opportunism. Measurability of Outputs The third opportunism-driving factor in the model is measurability of outputs, which refers to the degree to which an organization can measure its output in a reasonably undistorted manner. If the measurability of outputs is high, the business unit’s output metrics correspond well with the actual goals that the business unit needs to accomplish. High levels of output measurability facilitate the manager’s ability to communicate goal achievement to his superiors. However, if the measurability of outputs is low, monitoring becomes more difficult (Ouchi 1979, Langfield-Smith & Smith 2003). Because the actions of the business unit manager are less observable under conditions of low output measurability, low measurability creates leeway for the manager to act opportunistically without being caught by his superior. Based on this reasoning, this study argues that a low level of output measurability increases the room that managers have to behave opportunistically. This expectation is formalised as follows: measurability of outputs has a negative effect on the room for managerial opportunism. Decentralization of Decision Rights Decentralization of decision rights refers to decisions at the business unit level concerning, for example, the business unit’s investments or marketing choices. If an organization transfers decision rights from the CEO to the business unit manager, the business unit manager has more room to engage in opportunistic behaviour. The choices that are in the BU manager’s best interest are not necessarily in the organization’s best interest. For example, the business unit manager may choose to implement projects that he finds interesting but that are not in the firm’s best interest. Additionally, the manager might exploit the firm’s high-quality brand name to market the business unit’s lower-quality products to maximize the BU’s profits and/or the manager’s individual bonus. By delegating the decision rights to the BU manager, the organization provides the manager an opportunity to make self-interested decisions. Therefore, this study argues that the decentralization of decision rights increases the room for managerial opportunism. The final expectation in this study is formalized as follows: decentralization of decision rights has a positive effect on the room for managerial opportunism. 4.2.3 Summary of the Model The model, which consists of the research hypothesis and the additional expectations, is summarized in figure 4.2.
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Relative Performance Evaluation in
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NYENRODE BUSINESS UNIVERSITEIT Rela
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Table of Contents Preface 1 General
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Preface Why do people make things h
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2 CHAPTER 1. GENERAL INTRODUCTION I
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4 CHAPTER 1. GENERAL INTRODUCTION o
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6 CHAPTER 1. GENERAL INTRODUCTION T
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8 CHAPTER 1. GENERAL INTRODUCTION F
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10 CHAPTER 1. GENERAL INTRODUCTION
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Chapter 2 The Use of Relative Perfo
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2.1. INTRODUCTION 15 is not a promi
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2.2. THEORETICAL BACKGROUND 17 The
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2.2. THEORETICAL BACKGROUND 19 Sinc
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2.2. THEORETICAL BACKGROUND 21 who
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2.2. THEORETICAL BACKGROUND 23 suff
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2.3. SAMPLE AND MEASUREMENT 25 2.2.
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2.3. SAMPLE AND MEASUREMENT 27 2.3.
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2.3. SAMPLE AND MEASUREMENT 29 can
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2.3. SAMPLE AND MEASUREMENT 31 Comp
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2.3. SAMPLE AND MEASUREMENT 33 this
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2.3. SAMPLE AND MEASUREMENT 35 Emph
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2.4. ANALYSES 37 2.4 Analyses This
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2.4. ANALYSES 39 Table 2.8: RPE use
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2.4. ANALYSES 41 2.4.2 Correlations
Page 52 and 53: 2.4. ANALYSES 43 Concerning the con
Page 54 and 55: 2.4. ANALYSES 45 Table 2.13: Result
Page 56 and 57: 2.4. ANALYSES 47 Table 2.15: Summar
Page 58 and 59: 2.5. CONCLUSIONS AND DISCUSSION 49
Page 62 and 63: 2.6. CONTRACTIBILITY MIMIC MODEL (A
Page 64 and 65: 2.6. CONTRACTIBILITY MIMIC MODEL (A
Page 66 and 67: 2.7. ANALYSES FOR FOR-PROFIT BUS (A
Page 68 and 69: Chapter 3 Does Relative Performance
Page 70 and 71: 3.1. INTRODUCTION 61 Holmstrom’s
Page 72 and 73: 3.2. DEVELOPMENT OF THE MODEL 63 3.
Page 74 and 75: 3.2. DEVELOPMENT OF THE MODEL 65 RP
Page 76 and 77: 3.3. SAMPLE AND MEASUREMENT 67 3.3
Page 78 and 79: 3.3. SAMPLE AND MEASUREMENT 69 3.3.
Page 80 and 81: 3.3. SAMPLE AND MEASUREMENT 71 Tabl
Page 82 and 83: 3.3. SAMPLE AND MEASUREMENT 73 Tabl
Page 84 and 85: 3.4. ANALYSES 75 3.4 Analyses This
Page 86 and 87: 3.4. ANALYSES 77 Table 3.9: Pearson
Page 92 and 93: 3.4. ANALYSES 83 Larcker & Rusticus
Page 96 and 97: Chapter 4 Does Relative Performance
Page 98 and 99: 4.1. INTRODUCTION 89 Moreover, chap
Page 100 and 101: 4.2. DEVELOPMENT OF THE MODEL 91 is
Page 104 and 105: 4.3. SAMPLE AND MEASUREMENT 95 4.3
Page 106 and 107: 4.3. SAMPLE AND MEASUREMENT 97 To i
Page 108 and 109: 4.3. SAMPLE AND MEASUREMENT 99 of R
Page 110 and 111: 4.3. SAMPLE AND MEASUREMENT 101 Tab
Page 112 and 113: 4.4. ANALYSES 103 Table 4.8: Items
Page 114 and 115: 4.4. ANALYSES 105 RPE use ✻ Posit
Page 116 and 117: 4.4. ANALYSES 107 The model does sh
Page 118 and 119: 4.4. ANALYSES 109 RPE and RFMO. Mor
Page 120 and 121: 4.4. ANALYSES 111 room for manageri
Page 126 and 127: Chapter 5 Conclusion 5.1 Summary, C
Page 128 and 129: 5.1. SUMMARY, CONCLUSIONS AND DISCU
Page 134 and 135: 5.2. IMPLICATIONS FOR PRACTICE 125
Page 136 and 137: 5.3. LIMITATIONS AND SUGGESTIONS FO
Page 138 and 139: Appendix Overview of Questionnaire
Page 140 and 141: Q5 How often do the following thing
Page 142 and 143: Q14 When serving your clients, how
Page 144 and 145: Q23 Please indicate whether you agr
Page 146 and 147: Noise Q34 NOISE (primary measure) P
Page 148 and 149: References 1. Abernethy, M.A., Bouw
Page 150 and 151: 26. Diamantopoulos, A. & Siguaw, J.
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52. Himmelberg, C.P. & Hubbard R.G.
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83. Towry, K. 2003. ‘Control in a
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148 beïnvloeden, veroorzaken ruis
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Biography Hilco van Elten (1979) ho
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