an experimental investigation of the interactions ... - Vlerick Public

ABSTRACTEmployees often make decisions that involve a trade-off between improving the performance of theown business unit or department and improving overall firm performance. Previous research hasshown that such decisions are shaped by formal mechanisms such as incentive and informationsystems as well as by the descriptive social norms of the firm. This study explicitly recognizes thatemployees are subject to multiple formal mechanisms and investigates a specific aspect of acombination of formal mechanisms, namely the extent to which each formal mechanism motivatesemployees to act in the firm’s best interest. Relying on theory from social psychology, wehypothesize that (1) combinations in which not all formal mechanisms motivate employees to act inthe firm’s best interest (i.e. misaligned combinations) lead to a lower degree of employee decisionsthat are in line with the firm’s best interest than when all formal mechanisms motivate employees toact in the firm’s best interest (i.e. aligned combinations) and (2) descriptive social norms will driveemployee decisions in case of misaligned combinations but not in case of aligned combinations. Theresults of our experiment are consistent with these hypotheses. Our results contribute to the streamof research that investigates interactions between formal mechanisms and social norms by explicitlytaking into account that firms implement multiple formal mechanisms and by investigating the roleof a typical characteristic of a combination of formal mechanismsKeywords: formal mechanisms, social norms, alignment, firm performance3