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and Tiessen (1999) comes to similar conclusions when investigating the relationship between theweight of team performance in total compensation of team members and team performance.Analyzing compensation of medical group practices, Pizzini (2010) finds that the productive benefitsinduced by group incentives offset reductions in output associated with free-riding and effortdevoted to monitoring.Information is an equally important mechanism to achieve cooperation between differententities. Although modern information systems make it possible to provide decision-makers withinformation on a timely basis, it is also important that the information is understandable for thedecision-maker in order to make the decision-maker aware of the impact of his decisions on otherentities and on firm performance. Rowe et al. (2008), for instance, provides field evidence whichshows that the use of technical accounting jargon in summary reports about firm performanceinitiates competition rather than cooperation between different entities. Wouters et al. (2008) alsodemonstrates that monetary quantification of differences between the available options, which is acore characteristic of accounting information, improves cross-functional decision-making and leadsto a decision that is in the firm’s best interest (Carruthers and Espeland 1991). Thus, understandableinformation about the consequences of a decision facilitates the decision-maker to take into accountthese consequences and makes it more likely that the decision-maker chooses the option that is inthe firm’s best interest.In the current study, we explicitly recognize that decisions of employees are shaped bymultiple formal mechanisms in general and by incentive and information systems in particular. Themain implication of broadening the scope to multiple formal mechanisms is that combinations offormal mechanisms can be either aligned or misaligned with the firm’s best interest. A combinationof formal mechanisms is aligned if all formal mechanisms instigate employees to act in the bestinterest of the firm. If not all formal mechanisms motivate or enable employees to act in the firm’sbest interest, the combination of formal mechanisms is misaligned. Although misalignedcombinations of formal mechanisms are not consistent with equilibrium assumptions, employees areoften confronted with misaligned combinations of formal mechanisms. A major reason for theexistence of misaligned combinations of formal mechanisms is the nearly continuous involvement inchange processes which inevitably implies that the various parts of the economic structure are not inline with the firm’s objective function (Jorgensen and Messner 2009). Another reason is that firmsoften consciously decide to focus on one particular formal mechanism as they believe that thismechanism has the biggest impact on employee behavior.Misaligned combinations of formal mechanisms provide employees with mixed cues abouthow they are expected to behave. While firms with misaligned combinations of formal mechanisms8
often have a well-specified corporate objective function, the combination of formal mechanismsdoes not guide employees in how they have to make trade-offs between departmental and firmperformance (Jensen 2001). It has been well established in psychology that the presence of mixedcues instigates individuals to give priority to their own interest at the disadvantage of the interest ofthe group (Kramer 1999; Gaertner 2002; Rowe 2004). Similarly, we expect that the degree to whichemployees will act in the best interest of the firm will be lower in case of misaligned combinations offormal mechanisms compared to aligned combinations of formal mechanisms. Thus, our firstprediction is as follows:H1: Misaligned combinations of formal mechanisms will lead to a lower degree of employeedecisions that are in the best interest of the firm compared to aligned combinations offormal mechanisms.2.2 The interactive effect between social norms and combinations of formal mechanismsThe full architecture of a firm is broader than the formal mechanisms. Descriptive socialnorms, which describe how things are usually done within a firm, are also an important part of thefirm and have an important influence on employee behavior. 2 With respect to cooperation betweendifferent departments or business units, descriptive social norms of a firm are generally situatedbetween the two ends of a continuum (i.e. high focus on intra-firm cooperation and higherimportance of firm performance compared to departmental performance versus low focus on intrafirmcooperation and higher importance of departmental performance compared to firmperformance). 3 In order to obtain a situation in which intra-firm cooperation is “the way how thingsare done here”, companies often invest a lot of money in social events and teambuilding events.Although the importance of such events for establishing intra-firm cooperation has been recognized,the question how these descriptive social norms interact with different combinations of formalmechanisms has not been investigated yet.2 Social norms are often considered as a single construct. However, psychology literature makes a distinction betweendescriptive social norms, which refer to perceptions what is done, and injunctive norms, which refer to perceptions of whatought to be done (Goldstein and Cialdini 2010). As we want to refer to the way how things are actually done in anorganization, which is not always equal to the way how it should be done, we will explicitly refer to descriptive socialnorms.3 Note that for some firms intra-firm cooperation is not part of their strategy. Typically, entities within these firms are notinterdependent from each other and firm performance is maximized when each department or business unit focuses onmaximizing its own performance. Our study does not focus on such firms.9
Page 1 and 2: Vlerick Leuven Gent Working Paper S
Page 3 and 4: ABSTRACTEmployees often make decisi
Page 5 and 6: practice. Some firms, for instance,
Page 7: the firm’s interest. Our evidence
Page 11 and 12: Our theoretical reasoning assumes t
Page 13 and 14: supplier of wood, which is the most
Page 15 and 16: Revenues that a supplier will gener
Page 17 and 18: The descriptive statistics about th
Page 19 and 20: Overall, our results are consistent
Page 21 and 22: especially important in ambiguous s
Page 23 and 24: REFERENCESAnand, G., P.T. Ward, and
Page 25 and 26: Ivens, B.J., C. Pardo, and A. Tunis
Page 27 and 28: Wouters, M., J.C. Anderson, and F.
Page 29 and 30: TABLE 2: Quintile Distribution of t
Page 31 and 32: TABLE 4:Hypothesis 2: Degree of Fir
Page 33 and 34: FIGURE 1:Expected EffectsFigure 1 s
Page 35 and 36: FIGURE 3:Hypothesis 2: Degree of Fi
Page 37: APPENDIX 1Panel A: Information syst

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