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Crowding Out Intrinsic Motivation to be Honest in Participative Budgeting: An Experimental Examination of the Superior’s Choice of an Information System

Sat, October 5, 7:30 to 8:30am, TBA

Abstract

Recent experimental research finds evidence that an information system can increase honest reporting in participative budgeting by increasing expectations for an honesty norm. We extend the literature by examining the effect of the superior’s choice of an information system on honest reporting and the role that the subordinate’s norm sensitivity plays in that effect. This is an important extension as superiors typically choose to implement an information system in practice, and this choice can signal distrust and thereby “crowd out” intrinsic motivation for honest reporting. We replicate the positive effect of an exogenously assigned information system on honest reporting and show that this effect is robust to subordinates with high and low norm sensitivity. When the information system is endogenously chosen by the superior, however, we find that the positive effect of the information system is significantly weakened. This effect is driven by the reporting behavior of subordinates with high norm sensitivity, consistent with the superior’s choice crowding out intrinsic motivation for honest reporting in such subordinates. A supplemental analysis of exit questionnaire responses suggests that while all subordinates viewed the superior’s choice of an information system as a signal of distrust, subordinates with high norm sensitivity no longer felt obligated to report honestly. We discuss the implications of our results for theory and practice.

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