Management Accounting Section Midyear Meeting

New Controls and the Development of Trust

• In Event: Control Systems I

Abstract

Firms often rely on incomplete contracts and cooperation amongst employees in order to achieve targeted outcomes, making the building of trust between employees a vital component of success. While prior research suggests that cooperation-inducing controls can increase cooperation and build trust between employees, little is known about this relationship when employees have prior experience absent the control. In an experiment, we find that the increased cooperation and trust-building effects of a control for cooperation are similar when employees have experience with either the task or coworker prior to the adoption of the control, as compared to when employees lack this experience. However, consistent with expectations, we find that trust is not increased by the control when employees have experience with both the task and coworker prior to its adoption. Furthermore, we provide evidence that individuals with this experience are less prone to misattributions of others’ cooperative behavior and to neglecting base rate information about cooperation, shedding light on the mechanisms through which experience impacts trust development. Collectively, our results extend literature related to the effects of controls on trust, highlighting the important role that experience plays in the process. Our results also suggest that firms can obtain both direct and indirect benefits of controls for cooperation, even when employees have some prior experience with the job or coworkers – as could be the case for employees who had task knowledge through education or training or who were changing jobs – but are not likely to realize indirect benefits from placing controls on tasks currently being performed by existing teams.

Authors

• Jeremy Douthit, University of Arizona

• Jace Garrett, Clemson University

• Dan Way, Clemson University