Organizational Design and Control Choices

Building on new insights from organizational economics, management accounting researchers have highlighted how incentive contracts and performance measure choices complement structural arrangements in firms. We discuss how “slow moving” elements in organizational design, such as the allocation of decision rights to local managers and interdependencies between different parts of the production function, affect the working of incentives and performance measures. We pay attention to the empirical challenges that researchers face in this area and argue that mixed method approaches in which economic models are combined with empirical evidence can help to build a body of evidence that is robust and admits cross-study accumulation of knowledge. Finally, we illustrate how recent economic models that incorporate other-regarding preferences can help to bridge the gap between economics-based research in management accounting and more traditional approaches that rely on the behavioral sciences