Point of contact: Jannick Plähn

Social norms guide our behavior and interactions in a variety of economically interesting domains (Bicchieri, Dimant, Gächter, & Nosenzo, 2019). A norm can be formal or informal, personal or collective, descriptive of what most people do, or prescriptive of behavior. In the same social setting, conformity to these different kinds of norms stems from a variety of motivations and produces distinct, sometimes even opposing, behavioral patterns (Bicchieri, 2006).

In the management control literature, social norms are understood as an informal control to reduce the incidence of dysfunctional behavior like misreporting of accounting information (Fiolleau, Libby, & Thorne, 2017). For example, Guo, Libby, Liu, and Tian (2019) show in their experiment that the activation of a social norm can directly influence employee’s reporting behavior and thus the firm’s profit. Using the social norm theory of Bicchieri (2006), we look at the process of participative budgeting and conduct experiments to investigate under which circumstances a social norm is activated and effectively increases managerial honesty. More specifically, our study investigates whether peer pressure (i.e., being observed by and exposed to another peer) and team identity can activate a social norm of honesty in a participative budgeting setting.

In the next steps, we want to use our experimental data to design and calibrate the decision rules in an agent-based model to explore the dynamics of a social norm of honesty in a participative budgeting setting. By integrating agent-based modeling with experimental research, we benefit from the advantages of both methods (Smith & Rand, 2018).

References

Bicchieri, C. (2006). The grammar of society : the nature and dynamics of social norms. New York: Cambridge University Press.

Bicchieri, C., Dimant, E., Gächter, S., & Nosenzo, D. (2019). Observability, Social Proximity, and the Erosion of Norm Compliance. Working Paper.

Fiolleau, K., Libby, T., & Thorne, L. (2017). Dysfunctional Behavior in Organizations: Insights from the Management Control Literature. AUDITING: A Journal of Practice & Theory, 37(4), 117-141. doi:10.2308/ajpt-51914

Guo, L., Libby, T., Liu, X. T., & Tian, Y. (2019). Vertical Pay Dispersion, Peer Observability, and Misreporting in a Participative Budgeting Setting. Contemporary Accounting Research. doi:10.1111/1911-3846.12513

Smith, E. B., & Rand, W. (2018). Simulating Macro-Level Effects from Micro-Level Observations. Management Science, 64(11), 5405-5421. doi:10.1287/mnsc.2017.2877