Norms, Conformity, and Controls

Abstract

Research in behavioral economics suggests that, in addition to their traditional incentive effects, formal control systems can influence psychological motivations. We extend this literature by demonstrating experimentally that formal controls directly influence people's sense of what behaviors are appropriate in the setting (personal norms), and indirectly alter people's tendency to conform to the behavior of those around them (descriptive norms). These effects persist even after the controls are changed, so that the effects of current controls can be strongly influenced by past control strength. Our results support those who are incorporating psychological factors into principal‐agent models (such as Fischer and Huddart [2008]), and suggest that those models should be further modified to incorporate correlations between personal norms and conformity to descriptive norms.

The impact of capital proposal guidelines and perceived preparer biases on reviewers’ investment evaluation decisions

“…Using the strength associated with an experimental approach, our study isolates the judgement effect of proposal compliance and highlights the role of capital budgeting guidelines as an instrument of establishing legitimacy and social norms. Our result complements the recent findings that management control directly impacts on individuals' perception of social norms, and indirectly on their tendency to conform to the behaviours of people around them (Tayler and Bloomfield, 2011).…”

How Audits Moderate the Effects of Incentives and Peer Behavior on Misreporting

“…First, according to Lindbeck (1995) and Bicchieri (1990), conformity to a group norm is often conditional on whether there is a need to form expectations about other people's behavior. When audits are absent, participants' personal norms for honesty are less likely to be activated (Tayler & Bloomfield, 2011). Participants may be driven more by monetary incentives and less by peer norms.…”

“…Maas & Van Rinsum, 2013). In a public-goods setting, Tayler and Bloomfield (2011) find that weak initial controls can activate people's personal norms. They argue that people are less likely to pursue self-interested behavior when personal norms are activated, particularly when their actions would harm others.…”

“…Such systems can mitigate managers' opportunistic reporting behavior (Xie, Davidson, & DaDalt, 2003). Recent studies show that the presence of initial (relatively weak) control systems can change self-interested behavior by activating social norms (Tayler & Bloomfield, 2011). Additionally, control systems that make reports publicly available can reduce misreporting (Maas & Van Rinsum, 2013).…”

“…Third, our study offers interesting insights to the findings of Tayler and Bloomfield (2011). Their public-goods setting made it difficult to assess how agents change behavior in response to other peoples' decisions.…”