EC 12

Question 1

Updating management control systems – van Pelt (2020)

Answer 1

• Principals develop beliefs regarding the self-oriented versus socially-oriented behavior of their agents.
• Self-oriented beliefs are often stronger than the socially-oriented beliefs, implying that information suggesting a decrease in control (when one has developed beliefs that agents are self-interested) will have less impact than information suggesting an increase in control (when one has developed beliefs that agents are socially-oriented).
• Overall, principals find it easier to increase control than to decrease control.

Question 2

Predictive analytics and centralization of authority
Eva Labro, Mark Lang & James Omartian

Answer 2

• Predictive analytics provides headquarters with more insights into what happens at the local plan level and thus reduces the information asymmetry.
• Predictive analytics leads to more centralization of decision rights.
• Predictive analytics leads to more intensive use of incentives because the granular data allow to parse out uncontrollable factors that influence plant performance. So, while in the past,
  the existence of these uncontrollable factors was a reason not to use incentives, predictive analytics allows to use incentives in the presence of such uncontrollable factors.

Question 3

Updating management control systems –
Labro & Stice-Lawrence (2020, MS)

Answer 3

Accounting system updates:
- Economic, coercive and mimetic pressure induce updates of accounting systems
- Only updates induced by economic pressures generate favorable economic outcomes