Following the theoretical innovations of complementarity theory, management control studies have investigated interdependencies between different management control practices. In this paper, we compare the two dominant statistical specifications to test for the presence of an interdependency. We show theoretically how the power of the demand and the performance specification varies with the level of optimality in the sample and how those specifications are vulnerable to correlated omitted variable bias. Our simulation results reveal that the demand specification is more robust to variations in optimality and correlated omitted variables than the performance specification. We use these results to formulate recommendations for future research into management control interdependencies.

This paper experimentally investigates two control mechanisms that firms can use to avoid negotiation conflicts in negotiated transfer pricing decisions: leadership tone and performance evaluation schemes. When division managers are evaluated using a competitive performance evaluation scheme, a supportive leadership tone leads to a higher likelihood that divisions will settle on a transfer price close to the equal-profit transfer price. In contrast, when division managers are evaluated using a cooperative performance evaluation scheme, leadership tone does not significantly affect the likelihood that divisions settle on an equal-profit transfer price. These results demonstrate that firms, maintaining individual performance evaluations in a decentralized company structure, can use an informal control such as leadership tone to manage negotiation conflicts.

Anxiety prepares an organism for dealing with threats by recruiting cognitive resources to process information about the threat, and by engaging physiological systems to prepare a response. Heightened trait anxiety is associated with biases in both these processes: high trait-anxious individuals tend to report heightened risk perceptions, and inappropriate engagement in danger mitigation behavior. However, no research has addressed whether the calibration between risk perception and danger mitigation behavior is affected by anxiety, though it is well recognized that this calibration is crucial for adaptive functioning. The current study aimed to examine whether anxiety is characterized by better or worse calibration of danger mitigation behavior to variations in risk magnitude. Low and high trait-anxious participants were presented with information about the likelihood and severity of a danger (loud noise burst) on each trial. Participants could decide to mitigate this danger by investing a virtual coin, at the cost of losing danger mitigation ability on subsequent trials. Importantly, level of risk likelihood and severity were varied independently, and the multiplicative relationship between the 2 defined total danger. Multilevel modeling showed that the magnitude of total danger predicted the probability of coin investments, over and above the effects of risk likelihood and severity, suggesting that participants calibrated their danger mitigation behavior to integrated risk information. Crucially, this calibration was affected by trait anxiety, indicating better calibration in high trait-anxious individuals. These results are discussed in light of existing knowledge and models of the effect of anxiety on risk perception and decision-making.

We examine the effect of more precise cost information on contract renegotiations between supply-chain parties. Specifically, we experimentally investigate the benefits of activity-based costing (ABC) information to address common supply-chain inefficiencies that are caused by the buyer or the seller, but have the same underlying costs. Results suggest that the impact of more precise cost information depends crucially on the cause of the inefficiency that parties need to address during the negotiation. ABC information increases the total joint profit in the supply chain. However, ABC information increases the seller’s perceptions of the fairness of the buyer’s arguments for contract changes only when the buyer causes the inefficiency but not when the seller causes the inefficiency. The combined effect of ABC information on joint profit and fairness perceptions thus increases the buyer’s profit only when buyer causes the inefficiency but not when the seller causes the inefficiency.Data Availability: Data are available from the first author upon request.