Adverse Effects of Confidence in Complex Cost Systems Amid Competition
Advances in Management Accounting
ISBN: 978-1-83753-917-8, eISBN: 978-1-83753-916-1
Publication date: 24 October 2023
Abstract
Organizations desire more accurate cost systems as competition increases, and consequently increase cost system complexity, as cost systems with greater complexity are potentially more accurate than simpler systems. However, even complex systems are prone to impactful inaccuracies, for example, due to design or calculation issues, that can adversely affect decision-making and firm performance. The authors investigate whether and the extent to which cost system complexity and competition decrease managers’ attribution of cost-system-driven adverse firm effects to the cost system. The authors find greater cost system complexity (by inspiring greater confidence in the cost system) and higher competition (by providing a plausible external cause) decrease managers’ attribution of cost-system-driven adverse firm effects to the cost system. With both greater cost system complexity and higher competition, managers observing signals of material cost inaccuracies are potentially the least likely to attribute cost-system-driven adverse firm effects to the cost system.
Keywords
Acknowledgements
Acknowledgments
We thank the editor (Chris Akroyd) and two anonymous reviewers for their guidance. We would also like to thank Emily Griffith, Rachel Martin, Axel Schulz, Karl Schumacher, Steve Smith, Stuart Smith, Ryan Sommerfeldt, Ivo Tafkov, Todd Thornock, Richard Walstra, Adam Watanabe du Pon, Di Yang, and participants at the Management Accounting Experimental Research Brown Bag, University of Wisconsin-Madison Workshop, 2017 Management Accounting Section Midyear Meeting, 2017 AAA Annual Meeting, 2017 Accounting, Behavior and Organizations Section Meeting, 2017 AAA Midwest Region Meeting, and 2018 BYU Accounting Research Symposium for their helpful comments. We further gratefully acknowledge funding for this project from the BRITE Lab Research Grant and the Department of Accounting and Information Systems of the Wisconsin School of Business.
Citation
Matsumura, E.M., Thomas, T. and Yatsenko, D. (2023), "Adverse Effects of Confidence in Complex Cost Systems Amid Competition", Akroyd, C. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 35), Emerald Publishing Limited, Leeds, pp. 99-127. https://doi.org/10.1108/S1474-787120230000035005
Publisher
:Emerald Publishing Limited
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