A Proposed Framework for Behavioral Research in Accounting
Jacob G. Birnberg
Murphy Professor of Management Control Systems Emeritus
Katz Graduate School of Business
University of Pittsburgh
Do not quote without permission.
October, 2009
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A Proposed Framework for Behavioral Research in Accounting
Abstract
BAR today is richer in the topics covered, the methods used and the range of sub areas of
accounting in which it is performed. The growth in BAR has been accompanied by and
benefited from similar growth of behavioral research in other disciplines. This paper
offers a framework within which BAR literature can be viewed as a whole rather than in
segments such as by accounting sub-areas or by research method. The framework
classifies BAR by the focus of the research: the individual, group, organization or the
society within which accounting exists. The purpose of the framework is to help
researchers in BAR to appreciate the insights to their research questions that can be found
in BAR using another research method or studying a similar issue in another sub-area of
accounting. Existing research in each of these four areas is discussed to illustrate the
usefulness of the framework, behavioral research in other disciplines that could impact
BAR and areas of potential future research are discussed.
Key words:
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INTRODUCTION
In the 20 years since Birnberg and Shields (1989) (hereafter B-S) reviewed behavioral
accounting research (BAR) the area of applied behavioral research in general and BAR in
particular has burgeoned. The BAR literature has grown in breadth, depth and
complexity. This change reflects an important trend in BAR: the reference disciplines
and the object of accounting and non-accounting behavioral researchers have broadened.
The behavioral decision making and cognitive psychology literatures which stimulated a
significant portion of the emerging BAR research up to the late 1980’s continue to have a
significant influence on BAR (e.g., Camerer 2001). In addition, the role of behavioral
research has grown in other social science disciplines. Experimental economics has
moveded into the mainstream (e.g., McCaffery and Slemrod 2006). This literature has
had an impact on BAR (Moser 1998, Callahan et al. 2006). Legal researchers, heavily
influenced by the writings of Kahneman and Tversky (e.g., Kahneman and Tversky
1979), have begun to actively pursue behavioral issues. See Sunstein (2000). A strong
behavioral school even has developed within finance (e.g., Thaler 1993, Baberis and
Thaler 2003). Medical researchers have joined with behavioral researchers to investigate
issues such as how individuals react to prospective changes in the state of their health
(Udel et al. 2005). Even philosophy has developed a set of experimental researchers
(Appiah 2007 Knobe 2003) and a journal. Emerging methods for researching old
questions are altering the form of behavioral research, e.g., neuro-economics, (Knudsen
et al. 2007). These new tools permit researchers to go beyond the observed behaviors of
the decision makers and penetrate the “black box,” i.e., observe the brain’s activity
during decision making. Finally, these new behavioral researchers include economic
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modelers who have developed richer models of economic decision makers (“economic
man”) intended to explain behaviors such as cooperation (e.g., Rabin 1993, 1998) and
empiricists who have utilized aggregated data to test these models (e.g., LaPorta et al.
1997, Ittner 2007).
The burgeoning of BAR and the expansion of disciplines that in one form or another have
added “behavioral” as an adjective to one of their sub-disciplines has enriched the extant
research on which BAR can draw (e.g. Dickhaut et al. 2003, Hannan 2005). However, the
increased interest and diversity of methods used to research behavioral issues also leads
to a blurring of the definition of “behavioral research” in general and the boundaries of
BAR in particular. What was relatively clear 20 years ago is less clear today. The
proliferation of research methods has meant that BAR is more than laboratory
experiments, surveys and the occasional field study. A variety of archival data bases have
been used to investigate essentially behavioral issues (Banker et al. 2000 Ittner, 2007).
Even efficient markets researchers, who would not be considered part of the BAR
community, are identifying and researching issues that clearly are intended to understand
individual investors’ behaviors, i.e., anomalies, relative to the predictions of the efficient
market (Sloan 1996).
This blurring of boundaries between research thrusts has led to an often unrecognized
degree of commonality across BAR thrusts. While this has obvious potential benefits that
will be discussed latter, it means the boundaries used in this paper necessarily are
arbitrary and subjective. In general, the questions studied and the papers cited will be
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related to the actual behavior of people whether it is as individuals or collectivities of
varying degrees of size or complexity (e.g., groups or organizations) as they interact with
each other and/or their environment. This paper does not include those studies in which
the mechanism (e.g., the market) rather than the individual is the focus of the study. The
test used in this paper is analogous to one offered as an operational definition of
obscenity: We know BAR when we see it. At the margin different people will draw the
line in different places. However, there is little disagreement in the core of the research.
Given the growth in BAR, any attempt to provide a detailed review of BAR in general
would lead to a paper far beyond one this author could be expected to competently
produce. Moreover, recently a significant number of specialized reviews have been
published offering the potentially interested reader a wide variety of in-depth studies of
BAR by both research topic (e.g. auditing, management accounting) and research method
(e.g. laboratory experiments, field research). These reviews are cited in this paper where
appropriate and review papers or those with particularly useful reviews of the literature or
references are identified in the reference section of this paper.
What would appear to be needed at this point in time is a framework within which the
reader can integrate the diverse studies making up BAR. To do this I will present a
framework that focuses on the reference group of the studies (e,g., individuals, teams)
highlighting examples of research conducted in each focal domain using different
research methods and from different accounting sub-fields within BAR. This approach
not only is more parsimonious, but also permits the highlighting of a critical facet of any
research: the potential complimentarily of BAR across accounting sub-fields and
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methods. For example, a paper dealing with audit teams may inform researchers
interested in teams in management accounting and a field study may provide a laboratory
researcher with the insight needed to design a better experiment.
The paper consists of six sections. The first provides an overview of the paper and the
framework used. The second through fifth sections discuss each of the broad categories
of studies in the framework. The final section offers a brief summary of the paper.
ORGANIZATION AND SCOPE OF THE REVIEW
The approach used in this paper to categorize BAR is the behavioral unit that is the object
of the research. Does the research study the behavior of an individual, group, etc.?
Organizing studies in this manner highlights the similarities across otherwise diverse
studies and is intended to facilitate intellectual exchange among accounting researchers.
To do this I must necessarily restrict the depth of the review in any section to
accommodate the desired breadth of coverage. The framework is described in the next
section. Like BAR the boundaries between these categories at times are subjective. For
example, a paper may cover issues appropriate for understanding both groups and
organizations (Anderson et al. 2002).
The Framework
I have elected to view the extant BAR by what I have labeled its “focus.” I define focus
as the unit used to analyze the research question(s). The units range from the study of
individuals to the study of the environment that acts upon accounting or which
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accounting helps to shape. The four categories used in this review were selected because
they define distinct sets of research questions.1 They are:

Individuals

Small Groups

Organizations

Environmental Conditions.
Because a study’s classification is determined by the set of individuals it considers in the
research question(s) and/or the analysis, the categories can be viewed as constituting a
series of concentric circles with the innermost circles representing the more micro
studies. The outer “rings” represent more macro studies reflecting the broader focus of
the research question(s). The environmental conditions category can be interpreted as the
“world” within which all other events occur. Two important points should be noted.
First, within the categories, particularly the individual category, there may be subcategories. Second, studies from one category may inform studies in another, likely
adjacent category.
Definition and discussion of the categories
Individuals
These studies focus on the characteristics of a single actor and/or that actor’s response
to a particular accounting data set, accounting related stimulus or accounting related
setting. It is by far the most active of the BAR categories discussed in this paper and can
be viewed as consisting of its own subcategories. One line of individual research can be
characterized by a concern with the question: “How do individuals solve problems?” I
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label these “pure choice” studies because they focus on how well any actor can solve a
problem without consideration being given to the behavior of other actor(s). Recently,
many of these studies have investigated the manner in which the economic model
(“economic man”) in some significant way does not fit the behavior we observe.
The second line of research explicitly considers the role of strategic behavior in the
actor’s decision. In these studies the actor explicitly (should) consider the behavior of a
second actor who actually is present in the setting. These studies would include
negotiation (e.g., Fisher et al. 2000) or “cheap talk” (e.g., Zhang 2008). I label these
“strategic studies.”
Groups
Research classified as covering groups includes those studies where the relevant unit of
analysis consists of a small number of individuals. Typically, the members will be
viewed by the organization as affiliated (i.e., as acting in concert in some significant
way). Thus, what differentiates group research from research studying participants
individually or strategically interacting in dyads is the affiliation of the members. The
actors are assumed to be in the same unit at the time of the study. This would exclude
studies such as those where the individuals are located in different levels in a hierarchy,
e.g., a superior that supervises managers of different divisions (Zhang 2008). It is
distinguished from research on organizations on two dimensions. One is pragmatic:
groups are small enough to permit the researcher to study the interaction among the
multiple participants. As the size of the group increases, researchers find it more difficult
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to create and/or analyze the interactions (process) and the focus of the research shifts
from the members of the group/organization to the organization itself. The other
distinction is the focus of the research. While group research is concerned with the
activities of the group’s members, organization research is concerned with the role of
policy or the effect of characteristics of the organization or its environment on the
organization’s accounting policy or the organization as a whole. This reflects a higher
level of aggregation where the behavior of the individuals is lost. For practical purposes
the upper limit of group research usually is relatively small, typically four.
Organizations
As noted above, the focus of this research is on the characteristics of the unit. The entity
studied may be described by the legal boundaries of a firm or a division within a larger
entity. The research question often is the role played by structural characteristics such as
task complexity or the organization’s accounting system design. These studies move us
farther away from the characteristics of the individual discussed in the two previous
categories. It identifies the individuals/groups that compose the organization by the roles
they occupy rather than by focusing on the characteristics/actions of the individuals who
occupy them. The question is: Are we interested in better understanding the
accounting/information system(s) and/or the organization or the people?
Environmental Conditions
These studies examine the role of accounting in society. Studies included in this category
reflect the interaction between accounting and society, i.e., the broader world of which
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accounting is a part. The interaction can take the form of the external forces that shape
accounting as well as studies of the role accounting has played in shaping the world in
which we live. The former may be closely related to BAR studies in organizations. For
example, Prime Minister Margaret Thatcher’s intention to privatize British Rail affected
the relative roles of accounting and engineering within the organization (Dent 1991) or
the potential impact of the whistle-blower provisions of Sarbanes-Oxley (Hunton and
Rose 2008 De Zoort et al. 2008) . How the institution of standards for outputs led to the
establishing of standard sizes for clothing (Jeacle 2003a) is an example of how
developments in accounting, i.e., standard costs, can lead to changes in the environment,
i.e., standard sizes.
INDIVIDUALS
The earliest BAR studies across all accounting areas were of this type and it continues to
be the dominant form of BAR. Shields (2007) reported that 90 percent of the papers
published in BRIA from 2004 to 2007 studied the behavior of the individual. As noted
earlier, studies of the individual are of two types: individual choice studies and strategic
studies. While the two share a common core of issues such as the selection of
participants and the research methods utilized, they are significantly different in many
other ways. Thus this section of the paper is organized in a slightly different manner than
those discussing the other elements of the framework. The first section discusses issues
common to both. The second section discusses elements specific to individual choice
studies and the third section does the same for strategic choice studies.
Common Issues
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The two types of individual choice studies share many common features. These include
the research method selected and the choice of participants. Each of these is discussed
below. The section also discusses differences between the traditional economic model of
self-interested behavior and recent findings in the areas of interpersonal utility, trust and
cooperation found in this research.
Research Methods
The individual choice studies consist predominately of experiments though some utilize
surveys (Shields 2007). Experiments are particularly appropriate when the relevant
dimensions of the decision environment in which the decision maker interacts with the
stimulus and makes the decision are well known. Experiments have been used in BAR to
examine a wide variety of questions including internal, external and tax reporting
policies, incentive systems, various types of resource allocation decisions, ethical issues,
and various types of reports. The responses measured have varied from objective
outcomes such as investment decisions (Libby and Tan 1999) to more subjective
perceptions such as fairness (Evans et al. 2005) or trust (Coletti et al. 2005). Overall,
studies of this type are the predominant form of research in BAR, particularly North
American BAR, and can be found across a wide variety of topics, accounting sub-areas
and settings.
Individual choice studies also utilize surveys (e.g. Chalos and Poon 2000 Clinton and
Hunton 2001) and archival data (e.g., Banker et al. 1996). Archival studies often reflect a
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naturally occurring experiment that permits the researcher to study behavior before and
after the change (“stimulus”) has taken place.
Participants
A significant shift has taken place in the nature of the participants used in experimental
studies. Participants in the early studies most often were students (undergraduate
business majors and/or MBA students. But see Jensen 1966 Moser 1989). BAR studies
of the individual over the past two decades, however, have required and utilized
professionals as participants to a far greater degree. This is a significant difference from
the disciplines from which BAR draws its theories, e.g., psychology, where the generic
participant remains the norm. This reflects the differences in the two groups’ reference
populations for external validity. The use of professionals as participants became
necessary when BAR shifted from its initial focus of “How do participants role playing a
particular type of individual respond?” to “Do the skills accumulated by the professional
insulate him or her from the negative effects of heuristics or biases when they perform
complex professional tasks?” (e.g., Libby and Trotman 1993 Kennedy 1993). Students
cannot simulate that accumulated experience or professional knowledge, nor can a
mundane experimental task provide insight into the professional’s work.
The use of professional participants in BAR implicitly assumes that the professional’s
behavior in an experimental setting accurately reflects their behavior “on the job.” Fehr
and Leibrandt (2008) address this issue. They examine the cooperating behavior of
fishermen both in a laboratory trust experiment and their level of cooperation to avoid
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over fishing a given area. They find that the participants’ behavior in the experimental
setting accurately predicted their work behavior.
The broadening of the issues covered by BAR has expanded the type of professional
participants required. The revival of interest in Financial BAR now requires participants
possessing accounting expertise. BAR investigating proposed changes in the accounting
rules requires sophisticated/expert participants to test the validity of the hypotheses and
enhance the study’s external validity (e.g., Hirst and Hopkins 1998). This also is true of
BAR investigating anomalies found in archival financial accounting research (e.g., Sloan
1996) to generate BAR hypotheses (e.g., Joe 2003) 2, as well as studies of the behavior
of information providers in financial markets such as security analysts (e.g. Libby and
Tan 1999). However, many financial accounting oriented BAR studies continue to
utilize MBA students as surrogates for the “naïve investor” (e.g., Tan and Tan 2009).
For a review of these studies and a discussion of the issues see Libby et al. (2002) and
Koonce and Mercer (2005).
An exception to the use of professionals as participants is found in experiments in
management accounting. What we have learned from use of auditors and investors as
participants would suggest that manager participants likely would exhibit many of the
cognitive biases that student participants do (e.g., Kennedy 1993 Gilad and Kliger 2008).
However, this comparability may not carry over to activities such as budgeting behavior
and negotiation. See Vance et al. (2008) for an auditing example.
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Some researchers utilizing student-participants attempt to compensate for the
participants’ lack of expertise by measuring participants’ task specific knowledge, e.g.,
so many courses in accounting or years of work experience. They also use measures of
the participants’ general problem solving ability such as SAT or GMAT scores or
responses to selected questions from tests of that type (e.g.,Dearman and Shields 2005).
For a non-accounting study see Burks et al, (2008). These measures typically are used to
identify potentially relevant differences among inexperienced participants (i.e.,
students). However, Dearman and Shields (2005) use their problem solving ability
measure as an independent variable to explain why some participants exhibit non-fixated
behavior while the less able did.
One topic related to the selection of participants in which BAR has shown less interest
than others of decision making oriented research is gender differences. Non-BAR
strongly suggests that this, in fact, may be an issue. These researchers have reported
significant gender related differences in areas such as risk taking (e.g., Jacobsen and Lee
2007 Haung and Kisgen 2008), competition (e.g., Gupta et al. 2005) and negotiation
behavior (e.g., Bowles et al. 2007), three areas that can be important in BAR.
Those BAR studies reporting the presence (or absence) in differences in observed
behavior related to gender have done so for two reasons. One uses the participant’s
gender as an independent variable in the study (e.g., Johnson et al. 1998). These studies
investigate the conditions under which the participant’s gender could affect behavior. If
gender differences exist, randomization may obscure their effect(s). Other studies check
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for gender differences to be sure that they do not confound the experiment’s results (e.g.,
Fleischman et al. 2007 Booker et al. 2007). Future BAR may show greater awareness of
the issue since SSRN in June 2009 established an ARN for “Demographics, Gender and
Diversity Accounting Abstracts.”
Because of the limited research, it is an open question whether gender is as relevant an
issue when professional participants are used as it is in other studies. Does their
professional training and experiences override any gender issues? Two studies suggest
that the differences may persist. Chin and Chi (2008) using archival data from
Taiwanese audits found that female auditors are more risk averse and more ethical in
evaluating clients’ accruals. In a survey of U.S., German, Italian and Thai fund
managers, Beckman and Menkhoff (2008) report what they describe as the “expected
gender differences:” female respondents are more risk averse and exhibit greater
aversion to competition, i.e., a tournament reward system.
“Non-Economic” Dimensions Affecting the Individual
In what could be labeled “post-modern” BAR, a line of research focuses on the
appropriateness of two assumptions in the traditional economic model. One is that selfinterest is the sole motivator of choice; the other is the use of monetary outcomes as the
sole basis for measuring the utility of an outcome. While it is possible to integrate these
arguments into the utility function (e.g., Birnberg and Snodgrass 1988 Luft 1997
Casadesus-Masanell 2004) BAR tends to view these dimensions as if they are
constraints on the individual’s wealth maximizing behavior.
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Typically, BAR studies of this type bring together literature from psychology and
experimental economics. They stress that rather than behave in a self-interested manner,
individuals conform to certain social norms such as fairness, equity, trust, honesty or a
willingness to cooperate. For a discussion of these issues see Camerer (2001), Rabin
(1993, 1998), Fehr and Gaechter (2000), Fehr and Schmidt (1999), Moser (1998), Evans
et al. (2001), Evans et al. (2005) and Dawes and Thaler (1988). Another dimension
related to fairness and equity but not explicitly discussed in BAR is egalitarianism
(Dawes et al. 2007). Overall these studies are important for BAR for two reasons. First,
they show how little it takes for the participants to exhibit non-self-interested behavior.
Second, they show the importance of the individual’s perception of equal/fair treatment
relative to his or her peers and how they respond to a lack of perceived equity/fairness.
Trust is of interest to behavioral researchers of all types (Rousseau et al. 1998 Sapienza
et al. 2007). In BAR Rose (2007) examined how management’s financial reporting
behavior affected the investors’ willingness to trust them. Evans et al. (2001) focuses on
the individual in a management accounting environment and show that individuals will
behave honestly in a setting where their dishonest behavior would not be detected
thereby violating the self-interest assumption. As a possible explanation of this type of
behavior, Rutledge and Karim (1999) found that those participants who did not exploit
their asymmetric information in a principal-agent setting scored higher on ethical
development than those who did. Their research and many other papers suggest that nontotally-self-interested behavior is the norm or “default” behavior for many individuals
and in many settings rather than the self-interested behavior postulated in traditional
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economic theory. A possible explanation of why individuals exhibit this behavior is
whether or not they perceive that they were treated fairly (e.g., Greenberg 1990 Hannan
2005).
These findings can lead to interesting research on the individual’s response to their
absence fairness. Remindful of Lucy and Charlie Brown’s ongoing “relationship” over
his kicking the football, Bohnet and Zeckhauser (2004) report that decision makers
exhibit an aversion to betrayal and take actions to avoid it. Wang (2007) examines the
symmetry between the punishment for dishonesty and the reward for honesty. She finds
that honesty is rewarded more generously than dishonesty is punished. Issues of this type
can be related to resource allocation in managerial accounting and client behavior in
auditing. In both cases the research question would involve identifying which behaviors
lead to trust (or distrust) between parties: What causes an auditor to trust one client more
than another? What causes a superior (manager or auditor) to trust a particular
subordinate?
Any trust oriented research raises (at least) two questions related to experimental design.
One is how important are the experiment’s context (degree of realism) and the choice of
participants (students or professionals) used in the study? The other is the importance of
the presence or absence of the interaction with a real person when the participant is told
of the existence of another participant. The latter issue is discussed under strategic
choice situations.
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Culture and Its Impact on Decision Makers
BAR studies dealing with social norms and potentially differing values across cultures,
ask: Do the differences in culture induced norms affect behaviors studied in BAR? For
the most part these studies have drawn on the framework of Hofstede (1980) though
there have been some issues raised about the appropriateness of his categories (e.g.,
Baskerville 2003 McSweeney 2002). Because of the readily apparent cultural
differences, the greatest portion of this research has compared Asian and North
American workers (e.g., Birnberg and Snodgrass 1988 Chow et al.1999). The studies
thus far are inconclusive. While some of the studies have found differences consistent
with their predictions (e.g., Katchelmeier and Sheheta 1997), others have not (Birnberg
et al. 2008). In an interesting archival financial accounting study related to BAR,
Doupnik (2008) finds inter-country differences in earnings management after allowing
for differences for legal regimes.
The potential role of national cultures is becoming more important as BAR
internationalizes and research findings reported by researchers from many different
countries appear in journals and SSRN. This raises the question: Are research findings
from one country universally applicable or should we be concerned and replicate them
before we accept their universality?
As management systems and styles “internationalize” in large, industrialized economies,
it may mitigate concerns over cross-cultural differences. However, this homogeneity
may not be present in small-scale economies. In contrast to results reported in some
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BAR, Henrich and the Cross Cultural Ultimatum Game Research Group conducted an
extensive study across 15 small-scale economies. Their study is important because they
examine behavior among economies where the variation in economic development is far
greater than those typically studied by BAR. Using the dictator game and a social
dilemma game as well as the ultimatum game, they report that the “text book economic
model” failed to predict behavior. Their results are reported in various forms (Henrich et
al. 2005 Henrich et al. 2001) as well as in Henrich’s (2007) plenary address at the
AAA’s 2007 annual meeting. They conclude behavior in the experiments is generally
consistent with economic patterns of everyday life in these societies. Specifically: “The
higher the degree of market integration [in their society] and the higher the payoffs to
cooperation [in their society], the greater the level of cooperation in experimental
games.” (Henrich et al. 2001, 73-74)
Summary
While the methods used to study individual behavior have not changed significantly
since B-S, BAR has paralleled the trend found in experimental economics. A significant
portion of BAR now focuses on factors that influence decision makers in directions at
odds with the self-interest and wealth maximizing assumptions. These non-economic
dimensions include trusting behavior, cooperation and the expectation of a fair share of
any rewards. In certain setting this can lead to greater monetary returns to the decision
maker. However, they also can expose the decision maker to greater risk. Other
characteristics of the “work environment” such as the national/local culture also can
affect the expectations and behavior of the decision maker. It has been suggested that
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certain of the cultural differences observed in individuals may be based on different
market conditions among countries.
Individual choice studies
There are a variety of reasons for the popularity of individual focused research in BAR.
The first is simplicity. Considering the individual investor, auditor, etc. in isolation lends
simplicity to both the study’s research model and its design. It also simplifies the analysis
and interpretation of the results. The second is parsimony. It takes the fewest number of
participants to achieve the desired number of observations per cell. This is especially
important when the participants utilized are professionals. The third reflects the models
generated in the disciplines on which BAR has drawn most heavily, i.e., economics and
psychology. Both contain a significant literature relating to how the individual makes a
decision. Sociology, organization theory and anthropology that consider the “group” to
be the smallest unit have been drawn on by BAR to a significantly lesser extent.
Individual choice studies in BAR can be divided into two types depending on the type of
variable investigated. One group of studies is interested in better understanding the
impact of elements of the setting within which the individual acts on the individual. The
other is concerned with the appropriateness of rational wealth maximizing
characterization of the decision maker.
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Factors Related to the Task Setting: Incentives, Participation, Accountability and
Decision Aids
Four elements of the task setting are of particular interest in individual BAR. These are
incentives, participation and accountability. The first two are the focus of a significant
portion of BAR; the latter two, much less.
Incentives
Chow (1983) initiated the study of the role of incentives in BAR. BAR literature typically
uses the principal-agent model to generate hypotheses. (For a survey of the economic
models of incentives see Prendergast 1999). In general, the studies report that incentives
matter and the nature of the incentive system impacts an agent’s behavior, (e.g., Towry
2003 Sprinkle et al. 2008 Bonner et al. 2000).
Participation
Participation is, essentially, concerned with the honesty of communication within the
organizational hierarchy. Early BAR investigated how accurately the “workers”/agents
would communicate their private information. Would they use it to create slack?
Generally, the answer was yes. (e.g., Shields and Shields 1988 Young 19853). However,
in the next section discussing strategic interaction we will show how later researchers
have recognized the strategic nature of the interaction between the subordinate and the
superior and modeled participation as a negotiation process.
Accountability
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Given the function of accounting, it is surprising that the formal development of
accountability was in psychology (See Lerner et al. 1998 for a review.) despite the
obvious link to management accounting research on the effect of evaluation on individual
behavior (e.g. Argyris 1952 Prakash and Rappaport 1977). The notion of evaluation is not
limited to management accounting. When the superior in an audit team examines the
work of a subordinate or a client examines the work of a tax professional an “evaluation”
is taking place. The difference between the evaluation literature and BAR on
accountability is reflected in the breadth of the questions they ask. The evaluation
literature focuses on how the accounting system, e.g., the performance indicator, affects
the extent and direction of the effort provided by the “workers” (Prakash and Rappaport
1977). Accountability BAR not only asks for what the worker feels accountable but also
asks to whom the “worker” feels accountable when he/she faces conflicting demands
(e.g., Johnson and Kaplan 1991 Messier and Quilliam 1992) or how elements present in
the accountability setting, e.g., a need to justify ones actions, affects the worker’s
behavior (Ahrens 1996).
Miller et al. (2006) recognized that there is an element of mutual accountability in the
evaluation process. The superior likely has a prior relationship with the subordinate and
in many instances must “justify” any evaluation he/she makes. Their study focuses on the
reviewer in an audit setting. While the study only examines one party to the dyad, their
findings suggest that factors such as familiarity between the two parties can affect the
reviewer’s assessment. There may be limitations on the ability to perform these
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experiments with professional participants in dyads because of the potential impact on the
participants’ post experimental relations.
Systems Interface
Information systems in BAR essentially are viewed as decision aids. They are discussed
under various labels, e.g. Decision Support Systems (DSS) Knowledge Based Systems
(KBS). The DSS typically is used in the management information systems literature to
describe an information system intended to support a specific decision and is closest to
the term decision aid (DA) typically is used in auditing to describe what may or may not
be a computerized calculating system. In contrast, the KBS refers to a data base
collected for a specific area of inquiry, e.g., XBRL.
The simpler is the DSS. Two broad questions are researched under DSS: “How well are
the systems utilized by those for whom they are intended?” and “What characteristics of
the DSS facilitate or inhibit their utilization?” Specific issues researched under the former
include not only whether the DSS improves decisions, but whether the potential users
utilize them and whether the system can be used to facilitate learning. They differ from
the individual choice BAR studies discussed earlier that examined how the individual
responds to specific outputs of the system. Those studies typically are linked to cognitive
issues and the use of accounting data (e.g., Dearman and Shields 2005 Lipe and Salterio
2000). The papers discussed in this section are concerned with the utilization of a DSS as
a DA designed to assist an individual perform a specific task. They report that the DSS is
not always utilized (Eining, et al. 1997 Whitecotten 1996). Whitecotten (1996) found that
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auditors’ reliance on the DA was inversely related to their confidence in their own
judgment. Obviously, this raises two questions: “Is the auditor’s confidence appropriate?”
and “How do those using the DA perform relative to the best auditors?” Rose and Wolfe
(2000) shed some light on the second question. Using student participants and a tax
calculation task, they report participants who performed the calculation using “pencil and
paper” rather than the DA out performed the best DA assisted group by 22% but required
112% more effort (2000, 297). Also see Glover et al. (1997) and Borthick et al. (2006). It
is important to learn whether the results can be replicated with professionals, since it is
likely that their judgment is superior to that of the students.
Arnold et al. (2006) studied the type of data from the KBS used by (relative) novices
(senior/staff auditors) and (relative) experts (partner/manager). The two groups differed
on several dimensions. Novices chose feedforward explanations while the experts chose
feedback. Arnold et al. (2006) report that the greater the experts’ reliance on feedback
explanations from the KBS, the greater their adherence to the KBS’ recommendation.
There also are interactive systems intended to facilitate access to larger data bases. These
DSS are intended to improve the quality of decision making or assist in training. The
issues considered revolve around the usefulness of the data base. In BAR the issue
typically can be framed in terms of the behavioral characteristics of the user and the
usefulness to the user of the DSS. The XBRL is an example of such a system. It is
intended to enhance the user’s ability to obtain and understand financial data about the
firm. Hodge et al. (2004) found that non-professional users of financial statements were
24
better able to ascertain the impact of differing reporting methods for stock options
between firms using the XBRL than without it. However, like Rose and Wolf (2000)
they reported that many of their participants did not utilize XBRL. Other BAR has as its
purpose examining the use of DSS as a tool for training/educating novices.
Non-numerical formats are regularly used in corporations’ annual reports, internal
reports and our research. This issue initially was asked by MIS researchers in the 1970’s
(Dickson et al. 1977) and extended by Vessey( e.g., Vessey 1994). Despite the extensive
use of pie charts and graphs in internal and external reports, there is little research in
BAR on this topic. However, see Amer (2005). In marketing MacKay and Villarreal
(2007) found that the recipient’s ability to take advantage of the simpler nature of nonnumerical data is likely to vary among individuals. An interesting example of earlier
research in this area using faces to communicate financial data was reported by
Moriarity (1979)
“Non-Economic” Dimensions Affecting the Individual
The above dimensions of the task are essentially elements of the task setting in which the
individual makes a decision. They typically are set by the organization or environment
within which the decision maker is operating. The decision maker also brings certain
characteristics such as trust and fairness to the setting. These characteristic may be
(relatively) stable for any decision maker, e.g., desire to be treated fairly, or they may
vary with the situation, e.g., the decision maker’s mood. In this section these
characteristics as they relate to individual choice are discussed.
25
Ethics
Closely related to the study of norms is the study of ethical behavior. The former often is
researched in the context of what others expect the actor to do while ethical behavior
typically refers to the actor’s behavior. Noreen (1988) offers a theoretical link between
ethics and agency theory. He argues that parties to the contract could be expected to
follow social norms. Early BAR on ethics focused on the participants’ moral
development (e.g., Ponemon 1990). These studies are concerned with two issues: “How
developed is the moral reasoning of particular individuals/groups?” and “How does a
given level of ethical development affect participants’ on-the-job behavior?” These two
questions can easily be adapted for BAR in any of the accounting sub-areas. The broader
issue is how significant the ethical issue is in that sub-area? Auditing researchers have led
the way in considering the role of ethics in BAR. See Lowers et al. (1997) and Jones et
al. (2003) for reviews.
Like the cross-culture research described earlier, the ethics based research has been
characterized by issues over how to measure the level of ethical development/behavior of
the participants. This is not surprising since, like culture, the level of an individual’s
ethical development (as distinct from actions) is not observable. For a discussion of the
different approaches see Cohen et al. (1996).
In a post Enron world BAR in both auditing and management may find the issue of
increased importance. The problem facing the researcher is likely to be one of access. To
26
minimize the degree of intrusiveness and obtain responses, this research typically relies
on surveys or cases to elicit responses. There also appears to be a reluctance to publish
these papers in the mainstream accounting journals. A significant number BAR studies
have been published in The Journal of Business Ethics (e.g., Emerson et al. 2007 Arnold
et al. 2007).
Two tax-oriented ethics studies suggest possible studies for management accounting
behavioral researchers. Fleischman et al. (2007) demonstrate the linkage across the
various aspects of individual focused research. The paper examines the evaluation by
managers in a case concerning the ethical behavior of a spouse in the context of a tax
setting (innocent spouse rule). The paper explores the potential existence of the innocent
spouse rule as a norm and the extent to which research in ethics by behavioral scientists
can explain it. Similar studies might be conducted in management accounting. They
could relate the participant’s response to the firing of an innocent manager and, for
example, the participant’s predicted subsequent job behavior. This behavior relates to the
issue of perceived fairness discussed earlier. In the area of financial accounting Rose
(2007) related how what could be labeled (un)ethical reporting by management leads to
(dis)trust on the part of investors.
Cruz et al. (2000) reports that the tax professional’s willingness to resist the client’s
desire for aggressive tax reporting is positively correlated with the professional’s score on
the Multidimensional Ethics Scale. This raises the question of how a subordinate might
respond to a superior’s efforts for a more favorable set of budget estimates. Would a
27
measure of ethical development predict the likelihood of cooperation? In an experiment
in financial reporting, Vance et al. (2008) hypothesized and found that the better the
superior-subordinate relationship the less likely the subordinate’s was to resist the
superior’s request for aggressive financial reporting.
Two sets of BAR studies have extended early BAR on ethics in interesting ways. They
examine the impact of the individual’s environment (i.e., the context in he/she acts) on
the individual’s ethical behavior. Booth and Schultz (2004) examine the impact of the
organization’s ethical climate on the individual’s behavior. In a laboratory study they find
that holding the participant’s level of ethical development constant, the behavior of the
participant moves in the direction of the organization’s ethical climate. There is no reason
to believe that similar results would not be found in the effect of the permissiveness of
audit firms on auditor behavior.
Bailey and Spicer (Bailey and Spicer 2007 Spicer et al. 2004) linked cross cultural
research and ethics. Earlier studies had reported ethical differences among auditors in
different countries (e.g., Arnold et al. 2007 Patel et al. 2003). Bailey and Spicer
researched the ethical norms of a culture on individuals raised in a different culture. In
their studies, U.S. expatriates in Russia involved in the Russian business community.
They report convergence in ethical attitudes and intended behaviors between U.S.
expatriate and Russian respondents to their ethics survey. The U.S. expatriates in their
study responded more like their Russian counterparts than U.S. nationals in the U.S. The
respondents also expressed similar attitudes toward organizational practices that violated
28
the ethical standards or “hyper-norms.” U.S. expatriate respondents who were highly
integrated into the Russian community expressed ethical attitudes similar to those of
Russian respondents under conditions of “local (Russian) norms.” In both cases, the
ethical attitudes of Russians and Americans converge despite the differences that might
have been expected to arise due to their respective national identities.
Mood
Recently psychologists, experimental economists and accountants have begun to
examine the role of the decision maker’s emotional state (affect) on the decision process.
These studies could be important if different mood states, e.g., happy or sad, affect the
decision maker’s perceptions and decision. While mood could affect strategic
interactions, the research undertaken in BAR thus far has focused on the individual
decision maker.
The rationale underlying studies of this type is that mood affects the nature of the prior
experiences retrieved from memory. Positive mood states lead to retrieving positive
outcomes in comparable situations and vice-versa. Wright and Bower (1992) in a BARrelated study reported the effect of decision makers’ emotional state (happy, neutral, sad)
on their perception of the degree of riskiness of a decision and probability of success. As
they conjectured, the subjective probability estimate is influenced by the decision
maker’s mood. “Happy” decision makers give higher probabilities for the outcome of
positive events and lower probabilities for the outcome of negative events. They report
the opposite results for “sad” decision makers. In an accounting context, Moreno et al.
(2002) and Kida et al. (2001) report similar results. Consistent with these results Chung et
29
al. (2007) studied auditors making inventory valuation decisions and reports that mood
state affects the degree of conservatism in the auditor’s inventory valuation. Auditors in a
positive mood are less conservative than those in a negative mood. Moreno and
Bhattacharjee (2008) in a single party study, i.e., the other party did not actually exist,
explore in a transfer pricing setting the affect of knowledge of the other party’s emotions
on a manager negotiating posture. They report that knowledge of the other party’s
emotional state affects bargaining behavior. For a discussion of the literature arguing that
emotion can enhance the individual’s ability to make rational choices see Alkert et al.
(2003).
Psychologists and experimental economists have studied other emotional states that could
be of interest to accountants. Lerner and Keltner (2000, 2001) report that fearful
participants make more pessimistic estimates and more risk averse choices, while anger
leads participants to make more optimistic risk estimates and risk seeking choices.
Interestingly, the responses of angry participants more closely resembled those of happy
participants than those of fearful participants. For reviews see Lerner et al.(2004) Pham
(2007).
An interesting question raised by these studies is whether the effect of these emotions is
to make people overly optimistic/pessimistic? We cannot conclude one way or the other
without having some baseline measure of the probability. What should the individuals
believe the probability to be? Since the participants disagree, we can assume that their
emotional state has led at least one of the groups to be incorrect, but that does not
30
preclude the possibility that they both may be in error. Ideally further research will be
undertaken in this area where there is a known “correct” answer. A topic that conceivably
could be related to the issue of optimism/pessimism is the effect of regret in decision
making. It has been shown to have an impact in many non-business decision settings
(e.g., Gilbert et al. 2004).
A paper by Libby et al. (2007) suggests that optimism/pessimism is not always the
“irrational” result of the decision maker’s emotional state. They report that in some
circumstances optimism/pessimism may be the result of the incentives. If analysts desire
good relations with management, they report that, all else being held constant, the
optimism/pessimism of sell side analysts is a deliberate act and not based on an emotion
or trait.
Two recent studies suggest the possibility of yet another emotion that could be affecting
worker behavior—guilt/guilt aversion. However, these studies also illustrate how labels
also potentially can serve to separate like ideas. Schnedler and Vadovic (2007)
hypothesize and find that guilt aversion motivated participants to exert effort beyond the
minimum required by the control system. One might conjecture that this merely renames
the concept embodied in “gift exchange,” (e.g., Hannan 2005). Staffiero (2007) used guilt
to describe the behavior of individual members of Japanese work groups. The workers
felt guilt when they made insufficient contributions to their work group. However,
Birnberg and Snodgrass (1988) offer a more positive explanation of this behavior
suggesting that the outcomes to other members of the group may have a positive utility to
31
an individual member. Failure to achieve the group’s goal results in lowered utility
because of the loss to others as well as to oneself.
Fairness
While the perception of fairness has primarily been researched in strategic settings, the
perceived fairness of the accounting system affects the behavior of the individual in
individual choice settings as well. Libby (2001) and Hufnagel and Birnberg (1994) found
that the participants were sensitive to the perceived unfairness of the accounting system
(procedural fairness) even when they were not adversely affected by the rule or system.
Physiological measures and BAR
Behavioral Accounting researchers have tried a variety of methods to understand the
decision process. Those they have utilized are relatively non-intrusive, but provide
greater insight than observing an outcome/response in an experimental setting. These
approaches include think aloud protocols (e.g., Bedard and Biggs 1991), and data boards
(e.g., Shields 1980). These approaches yielded insights into “cognitive flow” or the
decision process being followed. However, both of these methods directly involve the
participant and are limited to reporting the decision maker’s conscious behavior. The
methods discussed in this section measure the same behaviors discussed earlier, but
using methods intended to measure physiological changes.
Hunton and McEwan (1997) utilized an eye movement retinal imaging computer to
study the information search strategy of financial analysts. Unlike protocol analysis that
32
relies on self reporting and data boards that report only choices, they were able to track
the search strategies of the analysts in a less obtrusive but more detailed manner. They
were able to observe data scanned but not reported (protocols) or chosen (data boards)
by the participants. Consistent with data board research, they found that the more
accurate analysts used a directed rather than a sequential search strategy, i.e., their search
appeared to be motivated by hypotheses generated by the process.4
In finance, Lo and Repin (2002) used more traditional methods (electro-dermal and
pulse rate measures) to measure the emotional state (level of excitement) of 10 stock
traders during a period of actual trading. They found significant differences between
periods when significant market events were and were not taking place. They argue this
suggests that emotion is a relevant component of the traders’ decisions. Their data
suggest that the response varies with experience, but the sample is too small to draw any
statistically significant conclusions.
Neuroeconomics and Neuroaccounting
Recently researchers studying decision making have taken a new approach. Working
with neuroscientists, they have gone one step deeper inside the “black box” that is the
decision maker. Using various devices they observe the patterns of brain activation as
individuals make choices (e.g., McCabe et al. 2001 Camerer et al. 2005 Knudsen et al.
2007). Given the neuroscientists’ knowledge of the function of the brain centers,
conclusions can be drawn about what underlies the observed behavior. By moving one
step closer to the decision maker’s cognitive activity, the role of the stimulus and the
33
response changes in an interesting way. The decision, typically considered the response
in BAR studies, now is the stimulus and the brain center activation is the response. This
is in contrast to traditional research in BAR where researchers observed behavior and
inferred the underlying cognitive processes or extracted them from protocols.
Thus far little research of this type has been undertaken by behavioral accounting
researchers except for Dickhaut (e.g., Dickhaut et al. 2003 Smith and Dickhaut 2005
Rustichini et al. 2005). Dickhaut and his colleagues have two papers (Dickhaut et al
forthcoming a, b) using neuroscience to study the evolution of recordkeeping, i.e.,
accounting. However, none of these papers provide the type of systematic review of the
possible link between neuroscience and BAR that can be found for finance in Sapra and
Zak (2008). They offer neuroscience explanations for observed behaviors in financial
decision making where data from neuroscience and neuroeconomics are available.
While potentially quite insightful, there are at least three reasons why research of this
type will progress more slowly than other types of BAR including experimental
economics related projects. First, it requires cooperation with a researcher possessing
access to machines to perform the scans and skilled in reading brain scans. Second, it
would appear that research of this type is quite expensive. Third, explaining the findings
to other BAR researchers may be difficult. Moreover, the results may not eliminate the
issue of “hardwired” versus “learned” behavior as the explanation for the response.
34
An example of neuroeconomic research’s potential relevance to BAR can be illustrated
using the findings of Luft (1994) and Hannan et al. (2005). Luft (1994) found that
participants in her study preferred a bonus to a penalty pay scheme even though the
payoffs from the two systems were equivalent. Hannan et al. (2005) found that the
participants in the penalty condition exerted more effort. Given that neuroscientists have
shown that different brain centers are used to measure pleasure (reward) and pain
(penalty) (Delgado et al. 2000), this raises the question of whether the preference for a
bonus scheme reflects differences between the pleasure and pain brain centers (“hard
wired” neuroscience explanation) or whether it is the approval implied by the “reward”
and disapproval associated with a “penalty” (a social psychology issue of intrinsic
reward). Barnea et al. (2009) using Swedish data on twins to study investing behavior
suggests that there is as one might expect both a genetic and a learned component.
A series of neuroscience studies related to the above question may provide some insight
into what is happening. Using the ultimatum game, Tabibnia et al. (forthcoming) report
MRIs of the brain that suggest similar results to those above for fair and unfair behavior.
It is an individual choice study using only participants who receive the “offer”
(ultimatum). Their results suggest that the (recipient) participants differ in what they
believe to be a fair offer. Those who judge the offer to be “unfair” show different
patterns of brain activity than those who consider the offer to be “fair.” Participants who
accept an unfair offer had different patterns in their MRIs than those who reject them
(Tabibnia et al. forthcoming).
35
A study by Harbaugh, Mayr and Burghart (2007) that relates brain activity to altruism in
decision makers also illustrates the potential link of neuroscience to BAR. They studied
the brain scans of 19 female students who were asked to make a decision allocating $100
between a food bank and themselves. The brain scans of the “altruistic” (gave more) and
“selfish” (gave less) participants show that the altruistic participants exhibit greater
activity in the part of the brain that reflects pleasure than do the selfish participants. The
altruistic participants show significant activity in that part of the brain even when they
were required to contribute a fixed portion of the $100 to the charity. Studies of this type
suggest that there is a physiological basis for the altruistic behavior that is observed in
the real world. It does not explain if the behavior is inherent (hard wired Hsu et al. 2008)
or related to interacting with people (learned Andreoni 1990). The authors suggest that
they believe their results also would apply to male participants had they been included in
the study.
Zak and his colleagues introduced a line of neuroeconomic research that approaches the
“black box” of human cognitive processes in a different way. They argued that the
observed behavior, in this case trust, is based on the brain’s response to a particular
hormone. Trusting participants exhibit higher levels of the relevant hormone than nontrusting, i.e., economically rational, participants. This work is summarized in Zak
(2008). Kuhnen and Chiao (2009) show that there also appears to be a genetic basis for
the differences in the amount of dopamine and serotonin. In their study these differences,
like those reported by Zak (2008) , are associated with different patterns of behavior, i.e.,
risk taking.
36
Summary: Individual Choice Studies
Overall, research focused on the individual’s decision making behavior has played an
important role in BAR historically. The predominance of individual focused research,
particularly among North American and many Australian researchers, is easily observed
by examining a recent issue of BRIA (2007). It contained 13 papers. All of these papers
could be classified as focused on the individual even though they may describe in the
scenario the existence of another/other hypothetical person(s) or have a scripted
confederate role play the “other person”. Equally important is the diversity in
topics/areas in which the research is located. Three were related to auditing. Four dealt
with aspects of management accounting. Three were related to financial
reporting/decision making. There was one in tax-ethics, one in cross cultural-ethics and
one related to education. While this admittedly is a convenience sample, the results are
similar to Shields (2007). They likely are representative of current BAR in North
America. (A very different view of BAR in Europe would result from examining an
issue(s) of AOS or other European based accounting journals.)
This emphasis on individual focused research is likely to continue to be true of BAR in
North American for several reasons. Many BAR questions focus on the behavior of
individuals acting alone. For example, some of the studies involve one individual’s
processing data provided by another individual or a system (e.g., Fedor and Ramsey
2007). Others continue to be concerned with the cognitive processes of individuals (e.g.
Joe 2003). Still others involve norms, ethics and culture which typically have been
37
studied by examining the behavior of the individual in isolation. Finally, the individual
also may be the easiest approach for researchers.
Individual choice studies do not exist in isolation from the other categories of BAR
discussed in this paper. As the research on strategic choice and group focused behavior
shows, understanding the behavior of individuals often is the basis for hypotheses about
behavior in dyads and groups. Behavior such as honesty (Evans et al. 2001, Cohen et al.
2007) that has been exhibited in studies in which the individual does not actually interact
with another participant can lead to predictions of behavior in dyads and groups that
differ from those of classical economics. This is particularly true because many of the
individually focused studies are studies isolating one member of a network of
individuals. This is readily apparent in the next section in the discussion of participation.
There also are limitations in studying the individual in isolation. In part this results from
the movement in organizations to make groups and teams the decision making unit. In
addition, a certain amount of the richness found in the decision making situation may be
lost when BAR isolates the individual from his or her environment.
Strategic Choice Studies
Studies that explicitly consider the participants’ strategic behavior are relatively new in
BAR though strategic behavior often was implicit and important in earlier BAR. How
managers behave in a participative management setting is an example of a strategic
setting. Moving from an individual choice study where the actor’s behavior is “inward
facing” to one where another actor’s behavior explicitly must be considered introduces
38
the strategic dimension to BAR. In contrast to the individual choice studies, in the
strategic behavior studies the decision maker must consider the choices made (or to be
made) by an actual rather than a hypothetical fellow participant. For example, in a
management accounting study the “strategy” to which the participant responds could be
the choice of budget level set by another participant acting as “management.” While an
individual choice study informs us how the manager/agent responds to a given budget
level, we do not learn which budget level the owner/principal would choose to offer to
motivate the manager/agent. In an individual choice study the researcher could set the
independent variable (e.g., the budget) at levels different from those a manager would
choose.
A significant amount of experimental economics research uses experimental dyads. See
Roth (1995). In BAR strategic choice studies recognize the limitations in studying the
individual in isolation from the environment and the importance in many settings of the
behavior of the “other” party on the individual. Some argue that it is important actually
to have the “other party” exist whenever the instructions indicate he/she does.
Experimental economists argue that it is required for one of two reasons. The first is
“maintaining the integrity of the participant pool.” Experimental economists often utilize
the same pool of participants in different studies. In some studies the participant’s
experience in a prior study is a criterion for selection. They argue it is important the
participants believe what they are told. If the post experimental debriefing informs them
that something was not really the case, they may speculate in future studies about the
true nature of the study. The other reason relates to the richness of the experimental
39
setting. Unless the experimenter has insight into how the other party will behave from
prior field or laboratory research, including the actual behavior of a participant will
increase both the potential insights from and the validity of the study. See Calegari et al.
(1998) for an example of this issue.5
Negotiation Studies
The negotiation process is ubiquitous in the business setting. For a review see Tsay and
Bazerman 2009. Audit firms negotiate with clients over changes in financial statements
and accounting methods (McCracken et al. 2008), firms negotiate with suppliers when
they establish operationally intimate relationships, i.e., JIT, and sub-units within the
organization negotiate transfer prices and/or quantities. While the surface characteristics
of the situations are different, many of the behaviors may be the same, e.g., the strategies
adopted by the parties. The degree of information asymmetry would be expected to
affect negotiation as could the incentives of the parties. For example, in budgeting
negotiations the parties typically are playing a zero sum game. The slack absorbed by the
worker reduces the manager’s/principal’s profit by a like amount. In other cases such as
the audit or transfer price settings, the negotiation game being played need not be a zero
sum game. Rather, a small concession by one party may be significant to the other. Such
an asymmetry in payoffs should affect the negotiation process. Negotiation studies also
can be divided into two settings: those where the parties have equal power and those
where one parties has an advantage.
The significance of the strategic interaction is of particular importance for BAR because
of the importance of performance as a “response.” An example of how individual choice
40
literature and strategic choice settings are related can be found in Fisher et al. (2000)
study of participation utilizing interacting dyads. In the context of the framework
utilized in this paper, this represents a paradigm shift. Early BAR into participative
budgeting focused on how the “worker” would behave. Would the workers take
advantage of their private information to create slack? Typical of these earlier studies,
Young (1985) had his participants meet with a “supervisor” played by the experimenter
or a colleague. However, the “supervisor” did nothing more than accept the workerparticipant’s budget. Thus, Young’s (1985) study essentially is an individual choice
study. While social pressure was present, its design forced the worker-participant
actually to face a supervisor, it omitted any negotiation over the acceptability of the
worker’s proposed budget. The explicit power in the situation was vested with the
worker. In reality, the budget setting process is quite different. In the natural setting the
supervisor also has significant power. Thus, while Young (1985) reported how the
worker would act in isolation, important aspects of participation are better captured as a
dyad that permits strategic interaction.
A second area of negotiation studies where the use of dyads is present is in the transfer
price literature. Like the participation studies, they are outcome oriented, e.g., which
condition/transfer price rule performs best. In an early study DeJong et al. (1989) test the
efficacy of various transfer pricing methods. Haka et al. (2000) vary the precision of the
accounting data the manager possesses. The participants receiving the less precise
information negotiated strategically. They tried to achieve the best price at the risk of
failing to reach a settlement. In contrast, those with more precise data use the negotiation
41
process to communicate information to the other party about his or her position in an
attempt to reach a more informed decision. Chalos and Haka (1990) and Ghosh (2000)
also studied the negotiation process in the transfer price setting in laboratory
experiments. Ghosh (2000) observed that when the incentive system is consistent with
the sourcing of the input, the systems are perceived as fairer and the participants behaved
in a less exploitive manner. Also see Luft and Libby (1997).
How humans negotiate and what motivates them to behave in a particular way is a
question of interest to all BAR. The findings in one area have implications for the others.
Calegari et al. (1998) report two interesting findings about dyads using an auditing based
task. One relates to the outcome of the negotiation process, the other to method. In their
study MBA students participating in the experiments as “auditors” and “clients,”
exhibited two types of behavior: competitive pairs and cooperative pairs. The
competitive pairs behave as Calegari et al.’s (1998) economic-based hypotheses predict.
However, the cooperative pairs exhibit what Calegari et al. (1998) describe as signaling
and cooperative behavior. What causes the pairs to behave differently is an unanswered
question that should interest BAR.
Calegari et al. (1998) also reported an interesting methodological finding. The outcomes
from a human-computer dyad are different from those of the human-human pairs.
Obviously, the computer was not programmed to respond to cues/signals of a
willingness to cooperate that the human partner might send. This reinforces the concern
about the limits in utilizing the individual choice style of research when the “other party”
42
has an opportunity to act/interact strategically. This is especially true where the set of
actions includes choices that could facilitate reaching a noncompetitive, but mutually
beneficial, conclusion.
There are, however, settings when studying dyads in a laboratory may not be practical or
even feasible. This especially would be true in cases such as Calegari et al. (1998) where
students may not be suitable surrogates for professionals. This raises the issue of external
validity. Researchers have tried to resolve this problem in an audit setting by studying
the negotiation process using professionals as participants in individual choice studies
that “simulate” interacting dyads. For example, Faevre-Marchesi (2006) studied the
initial negotiation postures of auditors and clients over a proposed change in the
financials giving the same case study separately to each type of participant. They
conclude that ex ante the clients have a better understanding of the auditors’ initial
position than the auditors do of the clients’. In a related study Tan and Trotman (2007)
proposed and tested a model of when in the negotiation process auditors should make
concessions to clients. Their experiment uses financial officers as clients and a computer
simulation as the auditor who negotiates with the client via e-mail (i.e., an individual
human-computer study). They report the clients’ responses to the “auditor” and the
strategies the clients utilized in responding to the simulated auditor. However, their
findings should be viewed in light of Caligari et al. (1998). How this initial difference
and strategies would play out during negotiations between financial officers and actual
auditors remains an open question. Because of the potential problems involved in using
actual auditors and their clients, it is unlikely to be studied in an experimental setting
43
using professionals as participants in both cases, i.e., human-human. We may need to
rely on archival research to understand the behavior of these dyads, e.g. using working
papers and notes in them (e.g., Nelson et al. (2000).
Negotiation Studies: Settings with Explicitly Unequal Power
Other papers have utilized dyads in negotiation/bargaining studies where the parties
posses unequal power. These studies usually investigate the presence or absence of the
norm of fairness in economic man rather than negotiation in a specific setting. They
typically utilize either the Ultimatum or the Dictator Game (Roth, 1995). In the Dictator
Game, one person, the dictator, is given a sum of money/points, called an endowment.
His/her task is to allocate the endowment between him/herself and the other party, the
recipient. The recipient must accept the dictator’s allocation. These studies utilize dyads
rather than a “simulated recipient,” i.e., telling the dictator participants: “There is a
second party in another room” Since the recipient is passive in the experimental setting,
the use of a dyad would appear to be intended to meet the criterion of not misleading to
the participants.6 In contrast, in the Ultimatum Game the first party’s (the “proposor”)
situation is identical to that of the dictator except that the recipient now may accept or
reject the proposer’s offer. If accepted, the proposer’s offer determines each party’s
payoff. However if the offer is rejected , both parties receive nothing.
The results of studies using both of these games tend to support a norm of fair treatment
expected by the responders and recognized by the dictator/proposer (Berg et al. 1995
Roth et al. 1991). In both the Dictator and Ultimatum games the parties making the
44
initial allocation offer amounts approaching on average 40% of their endowment (Roth
1995). This result appears to reflect the recognition by many of the participants of a
norm that sets the “fair” allocation of the endowment.
Cheap Talk Research in Dyads
The typical “cheap talk” study also reflects a setting where the strategic interaction is
germane to the study (e.g., Kachelmeier et al. 1994 Rankin et al. 2003). How will the
party receiving the nonbinding message react to it? Obviously, such a study could be
done using the individual receiving the message as the focus. (Half of the participants
receive a cheap talk promise from the experimenter and half do not.) However, such a
study would lose the behavior of the participant who is allowed to make the cheap talk
commitment. (Will they or won’t they indulge in cheap talk?) That individual’s behavior
also is of interest to the researcher. Thus, it is preferable for the study to use a dyad
(potential sender and receiver) rather than only a receiver. In general, research on cheap
talk has found that the cheap talk often is viewed by the recipient as if it is a binding
commitment (e.g. Kachelmeier et al. 1994 Zhang 2008). Cheap talk studies can occur in
any setting in accounting where the context permits one party to communicate with and
make a non-binding pre-commitment to another party that, if true, should affect the other
party’s behavior.
Effect of Third (Non-Negotiating) Party
The work of Fehr and Gachter (2000) and Zhang (2008) provide insight into why it is
beneficial for the researcher to include all the potential parties in a study. Fehr and
45
Gachter (2000) report that a third party, who only observes unfair behavior, is willing to
incur a cost to punish the unfair participant. Zhang (2008) in a BAR study provides an
interesting twist on the strategic interaction present in dyads. The dyad about which she
hypothesize consistes of two managers (agents) who report to the same owner
(principal). She examined the truthfulness and whistle blowing behavior of two agents.
Each agent’s cost is common knowledge to the two agents, but asymmetrical
information to the principal. Essentially, her findings show that the strategic behavior of
the members of the dyad (the agents) depends on the endogenous behavior (fairness) of
the third party (the principal). The actual presence of the third party in the study had two
benefits. First, enhances the internal validity of the study. Second to be sure that the
principal’s behavior in the experiment actually reflects how the principal would act. In
this case offer a lower wage because of concern over being cheated by the agents. This
insight, in turn, can serve as a basis for future BAR on the principal’s behavior in this
setting
Reputation 7
We all utilize information on another’s past behavior (i.e., reputation) in making choices.
Similarly, managers must rely on the reputation of other managers in making investment
decisions and investors, analysts and auditors rely on managers’ reputations in their
interactions with the firms. However, there is limited research on the role of reputation in
the willingness of one party to trust another. This reflects the design of experiments.
Most studies such as those described in the previous sections use a “turnpike” approach.
The participants are anonymously paired and typically do not “play” the same participant
46
more than once. This is intended to eliminate reputation as a factor in decision making
and a confound in the study. Thus, the question of the reputation of individual players
must be set aside. While it is possible for a player, e.g., the proposer in the ultimatum
game, to develop a general expectation of how the other parties will react. This
expectation is a form of a group reputation, stereotype or norm.
What is known is that when manager A is costlessly provided with Manager B’s private
information at the end of a period (after A has made his choice for the period) A forms a
reputation about another party, B. When the experiment is designed so that A and B
interact over several periods, B develops a “reputation” and the quality of decision
making improves relative to the turnpike design (Schwartz and Young 2002). Duffy et
al. (2009) report similar results. Their study has two added treatments. First, they find
that there is an order effect. Participants who receive costless feedback in the first block
of trials utilize the feedback/reputation related information. However, those participants
who receive feedback information in the second block of trials but not in the first, do not
utilize the information to the same degree. In addition, they report that when a nominal
cost is attached to the feedback, participants do not buy the information even though it is
quite profitable to do so.
Note that the two studies discussed above surrogated reputation in a very stylized
manner. It took the form of very specific information. This does encapsulate the idea of
reputation in a laboratory. However, in the “real world” the information that goes into
47
forming a reputation may be less precise and subjective. Given the role that reputation
can play in the business setting, there is room for additional research in this area.
Summary: Strategic Choice Studies
The study of dyads is at the intersection of individual and group BAR. It offers valuable
insights into the individual’s strategic behavior and is important for three reasons. One is
that strategic behavior is integral to many business activities. A second is that
participants act differently when the other party is present rather than hypothetical, (e.g.,
Calegeri et al. 1998) Finally, and perhaps most importantly, the use of dyads permits the
researcher to study both sides of the strategic interaction and do so over a series of
iterations between members of the dyad. The dyad may be composed of peers as in
Zhang (2008) and Towry (2003) or be hierarchical as in the studies of budget negotiation
(Fisher et al. 2000) and the Dictator and Ultimatum games.
BAR research undertaken thus far suggests that the presence of a “real person” with
whom the participant interacts affects their behavior (Calegari et al.1998). BAR using
dyads could be useful in developing a better understanding of how managers and
workers as well as auditors and tax professionals/payers behave in various settings in
addition to insights into the negation process. It also could reveal how “soft behavioral
constraints” such as norms can affect behavior.
The nature of the interaction can vary as can the mechanism used to achieve it. As even
the ultimatum game shows, both parties possess some power, i.e., the ability to affect the
48
behavior of the other, albeit in some cases a very “soft” power. The study of how they
use this power and how the parties interact (their strategies) is what makes the study of
dyads interesting. It is important to note that the results discussed above and elsewhere
often run counter to the simplistic notion of the self-interested, solely wealth oriented
“economic person.”
.
Because dyads can be viewed as a subset of group behavior, studying dyads yields
potentially valuable insights into group behavior. However, there are obvious
limitations. The level of complexity facing the individual members of a group increases
with the number of members interacting. Thus, many of the laboratory studies reported
below under group focused BAR limit the strategic choices available to the interacting
parties. As useful as data gleaned from the study of dyads may be, to better understand
the group phenomenon in question researchers have turned to alternative research
methods relying on naturally occurring events (field work, archival data, surveys and
interviews).
The ability to undertake research on dyads to observe the strategic interaction of the
parties may not be as easy as the BAR focusing on the individual. Dyad research at least
doubles the number of participants required with a comparable increase in the cost of the
experiment. It also can require a high degree of coordination. The participants must be
available at the same time and, typically, in the same place. This suggests that research
of this type is likely to take place in a laboratory or through field work. The former is
likely to mean student participants; the latter, professionals performing their job in their
49
natural environment. This would appear to limit the amount of work of this sort that will
be undertaken using non-student participants.
GROUPS
The label “group” in this context is used to include a variety of organizational
structures. Group is defined as any collection of individuals greater than two and
typically no more than four in laboratory studies. Rarely is it more than five members.*
This is admittedly an arbitrary definition but is consistent with the literature in the area.
The above definition does not specify a particular organizational structure(s) for a group.
Thus, group as defined for this section includes not only peer groups but also teams
where individual members have particular skills, responsibilities, information or
represent particular sub-groups within the organization, as well as hierarchical groups.
Psychology research on group decision making initially focused on the quality and
nature of the individual versus group decisions. Which makes the better decision? Which
makes the riskier decisions? See Sutton and Hayne (1997) or Daroca (1984). Sociology
was interested in the development of networks (e.g., Homans 1951) and the affect of
context variables on group behavior (e.g., Dalton 1959). For a review of sociology based
studies see Miller (2007). More recent studies have focused on the nature of the group
processes: How does the composition of the group (e.g., temporary, permanent) affect its
decision? What is the effect of changes in group membership? How does the decision
rule used by/imposed on the group affect their decision?.
50
BAR on groups has addressed five broad categories of questions: 1) Individual versus
group performance, 2) group decision processes, 3) the role of technical and accounting
systems in group decisions, 4) the role of incentives and 5) the role a group’s
characteristics play in its performance. Many studies have asked questions that relate to
more than one of the above categories. BAR group research has utilized the full range of
research methods including experiments (e.g., Young et al. 1993), surveys (e.g., Chalos
and Poon 2000), protocols (e.g., Bedard et al. 1998), video (Walker and Aritz 2006) and
field research (e.g., Anderson et al. 2002).
Participants
The type of participants used in group research has varied depending primarily on the
subcategory of BAR being studied. As is described below, auditing studies have used
auditors as participants whenever possible. Recently, studies have again began to use
students. This reflects both the declining availability of auditors as participants and the
belief that student participants possess the appropriate knowledge, skill and experience
for many group tasks.
In contrast, the study of groups in other areas, particularly management accounting, has
used a more diverse set of participants. Laboratory studies typically have used students,
albeit often students with significant work experience (e.g., Daroca 1984 Rowe 2004).
Managerial accounting researchers have studied “real people” in field studies (e.g.,
Anderson et al. 2002), and surveys of managers reporting on “on the job” experiences
(e.g., Chalos and Poon 2000).
51
Group Decisions and Processes
It is interesting to note that the much of the early research on groups in BAR was in
auditing (Schultz and Reckers 1981, Reckers and Schultz 1982 Trotman et al. 1983).
This likely reflected the overall level of BAR interest in auditing during this period as
well as the absence of teamwork in US firms at that time. The findings of the auditing
BAR studies generally are consistent with earlier non-BAR group research. For example,
Schultz and Reckers (1981) report that decision making groups exhibited higher
confidence and less variability than individuals. In a topic more closely related to
accounting than generic group research, Schultz and Reckers (1982) report that groups
adhere to the accounting rules more closely than individuals. Indeed, because groups
(audit teams) are the way audits are performed, the use of groups in auditing has been a
continuing area of BAR in auditing (e.g. Solomon 1987 Reckers and Schultz 1993).
In management accounting Daroca (1984) studied participation in a group setting. He
reported that, as Becker and Green (1962) had conjectured, participation could result in
group polarization against management leading to negative rather than positive “gains”
from participation. These findings, like those of Zhang (2008) cited earlier and
Greenberg (1990) indicate that group involvement may have negative outcomes for the
organization if the leader’s style is perceived negatively by the group.
Unlike the typical generic group study that focused solely on the group’s
output/decision, Bedard et al. (1998) studied group processes as well as the efficacy of
52
groups versus individuals. They utilized protocols developed from audio tapes to
examine communication among group members. What type of interactions characterized
successful and unsuccessful groups? Because their sample was of necessity small, the
findings must be viewed tentatively. However, they raised an important issue: What can
be done to make groups more effective? This suggests that we should study process as
well as outcomes. Bedard et al. (1998) raised the issue of how the voting rule, formal or
informal, affects group behavior. Given the range of possible rules, e.g., unanimity,
majority rule and leader with a veto, it is reasonable to expect that the voting rule could
affect the group’s behavior and output/decision. See Birnberg, Pondy and Davis (1970).
This issue is relevant to any group decision making setting within accounting.
Chalos and Poon (2000) also studied participation in a group setting. They used a survey
of and interviews with 177 managers comprising 55 budget teams in a single firm to
collect data on the effect of group process on perceived quality of group decisions. They
studied how the presence of participation in the group’s capital budgeting process affects
information sharing, budget emphasis and self reported measures of performance. They
report that participation positively affects the perception of the amount of performance
information available, amount of information sharing and the reported importance of the
budget process. It is important to note that the researchers did not observe the groups in
action.
Role of Decision Support Systems
53
Just as an individual’s decision making can be affected by the use of a decision support
system (DSS), group decision making can be altered by a DSS. Murthy and Kerr (e.g.,
Murthy and Kerr 2003) investigated the impact of different types of computer-mediatedcommunication (CMC) in different task settings on the quality of the group’s decision.
Typically the conditions compared are face-to-face communication and computer based
system(s). Consonant with Rowe’s (2004) findings, they reported that face-to-face groups
out performed CMC groups when problem solving was the measure of performance.
However, both CMC and face-to-face were equally effective in generating ideas (Murthy
and Kerr 2003 Kerr and Murthy 2004). However, performance appears to be sensitive to
the task setting and the type of CMC. Kerr and Murthy (2004) report that a bulletin board
form of CMC out performs “chat rooms” and face-to-face communication in a decision
setting that requires the the participants to exchange uniquely held information to reach a
successful conclusion,. The latter two perform equally well. This contingency class of
finding is similar to what Rowe (2004) reported on the importance in a group setting of
the “fit” between the group setting and the accounting report.
One caveat in evaluating the above findings is the use of student participants. Ho (1999)
used audit partners, managers and seniors to study the role of computerized decision
support system relative to face-to-face communication in a going concern evaluation. Her
study reports that groups of both types considered evidence that individuals did not. She
reports when comparing the two groups that CMC groups had greater agreement on the
going concern assessment than did face-to-face groups and had greater satisfaction with
their evaluation. A possible explanation is that the “impersonal” CMC setting may
54
neutralize the ability of an influential/powerful individual(s) in the group to exert undue
influence in the group’s decision.
Carpenter (2007) also used auditors in a group research study examining the
recommendation of SAS No. 99. SAS No. 99 requires the use of groups formally in the
audit process through “brainstorming” sessions. Because the brainstorming literature in
psychology using students had not uniformly reported the synergistic behavior expected
from group discussion (Dennis and Valacich 1993), she studied the process in an audit
setting using auditors as participants. She hypothesized that brainstorming groups would
perform better than individuals or nominal groups in part because the group members
were professionals “doing their job” in the experiment rather than student participants
performing a mundane task. Her results support the benefits of brainstorming. Hoffman
and Zimbelman (2009) extended Carpenter (2007). They used brainstorming to improve
the audit program. In their study a panel of experts brainstorm potential modifications in
the fraud detection program for a case study. They report that auditors subsequently given
the case and the modified program performed better than those who were not.
Based on the findings of Ho (1999), Carpenter (2007) and Hoffman and Zimbelman
(2009) it would appear that the external validity of generic group research may not
always apply to BAR. The good news for BAR is that is opens a wide variety of
questions. The bad news is the ability to secure access. In its early stages research on
computer aided group decision making may require field and archival data.
55
Role of Incentive Systems
As in other areas, the role of incentive systems has been very important in this research.
Management accounting group research recognizes the conflict between group
incentives and individual incentives. When the contribution of the individual is
identifiable, an individual based incentive system prevents the free rider problem where
the individual makes a minimal contribution to the group effort and secures a
disproportionately large reward. However, when the only observable measure is the
group outcome, the manager is limited on what he/she can base the payoff (e.g., Drake et
al. 1999).
Researchers have attempted to ascertain ways in which free rider behavior in groups
might be mitigated. Towry (2002) argues that information on peer’s performance that is
unknown to the principal/manager is observable by group members. Thus the group
members are capable of mutual monitoring. She reports that the greater the members’
group identity, the more effective their ability to monitor each other’s behavior (mutual
monitoring) and the greater degree of coordination they can achieve.
Rowe (2004) in a study that examined both systems and incentives takes a slightly
different approach to resolving the free rider problem. Rather than using monitoring, he
used the “information system” to inform the group’s members that free riding in his task
actually was sub-optimal behavior for both the free rider and the group. Rowe modeled
the free rider problem as a public goods dilemma. Each member of a four person group
decided how much of their endowment he/she would contribute anonymously to a
56
common pool. The amount in the pool was tripled and divided equally among the
group’s four members without regard to how much each had contributed to the pool.
Obviously, the self-interested strategy is to contribute nothing and share whatever is in
the tripled common pool. If all four members of the group follow a free rider strategy,
they would be no worse off, i.e., their initial endowment remains intact. At the other
extreme if all members of the group contributed their entire endowment to the pool, the
everyone would be far better off. Rowe found that the group members contribute (and
therefore receive) more when the information system informs an intact group of the
benefits of contributing. This occurs even though the information system did not provide
any new information and there is no communication among group members.
The Impact of Extra-Group Factors
While all of the above studies were laboratory based, BAR also has examined the
behavior of real groups. This permits the researcher to observe the effect of the setting in
which the decision takes place. Rowe et al. (2008) and Anderson et al. (2002) used two
different research methods to study the decision processes of groups in their natural
setting. Both papers study (among other things) group conflict, the sharing of horizontal
asymmetric information and the potential role of consultants. Rowe et al. (2008) reports
the results of a longitudinal, participant-observer field study of a particular cross
functional group within a division of a firm. The group was formed by management to
try to reduce costs. Initially, each group member behaved in a self-interested fashion to
retain slack and benefit their particular function in the organization, i.e., free ride. The
outcome of the study shows that consultants by redesigning the information system were
57
able to mitigate self interested behavior (conflict) and replace it with more group
oriented behaviors. Rowe (2004) later8 tested this finding in a laboratory setting.
Anderson et al. (2002) used a survey supplemented with interviews of group members
within a single firm to examine after the fact the effects of a large number of variables
(e.g., conflict resolution, group size, presence of consultants, importance of decision) on
the complexity of the ABC system adopted by a group and the speed with which it was
adopted. Their study is retrospective and cross-sectional and the data are amenable to
statistical analysis. One of the most significant findings is that complexity of the ABC
system increased with group size. They did not include any data on the group’s
subsequent performance.
Summary
Group research is increasing in BAR. This reflects the increasing use of groups in
practice across areas of accounting. Moreover, because so much of the research is
concerned with how groups function, it would appear that BAR in one area of
accounting is germane to others. In general, research suggests that, consistent with nonBAR research, group members have greater confidence in their decisions than
individuals, there is less variability among the decisions by groups than among
individuals and groups reach more conservative policy decisions. Because the typical
group study does not have a correct decision, the relative performance is not always
ascertainable. However, Bedard et al. (1998) reported in a study that did have a correct
answer that groups perform better but still may consider the proper action and reject it.
58
Greater insight into group decision processes is needed if BAR is to understand why
groups and individuals make different decisions. This would permit BAR to make
positive recommendations about how groups should function rather than solely
descriptive statements. Bedard et al. (1998) showed one way this could be done: using
audio (or video) tape of the committee’s deliberation. One question that emerged from
Bedard et al. (1998) is the critical nature of the voting rule adopted by the group. Others
(Anderson et al. 2002) related selected group characteristic, e.g., group size and use of
consultants, to the group’s recommendation. Group size led to more complex systems
and use of consultants facilitated reaching simpler decisions. Interestingly, the papers in
this area have not examined the role of factors such as the members ex ante willingness
to trust or cooperate on the group’s behavior and whether the group’s members are
volunteers or were assigned to the activity is germane. The latter could be significant in
the behavior of real world group membership.
While the initial research involved face-to-face groups. Recent studies (e.g., Kerr and
Murthy 2004) have examined the role of information technology for group interaction
instead of face-to-face communication. In general, CMC resulted in more confidence
and satisfaction than face-to-face communication. One can only conjecture why this is
true. A possible study would be to insert the same influential or forceful person in each
type of group (CMC and face-to-face) and test to see if CMC moderates his/her
influence. It also is possible that utilizing CMC gives the group members a greater
feeling of involvement.
59
It would appear that group research can be conducted and likely requires the use of a
variety of methods--laboratory, field work, survey and even protocol analysis. It also is
reasonable to assume that archival data may be useful for certain questions. Group
research, like individual research, has certain limitations. Using participants (students or
professionals) with no knowledge of their history with the other members could affect
the results. However, finding existing groups that can be observed in the field means a
loss of control in addition to the expenditure of time on the part of the researcher(s).
Taking the same group members into a laboratory setting may not be feasible. Creating
ad hoc groups in the laboratory using student participants may miss some important
aspects of the group behavior and necessarily results in a less rich environment. Finally,
every “observation” typically requires at least four participants. This can restrict the
number of observations reported in a group study or create a need for a very large
number of participants. All of these considerations argue for the use of multiple methods
to achieve convergent validity.
One type of group that has not received attention in BAR are groups that have an
ongoing existence within an organization. This would include committees and some
teams.9 In these groups the members likely have a “history” both good and bad with
each other. As we saw with dyads, (Favere-Marchasi 2006) familiarity affected
interpersonal behavior. Many committees that are intended to serve a particular function,
e.g., a budgeting committee, have continuing membership and have evolved rules that
the members follow in transacting the committee’s business. This type of group presents
60
a variety of issues such as voting rules and coalition formation that may evolved over
time. For a discussion of this, see Birnberg (2004).
As was the case with the individual focused BAR, group research has a linkage to other
BAR. In this instance it is organization focused research. The linkage, however, is less
obvious. Earlier organization focused BAR was more macro in character. The typical
variables used in contingency research are related to the organization’s characteristics,
e.g., size, task uncertainty and/or complexity. More recent studies are organization
process oriented. This research is more concerned with how a given organization decides
rather than a single characteristic that varies across organizations. Thus the elements of
the network whose output is being studied are important. Group characteristics can be
part of the characteristics of the network that are studied.
ORGANIZATION FOCUS
This research originated with Hopwood (1972) who argued that, when BAR observes
problems with the organization’s control system, the focus of BAR should be the “fit”
between the system and the organization rather than tinkering with the design of the
system. He repeated this concern in his invited presidential address at the 2006 AAA
Annual Meeting (Hopwood 2007). As noted in the initial description of BAR focusing
on organization, exactly which papers fall in this category is not always obvious. Those
BAR studies that present some difficulties in classification examine how particular
characteristics of the organization’s environment affect its accounting/reporting systems
or they examine how those systems affect individuals or groups within the organization,
61
e.g., contingency research. However, this problem of classification should be of little
concern to researchers. For an overviews of the methods used as well as research
findings in this focus see Covaleski et al. (1996), Anderson and Weidner (2007) and
Ahrens and Chapman (2007a, b).
BAR in this category has utilized a variety of methods including field studies, surveys
and archival studies. Field studies typically involve studying a single organization (firm,
subunit, etc.) (e.g., Hopwood 1972) or multiple units within an organization (e.g., Otley
1980). Data typically are collected after the event being researched has taken place via
interviews, surveys and observation of the organization’s activities. The interviews
usually take place after the event studied has occurred, i.e., retrospective. In these studies
researcher collected data may be supplemented by archival data from the unit being
observed (e.g., Anderson et al. 2002). Surveys in organization focused research often
combine elements of field research and survey research. Interviews may precede the
survey and be used to help design it or the interviews may follow the survey and be used
to clarify/amplify its findings. Archival BAR utilizes data collected by the
organization(s) to examine the effect of changes in systems or differences between
systems. Ittner (2007) discusses the strengths and weaknesses of this approach. A few
studies in BAR or cited in BAR involve real-time data collection utilizing participant
observers where the researcher is a part of the activity (e.g., Rowe et al. 2008).
As the various surveys of this literature indicate, the vast majority of these studies in
BAR are in management accounting in for-profit organizations. See Merchant and Van
62
de Stede (2006) (hereafter MVdS) and Dillard and Becker (1997). However, a few
studies cover a variety of not-for-profit organizations (e.g., Covaleski and Dirsmith
1983), audit firms (e.g., Dirsmith and Covaleski 1985) and governmental units (e.g.,
Ansari and Euske 1987 Boland and Pondy 1983). In financial accounting and auditing
research on organizations typically is related to fraud. For example, Cohen et al. (2008a)
used archival news clippings to study the role of managers in firms where fraud was
present.
MVdS (2006) reviewed the extent of field research in BAR. They utilized what by their
own admission was a restrictive definition of field research. To be classified as a field
study by MVdS required that there be intensive collection of data in the field and
extensive reporting of data in the paper. They reported that only one paper in BRIA
during the period they surveyed (1981- 2004) met their criteria and the leading North
American Journals (TAR, JAR, CAR, JAE, Auditing, JMAR and BRIA) published a total
of 23 (8%) of the field studies. Ten of these were in JMAR and seven were in CAR
(MVdS 2006 Table 1). This is not surprising. Though there are a number of active field
researchers in North America, e.g., Merchant, Euske, Anderson and Young, an
examination of MVdS’s (2006) data reveals a significant portion of the organization
focused BAR is performed by European and Australian-New Zealand researchers and is
published in European based accounting journals. AOS and Management Accounting
Research (UK) together published 215 of the 318 (68%) field studies (MVdS 2006
Table 1). Obviously, these data underestimate the level of field research in North
63
American BAR because many of the papers published in European journals were by
North American based researchers.
What distinguishes the organization focused research from the research on individuals
and groups is the relative insignificance of the person(s) in the papers. As the breadth of
vision expands, the ability to focus on the more micro aspects decreases. The study by
Anderson et al. (2002) illustrates this issue. They count the number of persons composing
a team and ask how group size affects the organization’s ability to achieve a desirable
outcome, but do not examine the behavior of the individuals who composed the team.
The types of question investigated in organization oriented BAR are quite varied. A
simple summary includes:

Effect of the “task” on the appropriate accounting/reporting system, i.e.,
contingency research.

The effect of task and goal uncertainty on the nature of accounting.

The effect of internal and external forces on innovations/changes in the
accounting/reporting system.

The importance of accounting relative to other metrics in the organization.

The role of various non-task characteristics of the organization on the
organization’s accounting and/or strategy.
Contingency Studies
64
Contingency research has a long history in BAR. The earliest studies drew on the work of
Burns and Stalker (1961) and typically revolved around task characteristic such as task
uncertainty (e.g., Gordon and Narayanan 1984 Hirst 1981). Papers in this line of research
raise the issue of the “fit” between the task’s/organization’s characteristics and the
appropriate accounting system. Firms that adopt the appropriate accounting system given
the organization’s characteristics should perform better all things being equal than those
that do not have the appropriate fit between characteristics and system. Despite the
intuitive appeal of this line of research, it has not been as popular as one might expect
because of the difficulty in finding appropriate data and research design (Otley 1980).
Fisher (1995, 1998) and Chenhall (2003) reviewed the literature in this area. From their
reviews it is apparent that organizations, like individuals, are diverse and differ on a
variety of dimensions. Each of these dimensions becomes a basis for research on
differences in accounting information and control systems.
A few studies examine the effect of individuals within the organization’s hierarchy on the
form of control exercised. Hopwood (1972, 1974) examines the role of management style
and other organization variables on the way the data of the accounting system are
utilized. While Hopwood’s research would appear to reflect a study of the individual, he
reports that the nature of the organization’s task affected the management style rather
than the selection of a management style being a “free choice.” Also see Otley (1978).
Closely related to these “traditional” contingency studies is the work of Simons (1987,
1990). Simons studied the fit between the strategy of the organization and the form of its
65
control system. He argues that there is a need for a fit between strategy and control
system. Innovative strategies require controls that permit the manager to make critical
decisions, i.e., innovate, if they are to operate effectively. In a recent study on this issue
using a variety of data collection methods, Kober et al. (2003) argue, unlike Simons, that
the link between strategy and control systems over time works in both directions. Not
only does the organization’s strategy affect the form of the control system, but the control
system may alert management to the need for a change in strategy. This idea is consistent
with Hedberg and Jonsson’s (1978) concept of the role of the information system.
The research of Simons (1987) and Kober et al. (2003) illustrate an important method
issue in organization focused research: what can be viewed as cross sectional versus
longitudinal approach to organizational research. Simons’ (1987) work is static. He
examines multiple organizations at a given moment in time using cross sectional analysis.
Ideally, the firms in this type of study are assumed to be in equilibrium so there already
exists the appropriate fit between their strategy and control systems. In contrast, Kober et
al. (2003) did a longitudinal study of a single organization. This permitted them to
examine changes in the nature of the organization’s control system over time. Note that
the answer to the contingency question of fit between strategy and control system does
not change. However, the longitudinal study provided us with a richer picture of how the
fit is achieved, maintained and ultimately may again change when the firm’s environment
changes. In a study similar to Kober et al. (2003) Cardinal et al. (2004) describe the
evolution of an organization’s control system over a longer period. Hopwood (1987) used
historical research methods to obtain insight into how Josiah Wedgwood adapted the
66
activities of Wedgwood Potteries to fit changing economic conditions. For a discussion
of the use of historical accounting research, see Luft (2007)
A set of studies that relate incentives to the nature of the task would appear to potentially
relate to both contingency research in organizations and individual focused BAR. The
original behavioral paper by Ouchi and Maguire (1975) clearly was an attempt to
examine the fit between incentive schemes used in particular task settings and the
prescriptions of agency theory. For example, do firms where the outcome of the workers’
task is measurable but effort is not, reward the worker on performance as agency theory
suggests? Their findings and later work such as Eisenhardt (1989) support the broad
outlines of agency theory. A more organization focused study examines the new (nonfinancial) measures developed by the organization to increase productivity. Banker et al.
(2000) took advantage of a naturally occurring experiment and used archival data from a
hotel firm to assess the efficacy of a new set of procedures intended enhance profitability
by increasing customer satisfaction and their return visits. Banker et al. (1999) used
archival data to examine the effectiveness of an organization’s decision to alter its
incentive scheme. Both of these studies are concerned with the organization’s policies
and the policies’ effects on the organization’s performance rather than the policies’
effects on the individuals who compose the organization. This is similar to studying the
behavior of markets as opposed to the actions of the individuals participating in the
market.
67
Burchell et al. (1980) extended the nature of the contingencies analyzed. They argued
that the role of the accounting system varied not only based on the characteristics of the
task, but also with the extent of agreement present among the parties on their goals. Their
paper argues against the role of accounting as a neutral technical system and a source of
objective data for decision making. Rather, they argue both the knowledge of the task and
agreement over goals is problematic. Thus the outputs of the accounting system may be
seen differently by the parties involved and can serve a variety of purposes depending on
the situation. For example, they argue that the accounting data may be the inputs into
“argument machines” (high knowledge, low goal agreement) or “learning machines”
(low knowledge, high goal agreement). Different settings place different stresses on the
accounting system. Miller and O’Leary (1987) discuss how these forces can work.
System Innovation
Periodically, accountants have studied how innovations in the firm’s accounting system
occur. There are two broad types of studies. One attempts to ascertain the characteristics
of firms adopting the accounting innovation. Others are concerned with ascertaining the
characteristics of a successful innovation.
Few studies attempt to understand why innovations such as ABC or Balanced Scorecard
are adopted by some organizations and not others. (Chenhall 2003). Given the range of
organizations required to study the diffusion of an innovation, it is not surprising that the
data are collected through the use of surveys. Gosselin (1997) studies the effect of the
organization’s strategy and structure on the adoption of ABC. Obviously, the economic
68
environment also is relevant. It is only conjecture, but one might argue that the advent of
the recent changes in management and accounting, e.g., ABC, value chain analysis,
Balanced Scorecard, resulted from the presence of external pressure on the organization
in the form of significantly increased (foreign) competition. How desirable would
organizations have found the adoption of ABC in the absence of competition from Japan?
Would organizations have adopted it if their profits had been high?
It also is important to study why innovations such as ABC and Balanced Scorecard do
not succeed. Brunsson (1990) suggests one explanation. He argues that there is a
difference between choice of a system (decision making) and gaining approval from the
appropriate members of management to implement that system. The latter, Brunsson
(1990) argues, is a political decision reflecting the diverse goals and views of the
organization’s members. His argument is in the spirit of Burchell et al. (1980) who argue
decisions reflect diverse goals and power.
Role of Accounting in the Organization
One of the most interesting lines of organization focused research discusses the relative
importance of accounting data in the organization. While as accountants we may believe
that accounting data are the basis for decision making in organizations, there is evidence
that accounting is not always the primary basis for a decision making. Lawrenson (1992)
researched decision making in British Rail when engineers occupied the dominant role in
the organization. Technical (engineering) data were of primary importance and was
supplemented by accounting data. This changed when the Thatcher government proposed
69
privatizing British Rail. It then was important that the organization be able to show a
profit. Accounting data now were of paramount importance in decision making (Dent
1991) and Engineering data were relegated to a secondary role.
Other researchers have studied why accounting achieved a particular role in the
organization looking at factors within the organization less readily apparent than
Thatcher’s policy shift. It would appear that the social environment within which
accounting exists can affect its role in the organization (Bougen 1989). Ansari and Euske
(1987) reported that intra-organization conflict affected the extent to which a new system
was implemented by repair depots. While the home office (DOD) thought it was
implemented, the repair depot continued to manage its activities with the old system.
Berry et al. (1985) report a similar finding within the England’s National Coal Board. At
the operating level the accounting system focused on costs and output. At the district and
central management level the accounting system was much more sophisticated and
focused on planning and control In this case the two systems appear to co-exist because
they met the differing needs of the different user groups. Overall, it would appear that
forces within the organization influence the preference for and use of accounting data.
As noted earlier, the boundaries for organization focused research is not without
controversy. Others, e.g., Dillard and Becker (1997) have a broader view of what would
be included. Many of the studies relate to how accounting serves broader societal issues.
The emphasis of these studies, however, is better understood in the context of accounting
70
and its societal context. Thus I have chosen to consider their focus, which is on
accounting and the external environment, in the next section.
Summary
Organization focused BAR asks how the characteristics of the organization affect the
accounting system. These characteristics have been very broadly defined. At their
simplest the characteristics refer to the nature of the firm, e.g., its production
characteristics, size, organization and even if it is a for profit or not-for-profit
organization. A more complex view relates to how accounting and/or organizational
innovations, e.g., incentive schemes and new approaches such as ABC, impact the nature
of the organization’s adoption of a particular accounting system. At the other extreme are
those studies that are intended to understand the relative role of accounting in the
organization. Is it the metric used in making decisions in the organization or only one of
the metrics used? What factors influence the answer to the previous question? All in all, it
reflects a broad literature that is most concerned with management accounting and for
profit organizations.
The research reviewed in this section continues to reflect the richness of methods and
disciplines utilize in BAR. The methods used reflect the same wide array found in the
other research foci-field studies, field surveys combined with interviews, archival data
and naturally occurring experiments. The data are both qualitative and quantitative and
the research may investigate anywhere from a single unit within a firm to multiple
organizations.
71
The most striking aspect of the organization focused BAR is the disciplines on which the
researchers draw. They tend to be a different set from those found in the other sections
reviewed. Individual, dyad and group focused studies draw primarily from psychology
and economics and to a much lesser degree on sociology for both theories and method. In
organization focused BAR it is exactly the opposite. Organization focused BAR draws
more on organization theory and sociology. Data often are qualitative leading the
researcher to rely heavily on their interpretation of the data and “draw conclusions” rather
than present the results of statistical tests with their apparent objectivity.
It would be a mistake for researchers who do not do organization focused BAR to ignore
it. Not only are the findings relevant to those who wish understand how accounting
functions within organizations, but this research often serves as the basis for more
controlled studies that are narrower in their focus. Conclusions drawn from small samples
or from qualitative data may provide laboratory researchers with an issue that merits
further inquiry. In this regard see Rowe (2004) and Rowe et al. (2008). The latter
informed and motivated the former study. There also has been a link between
organizational culture and individual (ethical) behavior (Windsor and Ashkenazey 1995).
Indeed, the role of an organization’s culture could affect and/or reinforce other aspects of
individual behavior, e.g., trust, honesty.
ENVIRONMENTAL CONDITIONS
72
The BAR included in this focus is concerned with the interaction between society and
accounting and vice-versa. BAR of this type examines how the environment, i.e., the
context, in which the organization exists affects accounting and how the resulting
accounting affects the members of the organization. In that sense it is a study of the
context within which accounting(s) comes into being and how the environment affects
the development of the resulting systems. It also studies how accounting can affect the
environment in which the organization carries on its activities.10
Research in this area draws on a different set of non-accounting research than the studies
discussed in the previous sections. This includes a variety of sociological and
philosophical theories and theorists, e.g., Braverman, Habermass, Latour, Foucault
(Cooper and Hopper 2007). The research may be perceived as more diverse than other
foci, but this reflects the difference in theory base rather than issues. The general topics
include:

The way environment and/or environmental events have influenced accounting in
the firm.

The manner in which accounting has been used to “control” or manipulate firm
members or society.

The impact of the firm’s accounting on the firm’s external environment.

Simulation of macro policies that do not involve accounting choices. This would
include studies of market mechanisms.
73
The first two topics are the most closely related conceptually. The environmental forces
affect the organization’s environment and the nature of the accounting that develops
within the organization. The particular accounting system that results from the
environmental forces may have as its intent specific effects on the behavior of the
organization’s members. The latter two research strands are quite distinct. The third type
of research includes both examples of how accounting is used to affect the organization’s
external environment as well as unintended effects of accounting on the environment. For
a review of this research see Baxter and Chua (2003) and Cooper and Hopper (2007).
Simulation through BAR studies of proposed policy changes examines the manner in
which accounting policy can affect/is linked to policy issues.
An element of the environment, national culture, by definition is a part of this focus.
Nearly all BAR on the effects of national culture are related to the behavior of
individuals; research discussed under the individual focus. An exception is Fligstein
(1998). He discusses the role of national culture on the importance of quantification. He
contrasts France and the U.S., where the latter’s culture stresses measurement to a far
greater extent than the former’s culture does. His arguments suggest the preference for
rule based versus principle based accounting is rooted in the national culture of the two
countries. It might also explain the different foci of North American and European BAR.
Power and Conflict
A central theme of much of the BAR in this area is the attempt by individuals or groups
to exert power over others and the resulting conflict. The argument, as advanced by
74
Cooper and Hopper (2007) in their review of the critical theory literature, is that one
cannot fully understand the accounting system within an organization without examining
the social, political and economic context that produced it. Moreover, once in place, they
argue, the system has implications beyond its mechanistic function. It affects the
behaviors within the organization beyond those usually ascribed to the system.
A significant portion of contemporary BAR in this area draws on the work of Foucault
(1977) on power and control. To those researchers accounting is not (only) a means of
measuring and reporting outcomes, but more importantly is a means of exerting control
over other “units,” e.g. Miller and O’Leary (1987). Thus it is concerned with the process
through which the change occurs and the relative power of the parties who cause it to
occur. This, in turn, means that the studies tend to reflect events occurring within a single
“organization.” That organization typically is a firm such as Caterpillar (Miller and
O’Leary 1997). However, others have studied broader organizations such as the (English)
National Coal Board (Berry et al. 1985), not-for profits (Covaleski and Dirsmith 1983)
and standard setting bodies (Durocher, Cortin and Cote 2007).
This research has been more active in the study of public management compared to other
areas of BAR discussed here. See Cooper and Hopper (2007, 222-228) for a review. The
central theme to these papers regardless of their particular context is the need to
understand accounting systems as the product of forces both internal and external to the
organization. They reject the notion that changes in the systems always result from
rational decision making. This can be interpreted by extending the approach of Burchell
75
et al. (1980) to an inter-organization context. When groups in the environment have
different goals, accounting is not perceived as objective by the parties. Rather they are
selective in the accounting data they use to defend/justify their position or attack their
opponent’s position. While this process often is explicit and observable, e.g., changes in
specific sections of the tax code, more typically it is not. To understand why an
accounting/measurement system is in place and how it came to be we must analyze the
events that preceded its adoption. While the questions, indeed, are behavioral, they may
lead us to using historical research techniques. See Luft (2007) or Jones and Mellett
(2007). An example of this approach is Jeacle and Walsh (2002) who studied the
evolution of credit analysis and the shift in responsibility (“power”) that accompanied the
changes.
Another interesting example of this research is Durocher et al. (2007). They review the
literature discussing various groups’ attempts to influence the financial accounting
standard setting process and develop an explanatory theory of the decision of a user
group whether to attempt to influence the process. It reflects the fact that in studying the
behavior in the “environment” many of the same issues discussed under other foci of
analysis in this paper also exist in this context. For example, Durocher et al. (2007)
utilizes models similar to those found in BAR relating to the motivation of the individual
to explain the behavior of the groups involved. It also utilizes themes of power and
legitimacy found in this paper under organizations.
76
While much of this literature is almost by definition a series of unrelated case studies,
there is a degree of overlap. This overlap, in turn, provides the basis for more general
conclusions. For example, in the final phase of their study of UK health service, Jones
and Millet (2007) discuss the same “environmental force” (Thatcher’s desire to privatize
governmental services) that Dent (1991) does for British Rail.
How Accounting Affects the Organization’s Environment
There is much less BAR in this area. One type could be labeled an “unintended
consequence” of the accounting system. These are changes that occur externally to the
organization as the result of an organization’s accounting innovation, but were not the
intent of the innovation. An example of such a consequence is the evolution of standard
sizes in clothing. Jeacle (2003a) argues that the change occurred as the result of
standardizing production and the adoption of standard costs in the clothing industry. She
(Jeacle 2003b, 2005) also described the role of standardization on other industries. While
many other examples such as this may exist, relatively few have been researched.
Organizations also consciously use accounting to influence their environments. One
example is Chwastiak (2001). She summarizes an interesting series of papers describing
how measurement systems were used by the Department of Defense (DOD) to legitimize
the Viet Nam war effort and the related expenditures. She argues that, because of
pressure from external groups, accounting systems were used to provide an aura of
efficiency that was not truly present. Her central argument across these papers is that the
DOD responded to the external pressure groups by selecting an accounting system that
77
provided the appearance of efficiency and effectiveness that, in reality, was not present.
Their intent was to provide a rationale for expanded military budgets consistent with
what Fligstein (1998) would have labeled the U.S. national culture.
It is not unusual for organizations to use press releases, etc. to present information
supporting a particular point of view. Tinker and Neimark (1987) is an example of how
an organization, General Motors, used accounting (their annual reports from 1917 to
1976) to present their position on the social issues of gender and class.
Simulation of Policies and Market Mechanisms
BAR on the effect of new accounting policies was discussed under individuals because
the research question concerned how the individual, i.e., a particular group of users such
as shareholders, analysts or loan officers, would respond to the accounting change be it
internal (e.g., the Balanced Scorecard) or external (e.g., partial consolidations). These
studies clearly are accounting research.
Behavioral research conducted by accounting researchers concerned with economic
policy and market mechanisms clearly lies within the domain of behavioral research and
experimental economics. The question is whether or not their being performed by
accounting researchers qualifies them as behavioral accounting research? They are
included, albeit briefly, to indicate the scope of the behavioral research being done by
accountants.
78
While this research primarily deals with generic topics, it is possible for studies using
experimental markets to examine issues clearly with the BAR domain. A study of this
type can examine the role of auditing and auditors in the behavior of the market for
assets. While this research typically has been done using archival markets data,
experimental markets provide the researcher with the opportunity to observe conditions
that currently do not exist, may not exist to a sufficient degree or where the required data
are not available. An example of this is Ackert, Church and Zhang (2001) who studied
the effect of uncertain litigation cost on seller behavior.
The research done on market mechanisms, i.e., various types of auctions, is most relevant
to the study of markets in experimental economics. For a discussion of the nature of this
research see Sunder (1995). The papers are unlikely to appear in accounting journals.
Their findings may have relevance to markets within the organization. However, thus far
there is no research in this area. Other research has focused on how particular
characteristics of a market such as information (Ganguly et al. 1994), the use of “circuit
breakers” in a market (Ackert, Church and Jayaraman 2001) and bubbles (Ackert, et al.
(2005) affect the outcomes. Dopuch et al. (1989) discuss the role of experimental markets
in auditing research.
Summary
Perhaps the most significant contribution of the BAR reviewed in this section is not the
specific findings. Rather, it is its central theme: accounting does not exist in a vacuum
and factors and forces external to the organization affect the accounting system and, in
79
turn, the members of that organization. It is equally, though less obviously, the case that
changes in the organization’s accounting system can impact the external environment. As
the result, this research can differ significantly from BAR discussed in the three previous
sections. This BAR often involves a longitudinal (historical) study of an organization and
examines the role that relative power plays in the development of the organization.
Environment focused research draws on a different research knowledge base than that
which predominates in the other areas. It draws much more heavily on sociology,
anthropology and critical theory research in other research domains. This tends to give
the impression that this BAR is distinct from and unrelated to the other research foci. In
reality, it can be viewed as providing the context within which the other research,
particularly organization focused research, must be viewed. This does not mean that it is
an input to all BAR. However, just as organization focused research may inform group
and individual focused BAR, this research may inform organization and group focused
research.
The use of experimental markets to study macro behavior of investors under particular
conditions appears to be an emerging area (see Moser 1998). As such it represents the
obverse to the individual focused research on investor behavior. This research may alter
the balance of financial accounting BAR from the behavior of the individual to the
manner in which the sum of these behaviors work their way through the market
mechanism just as archival financial accounting moved the focus of accounting research
from the individual effects to market effects.
80
Conclusion
Each section of this paper ended with a summary intended to reflect the role and direction
of research in that area. Thus the conclusions that can be drawn reflect the overall trends
in these diverse areas. In general, it would appear in the 20 years since B-S (1989) BAR
has continued to flourish. All of the foci used to organize the research in that paper have
continued to develop. Specifically, individual research has continued to fulfill its role in
helping us understand how data developed by new and/or proposed changes in
accounting systems may affect behavior. As new systems, e.g., the balanced scorecard,
are being utilized, BAR has examined their impact. Similarly, as the use of groups in
organizations has increased, group research in BAR also has grown.
BAR also has developed a more sophisticated view of areas researched by earlier BAR.
BAR now recognizes the presence of strategic behavior and has designed studies to
incorporate it into the research. This has led to research on dyads in areas where earlier
BAR focused on the individual, e.g., participation.
It is an interesting question to consider whether a review written in 2029 will discuss the
role of neuroscience in BAR and the expanded role of experimental markets. While both
of these methods appear promising, they also are costly and in the case of experimental
markets require a large subject pool. This means that students are the most likely
participants. Since many questions BAR studies require expertise, this may inhibit an
extensive use of experimental markets.
81
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Endnotes
101
This organization is similar to Hopwood’s (1976, 5) figure 1.1 describing the social
context of accounting. He had four categories: individual needs, group pressures and
control, organizational structures and control strategies and the social economic
environment. The organization used here differs from Hopwood’s by recognizing
differences within the group pressures and control categories between individuals and
groups.
1
In an interesting twist Allee et al. (2007) used archival financial accounting data to
provide convergent validity for BAR hypotheses.
2
3Those
familiar with the Dictator game discussed below will recognize that Young’s
(1985) task was essentially the use of a Dictator Game to simulate participation.
4
For a discussion of the use of eye movements in marketing research see Zaltman (1997)
For a discussion of this literature from an auditing perspective but germane to all BAR
see Hooks and Schultz (1996) and the symposium in Auditing (e.g., Dopuch 1992 and
Gibbons 1992). For the contrary view from psychology, see Kelman (1967).
5
6
There are, of course, designs where the recipient-participant could be needed later. For
example, the recipient-participant in the early rounds could in the later rounds play the
role of the dictator. The researcher could study the interaction between the amount
offered to a participant and the amount subsequently offered by that participant when
acting as the dictator.
7
Archival markets research has concerned itself with audit firm reputation, particularly in
the wake of Arthur Andersen, e.g., Barton (2005). There has been very limited BAR in
this area (Mayhew 2001, Mayhew et al. 2001). The BAR has characterized the audit firm
by using an individual in an experimental markets study.
8
Despite the dates of publication, the field research was conducted before the
experimental study.
Team is used here in the sports sense of the word: a group where each member has a
specific responsibility. The governance literature that has typically been archival
empirical can be done as a BAR study of the board and/or the audit committee. See
Cohen (2008b).
9
10
For purposes of classification, the question is the relative degree to which the research
is concerned with the external environment and the role of accounting in the organization.
Dent’s paper could easily have been considered in this section. Its inclusion in the
organizations section reflected its relationship to the other papers discussed there.
102