Defining Deviancy Down: The Development of Norms Under Imperfect Controls

Abstract

This study investigates how formal control systems and the behavior of peers influence behavior in accounting settings. We manipulate formal controls and peer behavior (social norms) in a laboratory experiment, allowing us to precisely investigate the interactive effect of these two factors on behavior. We provide evidence that weak controls lead to more socially-interested behavior, while strong controls lead to more self-interested behavior. We also provide evidence that individuals conform more to social norms that conflict with the behavior that formal controls induce. Finally, we find that individuals preferentially attend and conform to the self-interested actions of peers (as opposed to the socially-interested actions of their peers), causing self-interested norms to be “stickier” than socially-interested norms for behavior. Our results suggest that the interaction of formal controls and normative influence will lead to a gradual movement toward noncompliance with management expectations or regulatory requirements in accounting contexts.