The effect of a superior's preference and process control on a subordinate's information processing strategy

Abstract

The purpose of this study is to experimentally investigate whether management controls can mitigate a subordinate's biased cognitive strategy arising from a superior-subordinate goal-information asymmetry in a capital budgeting process. Goal-information asymmetry occurs when a subordinate has less knowledge of a superior's goal preference than the superior does. A subordinate's selection of an information-processing strategy in proposing an investment proposal is expected to be affected by the level of goal-information asymmetry (present/absent) which, in turn, can have detrimental effects on the effectiveness and/or efficiency of his or her judgement and decision-making. Finding management controls to mitigate these effects will improve the qualities of managers' information processing and decision making. One kind of management controls – process justification – is the focus of this study. The results showed that the process justification control influenced the subjects' selection of information processing strategies in reacting to the absence or presence of goal-information asymmetry.