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The role of consultants and management prestige in management control system adoption

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  • Leiby, Justin

Abstract

Consultants are often involved in management control system (MCS) adoption, but the literature ignores their role. In two experimental studies, I identify conditions in which consultant recommendations and, in turn, manager MCS choices intend to benefit management rather than optimize benefits for the firm. The experiments focus on the effects of management's prestige. I find that professional consultants recommend new (as opposed to established) MCS to high prestige managers, despite believing that established MCS will benefit the firm. In turn, high prestige managers disproportionately choose the new (as opposed to established) MCS when recommended and believe doing so is the highest quality choice, even when NPV and risk are constant across MCS. When prestige is moderate, consultants recommend established MCS and managers gravitate towards these MCS. I argue that consultant involvement can lead to an MCS adoption risk: recommending and choosing MCS because they are new or used by others, not because they are better choices for the firm.

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  • Leiby, Justin, 2018. "The role of consultants and management prestige in management control system adoption," Accounting, Organizations and Society, Elsevier, vol. 66(C), pages 1-13.
    • Handle: RePEc:eee:aosoci:v:66:y:2018:i:c:p:1-13
    DOI: 10.1016/j.aos.2018.03.003
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    1. Francesco Gangi & Jérôme Méric & Rémi Jardat & Lucia Michela Daniele, 2019. "Business for society," Post-Print hal-02382307, HAL.

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