Theories underpinning empirical performance measurement research

We review the literature on performance measurement system design that draws on economic, psychological, and sociological theories of managerial and firm behavior. performance measurement design choices are influenced by assumptions about objectives, beliefs, judgments, and expectations of employees and firms, the nature of the information environment, and the importance ceded to the organizational and social context in which individuals and firms operate. The interaction between the theoretical frameworks and their preferred level of analysis - that is, individuals, dyads, teams, firms, and society, result in different normative prescriptions, positivist interpretations of appropriate performance measurement system design, and their expected and unexpected outcomes. We provide examples from the literature and outline the contributions of research from each theoretical perspective. We conclude that while insightful and impactful research has occurred within each perspective, performance system design is a complex problem, and finding robust solutions requires synthesis across a variety of theoretical frameworks.