Performance measurement systems as generators of cognitive conflict in ambidextrous firms

Abstract

This study explores the decision-facilitating role of performance measurement systems (PMSs) in firms attempting to translate competence ambidexterity (i.e., the simultaneous pursuit of exploration and exploitation) into innovation ambidexterity outcomes (i.e., the achievement of both radical and incremental innovations). Drawing on paradox and organisational conflict literature, this study emphasises the role of cognitive conflict, generated by PMSs, in shaping the relationships between competence ambidexterity and innovation ambidexterity. Based on survey data from a sample of 90 Irish firms, our findings indicate that competence ambidexterity is associated with (a) the choice to have a balanced set of performance measures, and (b) the use of PMSs for frequent and intensive debate between top managers. Furthermore, the study reveals that these choices are interdependent, as they function as complements in generating cognitive conflict, which in turn drives the realisation of innovation ambidexterity outcomes. The results also show that cognitive conflict is not directly associated with the development of competence ambidexterity, but is instead generated through the conjoint action of a balanced PMS design and the use of PMSs for intensive debate. Overall, this study demonstrates the interdependent nature of choices concerning the design and use of PMSs, and the significant role of PMSs as generators of cognitive conflict in firms attempting to achieve ambidexterity.

Ambidextrous practices in public service organizations: innovation and optimization tensions in Dutch water authorities

“…Policies and procedures at the organizational level should not only support the invention phase of innovation but should also anticipate and support implementation by ensuring connection to organizational goals as well as to regular operation. Performance management systems should include measures for innovation as well as for optimization and support ambidextrous behaviour and learning both at the individual and unit level, as well as dialogue and comprehensive evaluation on how public performance is best served (Bedford, Bisbe and Sweeney 2019).…”

Strategy and innovation: the mediating role of management accountants and management accounting systems’ use

“…The provision of MAS information for decision making is likely to disrupt complacency by stimulating discussions and debate among managers which is required for a better understanding of consequences of exploratory innovations. The study by Bedford et al (2019) shows that MAS that are used to stimulate debate during the decision making process motivate cognitive conflict, that is questioning of existing positions, which is needed for explorative innovation. When MAS are used to make decisions, the thresholds for action are more likely to be made explicit resulting in actually triggering peoples' action to make definitive decisions to implement or not to implement a certain explorative solution.…”

Psychology in management accounting and control research: an overview of the recent literature

“…For example, as the findings of a field study suggest, the incorporation of behavioral nudges into performance measurement models can serve to exploit or mitigate managers' heuristics or cognitive biases (Malina and Selto 2015). Recent research employs cognitive psychology to investigate the decision-facilitating role of PMSs using the concept of cognitive conflict (Bedford et al 2019). Bedford et al (2019) explain that cognitive conflict is triggered by the perception of differences in opinions or judgments of appropriate actions or procedures to achieve an objective.…”

“…Recent research employs cognitive psychology to investigate the decision-facilitating role of PMSs using the concept of cognitive conflict (Bedford et al 2019). Bedford et al (2019) explain that cognitive conflict is triggered by the perception of differences in opinions or judgments of appropriate actions or procedures to achieve an objective. They find that firms choose performance measures that induce cognitive conflict, allowing them to translate ambidextrous strategies into innovation.…”