Fostering creativity, innovation, and CSR through management control systems

In the first chapter, I explore how artificial intelligence (AI) evaluators of creative outputs, instead of human evaluators, influence employees’ creativity. I also investigate whether the effect depends on the type of feedback provided by the evaluator and on whether the evaluation influences employees’ rewards. In an online experiment, I find that AI evaluators reduce employees’ creativity compared with human evaluators when the feedback includes numeric scores and the evaluation influences employees’ rewards. In contrast, the effect is not significant when the feedback is non-numeric or the evaluation does not influence employees’ rewards. Employees perceive AI evaluators that generate numeric feedback as adopting a quantitative evaluation approach. This perception diminishes intrinsic motivation, thereby reducing employees’ creativity. Results can be explained by a process of perspective-taking. Employees may struggle to anticipate the assessment of evaluators that they perceive as different from themselves, such as AIs adopting a quantitative evaluation approach. In the second chapter, coauthored with Eddy Cardinaels and Naomi Soderstrom, we study how mission statements interact with compensation interdependence to influence employees’ CSR engagement. When incentive plans tie employees’ wealth to financial performance, employees often face conflicts between prioritizing financial performance and pursuing prosocial outcomes (e.g., external CSR). This tension amplifies under compensation interdependence, where prosocial actions that reduce financial performance may also reduce colleagues’ pay. Employees may fear being viewed negatively by their peers for prosocial decisions that harm their company’s financial performance and mutual bonuses when their compensation is interdependent. In an online experiment, we document that stakeholder-oriented mission statements can mitigate this tension by fostering social norms that legitimize care for external stakeholders. Under compensation interdependence, these mission statements lead to more prosocial choices benefiting external stakeholders than shareholder-oriented missions. However, when compensation interdependence is absent, the type of mission statement does not alter employees’ decisions. Our research contributes to the literature on mission statements as management control systems, highlighting that their importance may increase with compensation interdependence. In the third and final chapter, coauthored with Ariela Caglio and Angelo Ditillo, we examine the determinants and consequences of incentive plan modifications favoring CEOs (IPMs) after uncontrollable events that hinder target attainment. Using data from S&P 500 firms during 2020, the first year of COVID-19, we find that IPMs are more likely in firms that are more severely affected by the pandemic and when CEOs have stronger departure incentives. However, such IPMs are less likely in firms with a compensation committee, suggesting that such modifications are not always in the best interest of shareholders. Examining investment decisions, we find that IPMs are associated with increases in R&D spending and environmental and social (ES) performance. This association is more pronounced for IPMs affecting long-term incentive plans rather than short-term ones. Taken together, these results suggest that, while IPMs may raise governance concerns, they can also mitigate managerial myopia by encouraging longer-term investments.