The Role of Incomplete Measurement Behavior as a Part of a Package of Control Practices Mediating Between Exploitation and Exploration

Abstract

This paper examines the use of incomplete accounting measures as a control practice to align strategy with exploration and exploitation (March, 1991). We examine empirically relationships between Incomplete Measurement Behavior (IMB), Formal Controls, and Organic Innovative Culture for both internal- and market-facing activities. IMB is a control practice that allows managers to mediate the tension between exploration and exploitation using other sources of information. We find evidence suggesting formal completeness acts as a substitute for IMB for market-facing activities. Further organic innovative cultures complement formal controls and indirectly substitute for IMB. Using equifinality as a criterion, we conclude there are indications that market-facing activities use interdependent management control systems (MCS) to mediate between exploitation and exploration strategies. We find indications that a reductionist approach of examining incomplete measures alone, without consideration of control practices, may lead to under specification.