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Strategy Selection, Surrogation, and Strategic Performance Measurement Systems


  • Accepted by Merle Erickson. The authors appreciate the helpful comments and suggestions from an anonymous reviewer, as well as from Scott Emett, Jeff Hales, Kathryn Kadous, Michael Majerczyk, Axel Schulz, Chad Simon, Steve Smith, Tom Vance, David Wood, and Donnie Young, as well as participants at the American Accounting Association Annual Meeting, the Accounting, Behavior and Organization Midyear Meeting, Brigham Young University's Accounting Research Symposium, and Emory University's Experiment-Based-Research Brownbag and workshop participants at Georgia Tech, Monash University, and University of Melbourne. We also appreciate the research assistance of Song Wang and Ye Wang. This research benefited from a Dean's Research Grant from the Goizueta Business School at Emory University.


Strategic performance measurement systems operationalize firm strategy with a set of performance measures. A consequence of such alignment is the tendency for managers to lose sight of the strategic construct(s) the measures are intended to represent, and subsequently act as though the measures are the constructs of interest, a phenomenon referred to as surrogation. We investigate how involvement in strategy selection affects managers’ propensity to exhibit surrogation. We predict and find that strategy selection reduces surrogation. Surprisingly, we do not find that engaging in strategy deliberation, a key process underlying strategy selection, reduces surrogation. Thus, managers’ involvement in the actual choice of strategy appears to be both a necessary and sufficient condition to mitigate surrogation. Our paper broadens understanding of factors that influence surrogation, such as the effects of different aspects of managers’ strategic involvement and buy-in. Further, by documenting how managers behave within (as opposed to simply with) strategic performance measurement systems, we highlight the potential for managers to endogenously influence the effectiveness of such systems.