The joint effects of performance measurement system design and TMT cognitive conflict on innovation ambidexterity

Prior research examining the consequences of specific performance measurement system (PMS) design attributes is largely focused on processes and decisions at an individual level. We extend this research by examining how PMS design attributes interact with group socio-cognitive processes to influence firm level outcomes. Specifically, we examine how the interaction between two PMS design attributes related to comprehensiveness – scope and integration – and top management team (TMT) cognitive conflict affect the achievement of innovation ambidexterity. Based on cross-sectional data collected from a survey of TMT members of 90 firms operating in innovative industries, we find that PMSs with broad scope positively interact with cognitive conflict, leading to higher innovation ambidexterity, while highly integrated PMSs negatively interact with cognitive conflict, leading to lower innovation ambidexterity. Overall, our study demonstrates the importance of disentangling the interplay of different PMS design attributes with group socio-cognitive processes for understanding how firms achieve innovation ambidexterity.