IT MONITORING: A REAL EFFORT EXPERIMENT

Abstract

Agency theory states that constant monitoring is necessary to increase agents' effort. While the existing experimental evidence focuses on probabilistic output monitoring, this article studies the impact of constant and continuous monitoring allowed by information technologies (IT) and compares it with the classic imperfect and probabilistic form. We analyze thus the differences in the effects of IT vs. classic monitoring on agents' behaviors. We also analyze the impacts on principal's behaviors that are largely ignored in the existing literature. For this purpose, we conducted a controlled laboratory experiment using a virtual organization setting which enables us to introduce a real-effort work task as well as IT monitoring and shirking activities (leisure and cheating). We find that IT monitoring implies a disciplining effect which appears when the agents are in an endogenous share pay scheme and perceive the sanction of being caught shirking. IT monitoring, even if it implies a time cost (that the principal cannot dedicate to work), is yet useful for the principal to sanction counterproductive activities, especially cheating, and is not detrimental to his/her performance.