A Marathon, a Series of Sprints, or Both? Tournament Horizon and Dynamic Task Complexity in Multi-Period Settings

• Published in: The Accounting review 2016-09, Vol.91 (5), p.1391-1410
• Main Authors: Choi, Jongwoon (Willie), Newman, Andrew H., Tafkov, Ivo D.
• Format: Article
• Language: English
• Subjects: Decision making; Studies; Tournaments & championships
• ISSN: 0001-4826; 1558-7967
• DOI: 10.2308/accr-51358

When using a tournament in multi-period settings, firms have discretion in selecting the tournament horizon. For example, firms can use a single tournament (a grand tournament) or a sequence of multiple tournaments, each with a shorter horizon than a grand tournament (a repeated tournament). Firms have also begun to use a combination of both in which a repeated tournament is embedded within a grand tournament (a hybrid tournament). Using an experiment, we investigate whether the effect of tournament horizon on performance depends on the dynamic complexity of the task, which reflects the potential for effort in one period to influence the link between effort and performance in future periods. When dynamic task complexity is low, we find that performance is greatest in the hybrid tournament, followed by the repeated and then the grand tournament. In contrast, when dynamic task complexity is high, we find that performance is greatest in the repeated tournament, followed by the grand and hybrid tournaments, with similar performance in the latter two tournaments. More generally, the results of our experiment suggest that the effect of tournament horizon on performance depends on dynamic task complexity. These results can help firms make better decisions when designing their tournaments by reinforcing the need to align the tournament horizon with the task.