Bounded rationality, blame avoidance, and political accountability: how performance information influences management quality

We examine performance impact on management by investigating whether information on past organizational performance (‘performance feedback’) influences future managerial quality. We employ a regression discontinuity design to analyse the performance and managerial quality of Korean metropolitan governments’ utility services. We find that (1) providing performance feedback improves managerial quality, but this impact is observed only among low-performing organizations, and (2) the impact of performance feedback is greater if organizations operate in electorally competitive jurisdictions. To explain these findings, we propose a bounded rationality model of organizational decision-making.