Organizing Data Analytics
A theory of credible skepticism in organizations is developed to explain the main tradeoffs in organizing data generation, analysis, and reporting and shows that motivating informative experimentation while discouraging misreporting are often conflicting organizational goals.
Abstract
We develop a theory of credible skepticism in organizations to explain the main tradeoffs in organizing data generation, analysis, and reporting. In our designer-agent-principal game, the designer selects the information privately observed by the agent who can misreport it at a cost, whereas the principal can audit the report. We study three organizational levers: tampering prevention, tampering detection, and the allocation of the experimental-design task. We show that motivating informative experimentation while discouraging misreporting are often conflicting organizational goals. To incentivize experimentation, the principal foregoes a flawless tampering detection/prevention system and separates the tasks of experimental design and analysis. This paper was accepted by Alfonso Gambardella, business strategy. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2023.00207 .