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Data Envelopment Analysis: From Normative to Descriptive Performance Evaluation

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Nadia Vazquez Novoa

The question of modern performance evaluation has been extensively discussed in the literature, leading to a call for models including non-optimizing behaviors of decision makers and non-financial performance criteria. A promising management instrument is data envelopment analysis (DEA), which enables the aggregation of financial and non-financial indicators into a single measure. This work contributes to a better understanding of DEA from two perspectives: (i) it offers a normative solution to the zero-value weight problem and (ii) it provides the first experimental results on behavioral DEA based on an original taxonomy of cognitive biases related to performance evaluation. Behavioral DEA is a completely new research area which yields plenty of research opportunities.

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4. Efficiency, balance, and biases: DEA from a descriptive perspective

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4.   Efficiency, balance, and biases: DEA from a descriptive perspective

The present chapter concentrates on the analysis of the DEA-based performance evaluation process from a descriptive perspective. As the topic of performance evaluation has been studied by researchers of the management accounting and the OM/OR communities, Subchapters 4.1 and 4.2 are dedicated to a literature review of the behavioral research in these two fields.384 Subchapter 4.3 deals with different cognitive biases that might affect the performance assessment process. It reviews several existing bias taxonomies and introduces a new taxonomy for the special case of performance evaluation. Finally, Subchapter 4.4 proposes a descriptive approach to DEA concluding with several insights for further research.

4.1   Behavioral research in management accounting385

Behavioral and decision making research in accounting emerged in the 1960s with Jacob Birnberg as main referent,386 even if the first contribution in this area was made by Chris Argyris in 1952. According to Birnberg, managerial accounting can only fulfill its goal of aiding management if both the need for information and the use of this information by the decision maker are taken into consideration.387 In this way, he reinforces the claim of Devine (1960), who first states that the “failure to recognize that much of what passes as accounting theory is hopelessly entwined with unsupported behavior assumptions is unforgiveable.”388 Birnberg & Nath (1967) emphasize the role of behavioral research in understanding the effects of accounting data on the users....

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