In summary, existing studies have provided support for the view those managers tend to include opportunity costs when explicit information is provided on alternatives.
However, we have little understanding of why some managers exclude opportunity costs in the more ambiguous, and common situation, where alternatives are not explicit. The
current study seeks to identify factors which may help explain why some managers do not treat implicit opportunity costs in ways consistent with normative theory. The research
seeks to provide evidence relating the treatment of implicit opportunity costs to an individuals’ cognitive style and to whether or not the individual has sponsored the project.
2.2. Cognitive Style
Cognitive style is the concept and the way individual perceive opportunity cost defined as the way an individual processes, transforms and restructures stimuli received
from the environment to shape a resulting response Doctor Hamilton, 1973. The importance of studying personality and cognitive style in accounting emphasized the need
to understand user characteristics in order to design better information systems Gul, 1984; Brownell, 1981; Dermer, 1973; Benbasat Dexter, 1979. Gul 1984, p. 246
summarized the purpose of studying individual characteristics by stating that research into the effects of personality seeks to “facilitate the preparation of accounting
information that is most suited to the user’s information processing needs.” There have been several ways of specifying cognitive style. Doctor Hamilton
1973 developed a conceptual scheme which classified individuals as high or low analytics. High analytics tend to experience the specific aspects of their environment as
discrete from the organized background rather than merged together, while low analytics have difficulties in perceiving parts of their environment as discrete. Low analytics focus
on the broad situation and these influences the way different aspects are experienced. Huysmans 1970 used a slightly different typology to distinguish two cognitive styles
5
which he describes as “analytics” and “heuristics”. The former deals with information in a structured, rational way building up understanding from clearly identifiable parts. The
latter tends to grasp situations in their totality rather than constructing them from the separate parts. Evidence suggests that analytics are better suited to task which can be
approached in a structured and repetitive way, while heuristics are better suited to grasping new situations quickly Mock et al., 1972; Vasarhelyi, 1977.
While the basic concepts of analytic and heuristic cognitive styles have been clearly articulated, the means of measuring these styles have varied. Blaylock Rees
1984 suggested that a lack of reliable measurement has been responsible for the disappointing findings of studies which have examined the relationship between cognitive
style and behaviour. A consequence of these limitations has been the advocacy of the Jungian
typology of cognitive styles and the use of the related and widely validated Myers-Briggs Type Indicator MBTI Henderson Nutt, 1980; Blaylock Rees, 1984. In
summarizing recent research on cognitive style, Blaylock Rees 1984 suggested that the Jungian typology provides a particularly useful approach to examine how managers’
cognitive style affects their information preferences and decision behaviour. One aspect of the Jungian typology distinguishes two modes for “taking in”, or perceiving,
information – “sensation” and “intuition”, this distinction may be linked in a general way to the analytic and heuristic classification, with the former relating to sensation and the
latter to intuition. The Jungian typology is more descriptive of cognitive characteristics that affect the way individuals perceive accounting information.
Jungian theory is a multi-dimensional concept that relates to individual processes of perception sensation or intuition, attitudes extroversion or introversion, processes of
judgement thinking or feeling, and the style of dealing with the outside world
6
judgement or perception Myers McCaulley, 1985 in Chenhall Morris, 1991. Combination dimension of “processes of perception sensation or intuition” and
dimension of “processes of judgement thinking or feeling” were chosen for the current study on the basis of the particular theoretical arguments linking it to individuals’
cognitive style. Taggart Robey 1981 proposed that an individual’s cognitive style is
determined by pairing of one’s perception and judgement tendencies, combined of two dimensions of cognitive style Jungian typology will resulting four cognitive styles are as
follows: sensationthinking ST, sensationfeeling SF, intuitionthinking IT, and
intuitionfeeling IF. Characteristics of each style are presented in table 2.1. appendix 1.
Further, Taggart Robey 1981 describe that an individual with an ST style uses senses for perception and rational thinking for judgement. The ST-style person uses facts
and impersonal analysis and develops greater abilities in technical areas involving facts and objects. In contrast, a person with an IT style focuses on possibilities rather than facts
and displays abilities in areas involving theoretical or technical development. This style would enhance the performance of a research scientist. Although an SF person likely is
interested in gathering facts, he or she tends to treat others with personal warmth, sympathy, and friendliness. Finally, an individual with an IF style tends to exhibit artistic
flair while relying heavily on personal insights rather than objective facts. A few studies that use the typology to explain decision makers’ broad preferences
for information related to accounting and resource allocation decisions e.g. Henderson Nutt, 1980; Blaylock Rees, 1984. The way in which cognitive style influences
decision makers’ preference for cost data has not been investigated. However, plausible reasons as to why cognitive style might influence managers’ treatment of implicit
7
opportunity costs may be deduced from the way the characteristics of sensation and intuitive styles influence individuals’ framing of decision problems.
2.2.1. The Framing of Resources Allocation Decisions
