Abstract
We challenge critics of agency theory who suggest that agency theory's value does not extend outside a narrow context dominated by egocentric agents seeking only to maximize wealth at the expense of the principal. Instead, we argue that agency theory's flexibility allows for its application to a variety of non-traditional settings where the key elements of agency theory, such as self-interest, information asymmetry, and the mechanisms used to control agency costs can vary beyond the narrow assumptions implied in traditional agency-based research. We suggest that extending agency theory to diverse settings using a deductive approach can be accomplished by formally recognizing and incorporating the institutional context surrounding principal-agent (P-A) relations into agency-based models. Thus, criticisms that agency theory fails to acknowledge the social context in which P-A relations occur provides not a barrier but an opportunity for extending our understanding of P-A relations to a variety of diverse contexts.
Original language | English (US) |
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Pages (from-to) | 202-222 |
Number of pages | 21 |
Journal | Journal of Management Studies |
Volume | 49 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2012 |
Externally published | Yes |
Keywords
- Agency theory
- Corporate governance
- Principal-agent relations
- Social context
ASJC Scopus subject areas
- Business and International Management
- Strategy and Management
- Management of Technology and Innovation