During prep for my comprehensive exams, I spent quite a bit of time compiling all the micro and macro theories we learned, discussed, or briefly highlighted throughout the seminars. I’m hoping by loading some onto the blog space it can help others with their own comps prep.

A rising tide lifts all boats, after all!

Agency Theory

  • Assumptions
    • Individuals are self-interest and thus are motivated to act on these interests
    • Goals of individuals may conflict
  • Key tenets (Eisenhardt, 1989; Jensen & Meckling, 1976)
    • An individual (i.e., agent) acts on behalf of the org (principal) thus sharing risk/obligations
    • This happens in any cooperative effort even if there is no contract!
    • Unit of analysis is the contract between the principal and the agent
    • Monitoring: principals must monitor agents to ensure that they have behaved appropriately
    • Risk Sharing: Individuals share risk and have different attitudes towards that risk and thus act differently
  • Predictions
    • Determining the most efficient contract governing the principal-agent relationship given that individuals are self-interested, risk averse, and have bounded rationality, there’s conflict among members, and there is information asymmetries
  • Evidence
    • Jensen & Meckling, 1976: uses agency theory to develop a theory on the ownership of the firm
  • Boundary conditions
    • How does individual differences influence the likelihood someone will act more agentic than stewardly
    • Collectives → what if there’s a mix of individuals who are collectivists and individualists
    • Cultures/environment → different companies in different industries or geographic locations may place a greater importance on collectivist or individualist environments
  • Interlinkages
    • Stewardship Theory (Davis et al., 1997)
    • BTOF (Cyert & March, 1963)