What is agency theory?

What is agency theory?


Assignment Overview

In this assignment you will become familiar with agency theory and read the seminal papers that describe it. You are asked to explain the theory, how it has been applied in current research and how it could be used in your own area of research interest.

Please read the assigned papers for this module.

Case Assignment

Extend the literature review provided to you in the reading list by at least 2 more papers (recent publication from the last five years and from top academic journals) on organizational change research.

Based on the extended literature review, write a paper, addressing the following issues:

What is agency theory?

What are the key models and findings related to agency theory?

What are the key implications for management practice?

Why should we study agency theory?

How can agency theory be used in research within your area of concentration?

Please organize your paper in a scholarly way. Add section titles when necessary. Explain your logic and when appropriate, use external sources and proper citations in APA style.

Conclude your report with a paragraph or so evaluating the entire exercise in terms of what you have learned and your reflections on the topic.

The paper is usually between 5 and 12 pages long. (7pges)


Assignment Expectations

  1. Able to understand the key themes in the reading list.
  2. Able to understand agency theory, findings, and implications.
  3. Answer the questions with clarity, depth, and critical thinking.
  4. Completeness and coherence: Chain of thought is easy to follow.
  5. Collect relevant evidences and consulted additional papers/resources to support the propositions.
  6. Paper is written clearly with appropriate format. Reference list is complete. Citation is properly done.



Required Materials


Required Reading

Argote, L., & Greve, H. R. (2007). A Behavioral Theory of the Firm – 40 years and counting: Introduction and impact. Organization Science, 18(3), 337-349. doi: 10.1287/orsc.1070.0280

Eisenhardt, K. M. (1989). Agency theory – an assessment and review. Academy of Management Review, 14(1), 57-74. doi: 10.2307/258191

Shapiro, S. P. (2005). Agency theory Annual Review of Sociology (Vol. 31, pp. 263-284).

Bahli, B; Rivard, S (2003). The information technology outsourcing risk: a transaction cost and agency theory-based perspective. Journal of Information Technology. Volume: 18   Issue: 3 Pages: 211-221   Published: Sep 2003

Eisenhardt, K. M. (1988). Agency-theory and institutional-theory explanations – the case of retail sales compensation. Academy of Management Journal   Volume: 31   Issue: 3 Pages: 488-511   Published: Sep 1988

Optional Reading

Hill, C., Jones, T. M. (1992). Stakeholder-agency theory. Journal of Management Studies   Volume: 29   Issue: 2   Pages: 131-154   Published: Mar 1992

Gomezmejia, L. R.; Balkin, D. B. (1992). Determinants of faculty pay – an agency theory perspective. Academy of Management Journal   Volume: 35   Issue: 5 Pages: 921-955   Published: Dec 1992

Tosi, H. L., Gomezmejia, L. R. (1989). The decoupling of CEO pay and performance – an agency theory perspective. Administrative Science Quarterly   Volume: 34   Issue: 2 Pages: 169-189   Published: Jun 1989


Modular Learning Outcomes



  • Integrate the Agency Theory lens with the overall field of strategic management.
  • Identify future research directions in strategic management using the Agency Theory lens.
  • Examine the variables that comprise Agency Theory view.


Module Overview

In this module, we will focus on Agency Theory, also known as the Principal-Agent Problem.

Our focus in this module is to understand Agency Theory and answer the following questions: How does this theory explain the relationship between agents and principals? What variables influence this relationship? What kind of research can use Agency theory?


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