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An Empirical Exploration of Decision‐making Under Agency Controls and Stewardship Structure

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  • Henry L. Tosi
  • Amy L. Brownlee
  • Paula Silva
  • Jeffrey P. Katz

Abstract

abstract Two theories have emerged in the managerial control literature as to the best way for organizations to ensure that managers are acting in the firm's best interest: agency theory, which stresses controlling decision‐makers through monitoring and incentives aligned with organizational goals, and stewardship theory, which stresses that decision‐makers will act in the organization's best interest even in the absence of controls. Much of the research investigating the utility of these two positions is based on archival data where actual decision‐making can only be inferred. In this study, we utilize a laboratory methodology in order to determine if decision‐makers actually make different decisions when under the types of control (or lack thereof) suggested in these two theories. The results of this study show that individuals under agency controls invest more in alternatives that maximize profits of an organization than individuals under stewardship controls.

Suggested Citation

  • Henry L. Tosi & Amy L. Brownlee & Paula Silva & Jeffrey P. Katz, 2003. "An Empirical Exploration of Decision‐making Under Agency Controls and Stewardship Structure," Journal of Management Studies, Wiley Blackwell, vol. 40(8), pages 2053-2071, December.
    • Handle: RePEc:bla:jomstd:v:40:y:2003:i:8:p:2053-2071
    DOI: 10.1046/j.1467-6486.2003.00411.x
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    Cited by:

    1. Patrick Velte, 2010. "Stewardship-Theorie," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 20(3), pages 285-293, April.
    2. Kimberly A. Eddleston & Franz W. Kellermanns & Thomas M. Zellweger, 2012. "Exploring the Entrepreneurial Behavior of Family Firms: Does the Stewardship Perspective Explain Differences?," Entrepreneurship Theory and Practice, , vol. 36(2), pages 347-367, March.
    3. Tina Øllgaard Bentzen, 2021. "Breaking the Vicious Circle of Escalating Control: Connecting Politicians and Public Employees through Stewardship," Administrative Sciences, MDPI, vol. 11(3), pages 1-18, June.
    4. Marco Castellani & Linda Alengoz & Niccolò Casnici & Flaminio Squazzoni, 2022. "A role-game laboratory experiment on the influence of country prospects reports on investment decisions in two artificial organizational settings," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 21(1), pages 121-149, June.
    5. Sophie Bacq & Kimberly A. Eddleston, 2018. "A Resource-Based View of Social Entrepreneurship: How Stewardship Culture Benefits Scale of Social Impact," Journal of Business Ethics, Springer, vol. 152(3), pages 589-611, October.
    6. Oluwamayowa Olalekan Iredele & Omowunmi Jumoke Ogunleye & Okwy Peter Okpala, 2017. "Determining the Business Case for Environmental Management Accounting (EMA) Practices among Listed Firms in Nigeria: The Stewardship Approach," EuroEconomica, Danubius University of Galati, issue 2(36), pages 179-194, November.
    7. Dong Wang & Daojun Sun & Xiaofeng Yu & Yihao Zhang, 2014. "The Impact of CEO Duality and Ownership on the Relationship Between Organisational Slack and Firm Performance in China," Systems Research and Behavioral Science, Wiley Blackwell, vol. 31(1), pages 94-101, January.
    8. Margaret Fletcher & Pavlos Dimitratos & Stephen Young, . "How can academic-policy collaboration be more effective? A stewardship approach to engaged scholarship in the case of SME internationalization," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    9. Pursey P. M. A. R. Heugens & J. A. (Jordan) Otten, 2007. "Beyond the Dichotomous Worlds Hypothesis: towards a plurality of corporate governance logics," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1288-1300, November.
    10. Astrachan, Joseph H., 2010. "Strategy in family business: Toward a multidimensional research agenda," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 6-14, March.
    11. Shafiq Saman & Albrecht Kate & LeRoux Kelly, 2023. "Extending the Interdependence Theory to Local Public Service Provision: Evidence from Iowa," Nonprofit Policy Forum, De Gruyter, vol. 14(3), pages 255-278, July.
    12. M. Nesij Huvaj, 2020. "A Co-opetition View of the Entrepreneur–Investor Relationship: Modelling Entrepreneurial Exit Pathways," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 29(2), pages 365-394, September.
    13. Omole Ilesanmi ISAAC & Adewumi AYODEJI & Edokpayi Sunday ADESUWA, 2022. "Board Components of Corporate Governance and Financial Index of Deposit Money Banks in Nigeria," Romanian Journal of Economics, Institute of National Economy, vol. 55(2(64)), pages 160-174, December.
    14. Pieper, Torsten M., 2010. "Non solus: Toward a psychology of family business," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 26-39, March.
    15. Yan, Yanni & Chong, Chan Yan & Mak, Simon, 2010. "An exploration of managerial discretion and its impact on firm performance: Task autonomy, contractual control, and compensation," International Business Review, Elsevier, vol. 19(6), pages 521-530, December.
    16. Britney Pisani & Peter J. Baldacchino & Norbert Tabone & Lauren Ellul & Simon Grima, 2023. "Board Diversity in Selected Large Maltese Family-Controlled Businesses and its Implications on Corporate Governance," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(3), pages 14-49.
    17. Chrisman, James J. & Chua, Jess H. & Kellermanns, Franz W. & Chang, Erick P.C., 2007. "Are family managers agents or stewards? An exploratory study in privately held family firms," Journal of Business Research, Elsevier, vol. 60(10), pages 1030-1038, October.
    18. Stijn Van Puyvelde & Ralf Caers & Cind Du Bois & Marc Jegers, 2016. "Managerial Objectives and the Governance of Public and Non-Profit Organizations," Public Management Review, Taylor & Francis Journals, vol. 18(2), pages 221-237, February.
    19. Creemers, Sarah & Peeters, Ludo & Quiroz Castillo, Juan Luis & Vancauteren, Mark & Voordeckers, Wim, 2023. "Family firms and the labor productivity controversy: A distributional analysis of varying labor productivity gaps," Journal of Family Business Strategy, Elsevier, vol. 14(2).
    20. Tampakoudis, Ioannis & Noulas, Athanasios & Kiosses, Nikolaos, 2022. "The market reaction to syndicated loan announcements before and during the COVID-19 pandemic and the role of corporate governance," Research in International Business and Finance, Elsevier, vol. 60(C).
    21. Majdi Anwar Quttainah, 2011. "Do Islamic Banks Employ Less Earnings Management?," Working Papers 645, Economic Research Forum, revised 10 Jan 2011.
    22. Manjit Kaur Sidhu & Parmjit Kaur, 2019. "Effect of corporate governance on stock market liquidity: empirical evidence from Indian companies," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(3), pages 197-218, September.
    23. Sebastian Goebel & Barbara E. Weißenberger, 2017. "Effects of management control mechanisms: towards a more comprehensive analysis," Journal of Business Economics, Springer, vol. 87(2), pages 185-219, February.

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