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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
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    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. Copyright 2003 Blackwell Publishing Ltd..

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Management Studies.

    Volume (Year): 40 (2003)
    Issue (Month): 8 (December)
    Pages: 2053-2071

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    Handle: RePEc:bla:jomstd:v:40:y:2003:i:8:p:2053-2071

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380

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    Cited by:
    1. 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.
    2. 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.
    3. 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.
    4. Pursey P.P.M.A.R. Heugens & Jordan Otten, 2005. "Corporate Governance Reforms around the World," Working Papers 05-08, Utrecht School of Economics.
    5. 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.

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