Michael, Steven C. (University of Illinois at Urbana-Champaign)
Abstract
Agency relationships--where one party (the principal) delegates authority to another (the agent)--are well studied in financial settings but less so in technical settings. The asymmetry of information between the general manager and the technical manager is likely to create the possibility of misdirected effort, an overuse of the agent's human capital, whether the agent is opportunistic or not. Analyzing a dataset of information technology hardware and staff spending by larger multidivisional firms during a growth phase of US IT spending, 1989-1993, results suggest that technical managers significantly overspent on hardware, with deleterious consequences for performance. Chief executive experience significantly altered the effects of overspending. Analysis of the results suggest a solution, a model termed "staged commitment," that can be used to monitor technical agents in many areas of business.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number
09-0103.