Agency theory is an important, yet controversial, theory. This paper reviews agency theory, its contributions to organization theory, and the extant empirical work and develops testable propositions. The conclusions are that agency theory (a) offers unique insight into information systems, outcome uncertainty, incentives, and risk and (b) is an empirically valid perspective, particularly when coupled with complementary perspectives. The principal recommendation is to incorporate an agency perspective in studies of the many problems having a cooperative structure.

http://strategy.sjsu.edu/www.stable/pdf/Eisenhardt,%20K.%20M.,%201989,%20The%20Academy%20of%20Management%20Review%2014(1)%2057-74.pdf

Agency Theory: An Assessment and Review

Our task is to adopt a multidisciplinary view
of trust within and between firms, in an effort to
synthesize and give insight into a fundamental
construct of organizational science. We seek to
identify the shared understandings of trust
across disciplines, while recognizing that the
divergent meanings scholars bring to the study
of trust also can add value.

Not So Different After All: A Cross-Discipline View Of Trust

Organizational learning has many virtues, virtues which recent writings in strategic management have highlighted. Learning processes, however, are subject to some important limitations. As is well-known, learning has to cope with confusing experience and the complicated problem of balancing the competing goals of developing new knowledge (i.e., exploring) and exploiting current competencies in the face of dynamic tendencies to emphasize one or the other. We examine the ways organizations approach these problems through simplification and specialization and how those approaches contribute to three forms of learning myopia, the tendency to overlook distant times, distant places, and failures, and we identify some ways in which organizations sustain exploration in the face of a tendency to overinvest in exploitation. We conclude that the imperfections of learning are not so great as to require abandoning attempts to improve the learning capabilities of organizations, but that those imperfections suggest a certain conservatism in expectations.

https://www.jstor.org/stable/pdfplus/2486499.pdf

The myopia of learning

Myopia of learning

Virtually all current theories of choice under risk or uncertainty are cognitive and consequentialist. They assume that people assess the desirability and likelihood of possible outcomes of choice alternatives and integrate this information through some type of expectation-based calculus to arrive at decision. The authors propose an alternative theoretical perspective, the risk-as-feelings hypothesis, that highlights the role of affect experienced at the moment of decision making. Drawing on research from clinical, physiological, and other subfield of psychology, they show that emotional reactions to risky situations often drive behavior. The risk-as-feelings hypothesis is shown to explain a wide range of phenomena that have resisted interpretation in cognitive-consequentialist terms.

Risk as Feelings

Taking Risks, the Management of Uncertainty

The authors investigate whether a manager's home culture significantly influences his or her international marketing decisions. They also examine whether the impact of home culture diminishes in an...

https://www.jstor.org/stable/pdfplus/1251635.pdf

Does Culture Matter? A Cross-Cultural Study of Executives’ Choice, Decisiveness, and Risk Adjustment in International Marketing:

A comprehensive set of sixteen measures of willingness to take risks has been developed. This set includes measures from three categories: measures from standardized risky situations having an underlying theory of risk, measures inferred from revealed choices in financial decisions, and measures derived from attitudes. A study of over 500 top-level business executives shows significant relationships within categories, but relatively little relationship across categories. Context differences, especially personal versus business situations and opportunities versus threats, underlie the responses.

A portfolio of risk measures

Organizational Design and Management Norms: A Comparative Study of Managers' Perceptions in the People's Republic of China, Hong Kong, and Canada

When experienced decision makers are presented with a choice between two alternatives, one risky and one relatively safe, which do they choose? Frequently the answer is neither. Consider, for instance, a top-level business executive faced with a threat by a union at a subsidiary company to go on strike unless a time-andmotion study is immediately discontinued. The two obvious actions of the executive are (1) ignore the threat and continue the study or (2) discontinue the study. The typical executive, however, is likely to collect more information (about the potential payoff from the study, about the union's position, etc.), to initiate negotiations with the union leaders, to delay taking any immediate actions, or to delegate the decision to the executives of the subsidiary. A typical experimental approach to studying decision making under uncertainty is to ask a subject to choose between two lotteries defined In this study over 400 top-level executives confronted four risky situations cast in an "in-basket" format. Each situation involved a choice between a risky and a sure alternative. Having the executives respond by writing memos to specify how the situation should be handled allowed an examination of a rich variety of actions for modifying risk. Responses in the form of probability equivalences and rating scales were also obtained. The results showed that the executives had a relatively strong tendency toward risk seeking, particularly when the payoffs were negative. All three response modes gave generally consistent information about risk propensity, but there were significant differences across the four situations. Overall, between one-fifth and one-half the time, the executives attempted to modify the risks especially through collecting new information. Delegating, delaying, and collecting information were positively associated with a desire to avoid risks. The Risk In-Basket was an effective way to assess risk propensity and to study risk modifications. * This research was supported by grants from the Technology Branch of the Canadian Department of Industry, Trade, and Commerce and from the Social Sciences and Humanities Research Council of Canada. We wish to acknowledge the major contributions of our colleague William T. Stanbury to the design, data collection, and coding. Alfred Kwong assisted on the design and John Bassler contributed to the data collection and coding. We are grateful to Vinay Kanetkar and Brad Cousins for their work on the analysis. The comments on an earlier draft by an anonymous referee were helpful.

Donald A. Wehrung

Papers

Taking Risks, the Management of Uncertainty

Does Culture Matter? A Cross-Cultural Study of Executives’ Choice, Decisiveness, and Risk Adjustment in International Marketing:

A portfolio of risk measures

Organizational Design and Management Norms: A Comparative Study of Managers' Perceptions in the People's Republic of China, Hong Kong, and Canada

The Risk In-Basket