Agency Theory: An Assessment and Review

The provided text is an academic article titled "Agency Theory: An Assessment and Review" by Kathleen M. Eisenhardt, published in the Academy of Management Review in 1989. This comprehensive review examines the controversial nature and significant contributions of agency theory, which analyzes the relationship between a principal delegating work and an agent performing it, often framed as a contractual problem. The article describes the two main streams of agency theory—positivist and principal-agent research—highlighting their differing focuses but complementary roles in identifying efficient contract types. Eisenhardt concludes that agency theory provides unique insights into information systems, incentives, risk, and outcome uncertainty, and presents empirical evidence supporting its validity, particularly when combined with other organizational perspectives. Finally, the author offers recommendations for future research using agency theory, urging scholars to focus on its distinctive variables and apply it to a richer array of contexts.