Agency Relationships in Marketing: A Review of the Implications and Applications of Agency and Related Theories

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. American Marketing Association is collaborating with JSTOR to digitize, preserve and extend access to Journal of Marketing.Agency and related theories have proven useful as theoretical frameworks for examining relationships between principals and their agents in many disciplines. However, though marketing involves a wide array of agency relationships, agency-based research has only recently begun to be reported in the marketing literature. The authors therefore attempt to clarify the marketing implications of agency theory by describing its major constructs, the two different types of models embedded within the theory, and some closely related theoretical structures. They also critically review past and potential agency-based research in marketing and suggest ways in which marketers might contribute to improving its validity and usefulness. AGENCYtheory has spawned a large amount of recent research in economics, finance, accounting, organizational behavior, political science, and sociology. Its proponents prophesy that a revolution is at hand, that agency and related theories can greatly improve our understanding of why organizations exist and how they work (Hesterly, Liebeskind, and Zenger 1990). Some scholars, however, are troubled by these theories' underlying assumptions about human behavior and organizational processes (Donaldson 1990). A few detractors brand them minimalist, tautological, trivial, and even dangerous (Hirsch, Michaels, and Friedman 1987; Perrow 1986).

“Trust but verify”? The performance implications of verification strategies in trusting relationships

“…A disadvantaged exchange partner may respond to this asymmetry and vulnerability by producing information relevant to the exchange. These observations have been made in marketing and other literature (Bergen et al 1992;Lippman and McCall 2001;Rose 1995). A key contribution of the information economics literature is the description of how participants solve these problems with information.…”

“…Information of particular relevance in trusting relationships includes knowledge about the performance capabilities of the other party, information regarding the other party's intended behavior and information from third parties concerning the trusted party. Marketing scholars have also emphasized the role of information production to address exchange vulnerability (Aiken and Boush 2006;Bergen et al 1992;Heide et al 2007;Rao and Monroe 1996). In these circumstances, information supplements and fills in gaps created by trust (cf.…”

Pricing to manage export channel relationships

“…In agency theory, the agent is defined as being risk averse (in contrast to the principal, who is usually mapped as risk neutral). The importer's risk aversion may result from different reasons-for example, dependence on the exporter to supply attractive products at competitive prices (Lassar & Kerr, 1996) or limited flexibility to diversify its engagements after committing to an exporter (Bergen, Dutta & Walker, 1992). Risk also arises as the importer can only partly influence its economic performance in the market because uncontrollable effects such as competitor actions, governmental policies, or economic conditions similarly affect the business.…”

An Empirical Investigation of the Antecedents of Sales Force Control Systems

“…These frameworks have been applied to marketing issues such as Channel coordination and control, franchising, make-or-buy decisions, and sales management (for a review see Bergen, Dutta, and Walker 1992). In sales management, agency theory has been applied to the question of salary vs. commission compensation (Basu et al 1985;Lal and Srinivasan 1993), while transaction cost analysis has been used to explain the use of direct salesforces vs. manufacturer representatives (Anderson 1985) and the proportion of salary to total compensation (John and Weitz 1989).…”