Impact of “Adverse Selection” on Managers' Project Evaluation Decisions

Harrison, Paul; Harrell, Adrian M.

doi:10.5465/256596

Cited by 37 publications

(57 citation statements)

References 13 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…This may also manifest itself in pseudo compliance or the so called "ceremonial adoption" of corporate initiatives and practices whereby the unit formally reports adoption to HQs, but in fact does not follow the practice (Kostova & Roth, 2002). Other manifestations include deliberate falsification of financial reports, shirking productive capability, or lying about unsuccessful project outcomes (Harrison & Harrell, 1993;Young, 1985). In addition, subsidiaries might sabotage HQs and abuse the discretion granted to them through intellectual property misappropriation, tunneling corporate resources and assets, transfer pricing, and other rent-or power-seeking actions at the expense of the corporation (e.g., Fama & Jensen, 1983;Jensen & Meckling, 1976;Mudambi & Navarra, 2004).…”

Section: Manifestations Of Subsidiary Agencymentioning

confidence: 99%

Understanding Agency Problems in Headquarters-Subsidiary Relationships in Multinational Corporations: A Contextualized Model

Kostova

Nell

Hoenen

2016

Journal of Management

130

155

View full text Add to dashboard Cite

This paper proposes an agency model for headquarters-subsidiary relationships in multinational organizations with headquarters as the principal and the subsidiary as the agent. As a departure from classical agency theory, our model is developed for the unit level of analysis and considers two root causes of the agency problem—self-interest and bounded rationality. We argue that in the organizational setting, one cannot assume absolute self-interest and perfect rationality of agents (subsidiaries) but should allow them to vary. We explain subsidiary-level variation through a set of internal organizational and external social conditions in which the headquarters-subsidiary agency dyad is embedded. We then discuss several agency scenarios reflecting various levels of self-interest and rationality that lead to different manifestations of the agency problem. The proposed framework can inform more relevant applications of the agency perspective in organizational studies and motivate future research.

show abstract

Section: Manifestations Of Subsidiary Agencymentioning

confidence: 99%

Understanding Agency Problems in Headquarters-Subsidiary Relationships in Multinational Corporations: A Contextualized Model

Kostova

Nell

Hoenen

2016

Journal of Management

130

155

View full text Add to dashboard Cite

show abstract

“…Motivated by their own self-interest, agents will "make themselves better off by deviating from their cooperative behavior" which maximizes the firm's welfare (Baiman 1990, p. 342). Harrison and Harrell (1993) have suggested agency theory as an alternative theoretical perspective from which to view the phenomenon of escalating commitment. They explain the application of agency theory to the problem of escalation as follows:…”

Section: Agency Theorymentioning

confidence: 99%

Why Software Projects Escalate: An Empirical Analysis and Test of Four Theoretical Models

2000

View full text Add to dashboard Cite

This research was made possible through a grant from the Information Systems Audit and Control Foundation and is based on a survey of Information Systems Audit and Control Association (ISACA) members. Some of the descriptive results from the ISACA survey were presented at the 1997 Hawaii International Conference on System Sciences and published in its proceedings (Keil and Mann 1997c). Preliminary results from the ISACA survey in the form of descriptive statistics were also published in the IS Audit & Control Journal (Keil and Mann 1997a, 1997b

show abstract

“…According to agency theory, the principal can avoid the adverse selection problem through prior acquisition of information about the agent's true characteristics and attributes [32].…”

Section: Pre-qualification Efforts and Adverse Selectionmentioning

confidence: 99%

“…Several studies have applied agency theory to study both general project success and IS project success in principal-agent settings in which one group of people have delegated the responsibility of project implementation to another group [32,31,69].…”

Section: Introductionmentioning

confidence: 99%

“…Agency theory describes the environment within a firm or between a set of firms in terms of sets of contracts in which one party (the principal) engages another party (the agent) to perform a service on the principal's behalf which involves delegating part of the decision making authority to the agent [32,39]. Several studies have applied agency theory to study both general project success and IS project success in principal-agent settings in which one group of people have delegated the responsibility of project implementation to another group [32,31,69].…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

An agency theory model of ERP implementation

Basu

Lederer

2004

Proceedings of the 2004 SIGMIS Conference on Computer Personnel Research: Careers, Culture, and Ethics in a Networked Environme

View full text Add to dashboard Cite

Enterprise resource planning (ERP) systems are becoming rapidly indispensable in order for large and medium sized organizations to run their operations. Therefore, management needs to know the factors that drive successful ERP implementation, a product of the continuous interaction between the implementation consultants and client firms. Agency theory has been successfully used by different researchers to explain relationships between two parties seeking a common outcome. This paper develops a model of testable propositions for applying agency theory to study the relationship between implementation consultants and client organizations deploying the ERP systems, and to consequently evaluate how the relationship affects the implementation success.

show abstract

Impact of “Adverse Selection” on Managers' Project Evaluation Decisions

Cited by 37 publications

References 13 publications

Understanding Agency Problems in Headquarters-Subsidiary Relationships in Multinational Corporations: A Contextualized Model

Understanding Agency Problems in Headquarters-Subsidiary Relationships in Multinational Corporations: A Contextualized Model

Why Software Projects Escalate: An Empirical Analysis and Test of Four Theoretical Models

An agency theory model of ERP implementation

Contact Info

Product

Resources

About