agencyt theory has changed

(1)

Management Decision

Agency theory: the times, they are a-changin’

Josh Bendickson Jeff Muldoon Eric Liguori Phillip E Davis

Article information:

To cite this document:

Josh Bendickson Jeff Muldoon Eric Liguori Phillip E Davis , (2016),"Agency theory: the times, they are a-changin’", Management Decision, Vol. 54 Iss 1 pp. 174 - 193

Permanent link to this document:

http://dx.doi.org/10.1108/MD-02-2015-0058 Downloaded on: 31 January 2016, At: 21:28 (PT)

References: this document contains references to 71 other documents.

To copy this document: [email protected]

The fulltext of this document has been downloaded 104 times since 2016*

Users who downloaded this article also downloaded:

Alfonsina Iona, Leone Leonida, (2016),"Suboptimal financial policies and executive ownership in the UK: evidence from a pre-crisis", Corporate Governance: The international journal of business in society, Vol. 16 Iss 1 pp. 187-210 http://dx.doi.org/10.1108/CG-01-2015-0005

Mohammed N. Chaker, Naceur Jabnoun, (2010),"Barriers to service quality in Islamic banks in Qatar", International Journal of Commerce and Management, Vol. 20 Iss 4 pp. 296-307 http://

dx.doi.org/10.1108/10569211011094622

Irfan Butt, Nausherwan Saleem, Hassan Ahmed, Muzammil Altaf, Khawaja Jaffer, Jawad Mahmood, (2011),"Barriers to adoption of Islamic banking in Pakistan", Journal of Islamic Marketing, Vol. 2 Iss 3 pp. 259-273 http://dx.doi.org/10.1108/17590831111164787

Access to this document was granted through an Emerald subscription provided by emerald- srm:277061 []

For Authors

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.

About Emerald www.emeraldinsight.com

Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.

Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

Downloaded by University of Arizona At 21:28 31 January 2016 (PT)

(2)

*Related content and download information correct at time of download.

(3)

Agency theory: the times, they are a-changin ’

Josh Bendickson

Department of Management, College of Business, East Carolina University, Greenville, North Carolina, USA

Jeff Muldoon

School of Business, Emporia State University, Emporia, Kansas, USA

Eric Liguori

Department of Management, The University of Tampa, Tampa, Florida, USA, and

Phillip E. Davis

Department of Management, College of Business, East Carolina University, Greenville, North Carolina, USA

Abstract

Purpose – Theories develop over time and are influenced by both events and people. Looking primarily at the applications between contracting principal-agent relationships, the purpose of this paper is to explore how agency theory emerged from a number of economic and social developments.

In doing so, the authors explain how this once dominant theory comes up short regarding varying realms of entrepreneurship as well as with multiple modern business phenomena.

Design/methodology/approach– The authors first present a brief overview of agency theory.

Second, the authors identify major events and people and address how they impacted the development of agency theory. Third, the authors provide insights on agency theory across three contexts (strategic entrepreneurship, social entrepreneurship, and family business). Implications, limitations, and future research directions are then offered.

Findings – The authors provide a deeper understanding of agency theory, thus broadening its underpinnings and enabling readers to more readily understand why agency theory is limited in its explanation of certain and modern business phenomena. The authors find that some of the seminal influences to agency theory are quite dated which has limited its explanatory power in terms of the modern day business and with more recent disciplines such as entrepreneurship.

Research limitations/implications– The authors are limited by their choices of major events that influenced agency theory at the expense of not being able to include everything that may have impacted the theory over time. These limitations, however, are offset by the research implications.

As the authors highlight the underpinning of agency theory, the authors subsequently provide scholars and practitioners with five primary boundary conditions, each of which are in need of attention for agency theory to maintain relevant explanatory power.

Originality/value – A deeper understanding of agency theory can be gained by looking at its underpinnings. By presenting numerous principal-agent conflicts and demonstrating areas in which it has fallen short (i.e. entrepreneurship and more recent business phenomenon), we shed light on the obstacles agency theory must overcome in order to maintain its position as a prominent theory.

KeywordsFamily firms, Entrepreneurship, Agencies Paper typeConceptual paper

Management Decision Vol. 54 No. 1, 2016 pp. 174-193

DOI 10.1108/MD-02-2015-0058

Received 12 February 2015 Revised 14 June 2015 16 October 2015 Accepted 23 October 2015

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0025-1747.htm

The authors acknowledge the helpful feedback and guidance of Arthur Bedeian and Jean McGuire on earlier versions of this paper.

174 MD 54,1

(4)

Introduction

Agency theory is not a new concept, rather an incremental advancement encompassing a variety of relationships and ideas. Mahoney (2005) stated that the corpus of agency theory consists of a cluster of seminal articles that scholars typically seek out for information about the theory (i.e. Arrow, 1985; Berle and Means, 1932; Jensen and Meckling, 1976;

Levinthal, 1988; Pratt and Zeckhauser, 1985). In this paper we explore the fundamental underpinnings based on contributions from influential people, seminal research articles, and the modern business environment as they relate to the evolution of agency theory.

This approach informs the past, current, and future applications of the theory. We narrate relevant shifts in workplace dynamics, and although this is not intended to be exhaustive, these events offer a foundation to examine a common theme: the need for governing mechanisms and changes in modern business, including entrepreneurship. Although we are certainly not the first to critique agency theory (e.g. Dobbin and Jung, 2010), we are confident that management scholars, agency theorists, entrepreneurship scholars, and practicing managers will find value in our overview, and at times, our critique as we point out five boundary conditions agency theorists need to address.

We are primarily interested in two fundamental questions. First, what are the underpinnings of agency theory (i.e. events and people that led to its development)? Few would argue greater theoretical development is not needed in management (Pfeffer, 1993), and agency theory is one of the dominant theories in strategy and especially in corporate governance. Yet, despite the development and acceptance of agency theory in the strategy literature, scholars have neglected to consider the core underpinnings of the theory and why and where those underpinnings may now lead the theory to come up short in terms of current usefulness. Therefore, second we ask, what are the boundary conditions and implications of agency theory due to the aforementioned underpinnings that are misaligned with issues in today’s business environment?

Answers to the first question will provide a deeper understanding and greater perspective of the development of agency theory. To address the second question, we identify areas of scholarship where agency theory lacks explanatory power which calls into question the usefulness of agency theory as a foundational management theory. The contributions of the manuscript are three-fold. First, by answering these questions we contribute to the management and entrepreneurship literatures by identifying the evolution of agency theory as a means to help unpack why and how agency theory does and does not explain certain phenomena. Second, we identify research streams that pose boundary conditions for agency theory extensions and present the implications of these conditions as shortcomings of the theory. The entrepreneurship and family business domains may offer fruitful and unique grounds for examining complicated principal-agent issues but they are domains that agency theory currently fails to thoroughly address. By integrating these literatures with agency theory we conclude that while agency theory is partially useful in examining these domains, some serious flaws exist. Finally, we contribute by identifying disconnects between scholarly identified agency relationships and the use of agency theory in practice, as will be explained in greater detail by providing extensions and examples of these disconnects via boundary conditions, implications, and hence subsequent alternatives.

The remaining sections are ordered in the following manner: we provide a brief review of agency theory which offers a lens for readers to use in order to follow the evolution of the theory. Following this review, we uncover the underpinning events, people and actions that propelled agency theory into existence, providing, in part, rationale as to why certain areas of entrepreneurship and modern business are not well explained by the theory. Following this section, we juxtapose the usefulness and the drawbacks of agency theory in the domains of

175 Agency theory

(5)

strategic entrepreneurship, social entrepreneurship, and family business. Last, a thorough discussion integrates the purpose of the manuscript by presenting the five major boundary conditions and implications which stem from these conditions.

Review of agency theory

Scholars use agency theory as a contract for the unit of analysis between principals and agents. Principals delegate work to agents, anticipating that agents will complete these demands in the principals’best interest (Eisenhardt, 1989; Jensen and Meckling, 1976).

“Agency theory is based on the relationship between one party, the principal, who designates certain tasks and decisions to another party, the agent. The focus of agency theory stems from assumptions that the agent will behave opportunistically, particularly if their interests conflict with the principal” (Mitchell and Meacheam, 2011, p. 151). The pursuit of similar interests is not always evident between these two parties causing an agency problem. When different interests arise, necessary attention must be directed to resolving this conflict. These differences are difficult to measure and require governing mechanisms to facilitate congruence and shared risk (Arrow, 1971). Accordingly, the focus of agency theory has been on the potential conflict between the agent and the principal.

One of the primary reasons why conflict emerges is that work contracts are imperfect since not every single contingency can be accounted for; monitoring is difficult and costly, and as such, the principal may have difficulty enforcing their property rights (Eisenhardt, 1989).

The Modern Corporation and Private Property(Berle and Means, 1932) is a seminal precursor to agency theory. Their thoughts on economic power, ownership, control, modern corporate structure, and shareholders were fundamental to agency theory development and in the 1970s, economically minded scholars revived these thoughts and ultimately created the agency theory perspective (Fama, 1980; Fama and Jensen, 1983; Harris and Raviv, 1978; Jensen and Meckling, 1976).

James Burnham (1941) took a grim view of managers and suggests their actions are self-interested and opportunistic. Though not often cited in agency research, these assumptions are very consistent with agency theory by questioning managerial intentions. Agency theory is founded on seven fundamental assumptions: self-interest, goal conflict, bounded rationality, information asymmetry, preeminence of efficiency, risk aversion, and information as a commodity (Eisenhardt, 1989). These assumptions overlap and build on numerous preeminent articles and theories. Comparison is outside the scope of this paper, although readers may find interest in comparing agency assumptions with transaction cost theory, stakeholder theory, and contingency theory.

Two forms of agency theory have developed: positivist and principal-agent ( Jensen, 1983). Positivist researchers have emphasized governance mechanisms primarily in large corporations. For example, Daviset al.(1997, p. 23) note“to protect shareholder interests, minimize agency costs and ensure agent-principal interest alignment, agency theorists prescribe various governance mechanisms.”These mechanisms are generally emphasized by positivist researchers and usually focus on executive compensation and governance structures ( Jensen and Meckling, 1976). The second stream, principal-agent, while sounding precisely applicable to our line of research, is more concerned with technical and mathematical relationships that details the specifics of the contract between the principal and the agent. In other words, the focus of principal-agent is to determine the optimal contract (Eisenhardt, 1989). Hence, our manuscript utilizes a positivist lens.

More broadly, the positivist stream can be expanded to various principal-agent type relationships. Scholars have expanded the principal-agent problem to consider a whole host of other issues that emerge. For example, Smith and Warner (1979) identify

176 MD 54,1

(6)

principal-principal conflict between bondholders and shareholders. Mills (1990) does so through client-service conflicts whereas Mitchell and Meacheam (2011) do so through principal-knowledge worker conflicts. Principal-agent relationships need not be bound to shareholder-CEO relationships and can be applied as a more general theory (Eisenhardt, 1989). Harris and Raviv (1978) describe an agency paradigm expandable to employer-employee and insurer-insured. Hill and Jones (1992) suggest agency relationships explain many other contractual relationships among stakeholders. Given the potentially long list of conflicts, greater emphasis on the specific governance mechanism used to manage these relationships is needed.

Over time scholars have narrowly applied agency theory, resulting in a disconnect between agency problems and agency theory. Agency relationships apply to a wide host of aforementioned settings, whereas agency theory is too often reduced to shareholder-CEO relationships. In this manuscript, we unify the various agency problems with theory by exploring influential events and people while also emphasizing the use of governance mechanisms. On one hand, by extending beyond the typical settings linked to agency theory (e.g. shareholder-CEO relationships), we illustrate how the theory could help explain principal-agent issues in entrepreneurship, family business, and other modern phenomenon. On the other hand, this integration also raises some serious questions and concerns about the theory’s usefulness to explain the duality of principal-agent roles in the modern business environment.

Fundamental influences

When dealing with the nature of humans, many assumptions in agency theory (e.g.

bounded rationality, information asymmetry) are present throughout history. Though not all-inclusive, many important contributions between the Industrial Revolution and the twenty-first century are present in the following account of agency theory in the USA.

The following sub-sections attempt to identify seminal events and people important to the evolution of agency theory. These events provide a multitude of antecedents and insights to modern day studies and uses of agency theory. The following will reveal the events that took place and also provide examples of“agency conflict”far before scholars coined the term, agency theory. Subsequently, we are able to note time periods in which agency theory was useful and had explanatory power such as the Industrial Revolution.

Industrial Revolution

Mechanical revolutions consistently progressed throughout history. Continuously inventing and refining objects was common practice. With the Industrial Revolution, however, came major social, political, and economic changes in the lives of many (Wells, 1922). The Industrial Revolution started in the mid-eighteenth century and continued into the nineteenth century, radically transforming and enriching society.

Much technological advancement in agriculture, mining, transportation, and manufacturing occurred around this same time (namely, discoveries such as the steam engine, cotton gin, telegraph, sewing machine, telephone, and the internal combustion engine). The steam engine was of particular importance. Not only did James Watt’s patented steam engine dramatically propel the Industrial Revolution by providing a power source to factories, but his company also discovered and implemented managerial techniques (Pindur et al., 1995). These discoveries not only changed the shape of US industry, but also provided major lifestyle changes. As cities grew, no longer would a majority of the US workforce consist of subsistence farmers.

Many workers began moving to cities and quality of life was improving both in

177 Agency theory

(7)

lifespan and wages (Cooper, 1990). The technological expansion and creation of mid- and large-sized businesses dramatically changed a once very rural life in the USA.

From an agency theory perspective, it is important to begin with the significance of the Industrial Revolution, as it directly influenced the increasing size of organizations.

No longer could a business be run by a single entrepreneur, but rather a professional cadre of managers. In other words, these large organizations needed to employ mechanisms to ensure the completion of detailed work tasks across the organization.

Managers posed an interesting conundrum for owners. How could owners get managers to act in their stead? How could managers motivate employees under their supervision to act in the best interest of the owners? Prior to the Industrial Revolution, management as a discipline was not formally studied as most business tended to be small entities (Wren and Bedeian, 2009). Burnham (1941) explains that until larger-scale enterprise was developed, industry did not require professional managers. Large, modern organizations must employ various middle and top managers to monitor and coordinate work under their control (Chandler, 1977). These managers were charged with dividing the work effort in a manner to support the interests of the owner(s).

In doing so, a layering of the leadership within the organization created potential principal-agent conflicts at each management level. Large organizations needed to clarify expectations at each level to minimize conflict. They needed to create governing mechanisms that drove behaviors leading to desired outcomes for the owners.

Without these fundamental changes, created by the Industrial Revolution, a great deal of the conflicts in agency theory would have never taken place. Post-revolution, firms would continue to grow until reaching a size where an owner could no longer be in contact with all phases of a business, such as buying, manufacturing, selling, and engineering (Litterer, 1961). Many more specific examples occurred during this time period. For one, department heads displayed opportunism by withholding information from other managers, creating jealousy and manager-manager conflict (Litterer, 1961). Information asymmetry drove organizations to focus on ways to encourage managers to work together for the greater good of the organization, which created a need for mechanisms that would minimize information hoarding and emphasize shared objectives. The Industrial Revolution set the stage for creating a theory such as agency. Ideas about management were relatively new and the development of agency theory provided a useful means for explaining these new issues. Other events were also critical to shaping agency theory, so now we turn our attention to another foundational event, the creation of the stock market.

The stock market

Various informal forms of stock markets were present centuries before the creation of the New York Stock Exchange (NYSE). For example, resembling modern day commodity traders, Mesopotamians formed trading companies hedging grain sales (Sobel, 1965). Although primitive, early mechanisms of compensation and governance were likely present in some form. Banner (1998) examines the origins of the NYSE and traced its initial presence to coffee house meetings in New York City in September 1791.

Various meetings took place, such as the Buttonwood agreement (Wright, 2002), and trading continued without regulation until brokers more successfully organized in 1817. Initially, there were 17 governance rules put in place under the NYSE, and by 1860, the NYSE established prices nationwide and was widely recognized as a measure of national economic health (Banner, 1998).

The separation of ownership and control, created largely by the emergence of stock- offering companies, is a fundamental concept in agency theory as it is a formal

178 MD 54,1

(8)

governance mechanism used to protect stockholders from opportunistic owners and managers. Berle and Means (1932) articulate problems legal owners incur when they are separated from control over large enterprises and they explained how the USA transferred control from owner to management (Schwarz, 1987). We see ownership and control conflicts throughout time, but as stock markets were created, complexities arose. The history of events creating markets plays a key role in the development of agency theory. Shareholder-CEO conflict develops from this separation, as does concern regarding unaligned interests. Principal-principal conflicts also arise due to various and potentially conflicting investor interests. Governance mechanisms gain importance from the emergence of public corporations, primarily through boards of directors and executive compensation. Compensation is identified as a means to control managerial opportunism and coordinate executives and shareholders (Barnard, 1938).

It is notable that compensation coordination appears to be expandable to many agency relationships beyond shareholder-CEO relations as it attempts to satisfy both principals and agents.

The development of a stock market allowed for the principal-agent context to become more important, since it allowed for the creation of further owners. A major push of the Herbert Hoover administration was to create an ownership society, where everyone owned a portion of the economy through stock ownership (Schlesinger, 1958).

The significance of this development was that ownership was no longer in the hands of entrepreneurs such as Carnegie or Rockefeller, or even financiers such as J.P. Morgan.

Rather, it was a diverse collection of owners and individuals. Hoover’s administration viewed stock ownership as one mechanism to govern the self-serving behaviors of both principals and agents (Schlesinger, 1958). This vision also spread ownership and the risks associated with ownership across a myriad of owners. The agency problem emerged partly from the fact that stock ownership was based on market solutions, where trust and alignment of interests were more difficult than individuals had believed. The shift of ownership due to the stock market paved the way for a theory that addressed such conflicts. However, other influences of new governance mechanisms, such as organized labor, also impacted agency theory.

Organized labor and unions

The latter decades of the nineteenth century witnessed a great deal of conflict between labor and management. Conflicts occurred within many industries, including railroads, mining, steel, and meatpacking. Working conditions, hours, and rate of pay were often at the heart of labor-management conflicts. Organized labor and unions arose out of the need to establish rules to govern things such as working conditions, hours worked, and rate of pay. At the time, employees perceived an imbalance in their interests (safety, work hours, fair wages, etc.) with those of the owners (profit, growth, etc.). From the employees’ perspective, formal rules and guidelines were necessary to ensure safer work conditions and equitable pay. The National Civic Federation attempted to mediate disputes, inform the public regarding management labor relations, and demonstrate that the two parties had mutual interests (Wren and Bedeian, 2009).

Despite ongoing efforts and negotiations in the 1920s and 1930s, labor and management continued to grow distant. These decades saw the birth of legal rights granted to unions through the Wagner Act (Badger, 1989) as well as a uniting of the working class due to popular culture (Cohen, 1990).“One of my trade union friends told me that he remembered when he was a quite small boy hearing his father, who worked in a shoe-shop, railing daily against his boss. So he grew up believing that it was

179 Agency theory

(9)

inherent in the nature of things that the workman should be against his employer” (Follett, 1926, pp. 133-134). This thought process is problematic to the organization and, therefore, not in the best interest of shareholders or workers. Manager-worker conflict and owner-worker conflict are at the core of this agency problem. Unions were formed to better align the conflicting interests between managers and workers. Cooperation remains critical, and if workers are aligned with the organization, their loyalty will increase the likely acceptance of the objectives (Simon, 1997). Information asymmetry and opportunism are also both present. Manager-worker and owner-worker conflicts have persisted since biblical times; the conflict is not specific to the agency problem, it has been a problem longer than anyone can recall. Whereas the problem has persisted across centuries, the onset of organized labor and unions offered the employees a new governance mechanism (i.e. one in which agency theory had reasonable explanatory power and), one which organized labor could utilize to improve working conditions, influence work schedules, and demand appropriate compensation. Almost simultaneously, in a post Industrial Revolution economy, we have the onset of the stock market, organized labor, and yet another element that set the substructure for agency theory, scientific management.

Scientific management

Appropriately, this section begins with Frederick W. Taylor. Taylor, an engineer, who strived for efficiency, did so through facts and objective experiments. His major contributions and focus were on time studies, standardized tools and procedures, monetary rewards, individualized work, training, selection of first-class men, and rest pauses (Locke, 1982). Taylor believed scientific management offered the opportunity for shorter hours, better education, increased compensation, and an improved quality of life for workers. In pursuit of scientific management thinking, Taylor introduced a new form of governance mechanism known as standardized work.

Taylor’s work affected the agency problem in two critical ways: through his process and through those who mimicked or expanded on his work. The process of his studies created worker conflicts as certain workers were getting paid more to participate in the studies. Workers with higher output were sometimes identified as the “standard” producer, making those workers with lower output standout to management.

The process also created owner-manager conflict as the owners were modifying management’s duties. Managers were often asked to improve the performance of individuals, not just the group. Although workers were receiving higher wages, there was still conflict with owners, as they were collecting much greater profits. Worker- management conflict also increased because worker conditions became more mundane (Klaw, 1979). The second contribution of Taylor’s work to early agency relationships was through the many spin-offs of scientific management. Despite Taylor claiming his processes never led to union conflicts or strikes, this was not the case for all practitioners of various forms of scientific management (Wren and Bedeian, 2009).

Scientific management was a seminal part of management in the late nineteenth and early twentieth centuries. Its development was not without problems and, as mentioned, many agency conflicts were present throughout this time period. As a consequence of this movement, the various studies, and experiments conducted provide insight to early principal-agent disconnects. If we view governance mechanisms as a swinging pendulum, organized labor and unions swung the pendulum in favor of employees (agents) whereas scientific management primarily swung the pendulum in favor of owners (principals). While the type of governance

180 MD 54,1

(10)

mechanism shifts, the role and significance of such mechanisms remains of paramount interest. The role of scientific management in pushing forth agency theory was fundamental and of ideal timing, occurring alongside the Hawthorne Studies and human relations movement and just prior to the release ofThe Modern Corporation and Private Property(Berle and Means, 1932).

The Hawthorne studies and human relations

From 1924 to 1933, the Hawthorne studies were conducted, becoming among the most famous studies in management research. These studies were held at the Western Electric Company and led by Elton Mayo and Fritz Roethlisberger who are generally credited for initiating the human relations movement in industry (Muldoon, 2012).

Ultimately, the studies’major conclusion was that human-relations are valuable, and people are motivated by more than money (Greenwoodet al., 1983). These studies bring human relations to the forefront of management theory and few would doubt that the Hawthorne studies were seminal in the development of management and represent an attempt to alleviate worker-manager conflict. More specifically, if agents are motivated by more than money, how do organizations identify these motivations? Also, how could organizations use these motivations as mechanisms to drive desired behaviors?

The Hawthorne studies represent a social advancement for workers and, in a way, resolve some of the agency conflict present between managers and workers. The governance mechanisms here require a different hand, one that requires flexibility and compromise. For instance, one of the particular issues of agency that was discussed during the Hawthorne studies was the“Man in the middle problem.”This represented a unique agency issue common to the first line manager in that they may have issues fulfilling their managerial role due to social pressures exerted by workers. The Hawthorne researchers sought to provide a forum where workers and management can find some common ground. Common ground is not often defined in typical principal- agent contracts. The outcome of a compromise may lead to several different variations of principal-agent contracts. Mayo sought to do this through the training of managers so that they focussed on cooperation and harmony rather than competition and discord. By focussing on social interventions, a compromise is possible. This is far from the most commonly discussed shareholder-CEO agency conflict. It represents, however, the beginning of human-relations, which offered great potential to reduce the gap between manager-worker asymmetry and conflict. This focus on human relations is an important component in reducing agency conflicts between owner-worker and manager-worker.

The Hawthorne studies represents only one school of thought in the human relations movement. One of the most important contributions to human relations came from an executive, Chester Barnard. Barnard’s argument is that the corporation is based on cooperation and that the main function that the executive performs is to ensure cooperation within the organization. Yet Barnard also pointed out that such cooperation is rare. Only a few organizations are able to achieve adequate levels of cooperation to survive. This occurs because individuals are often able to form informal organizations (a finding expanded on from Mayo and the Hawthorne studies) as a means of maintaining their own personality in the face of organizational influences.

The role of the executive is to ensure cooperation through communication and incentives. Through both, executives could ensure individuals will follow orders. Yet, this influence is limited. Orders will only be followed when individuals understand the order, which serves the followers and the organizations interest. Hence yet again the agency problem is a dominant theme in the era of human relations. Both Mayo and

181 Agency theory

(11)

Barnard understood that workers-managers have the ability to bond together in the face of following orders. In this vein, compromise acts as a governance mechanism that minimizes principle-agent conflict and influences agency theory yet the organization then was less rational than scholars of the previous era had believed.

In summary, our journey through various managerial and economic events offers greater insights into agency theory yet will also shed light on some limitations agency theory faces in the modern business environment. We began with the Industrial Revolution where the growth in organizational size fueled a need for professional managers, as owners and entrepreneurs could not monitor every detail. The“layering” of organizations gave rise to various types of agency problems that required governing mechanisms. In what followed, a discussion of the stock market and how stock ownership in publically traded companies served as a means to govern the behaviors of company executives and boards of directors. Then, an overview of organized labor illustrated how employees (agents) created governing mechanisms, in the form of unions, to ensure that the interests of the employees were satisfied. A walk through scientific management revealed the use of“standards”to help govern worker activity and pay, which led to higher profits for owners. A discussion of the Hawthorne studies and human relations concludes our section on fundamental underpinnings. The human relations movement identified compromise as a governing mechanism to minimize agency issues. In doing so, this perspective illustrated the importance of understanding human motivations and often, those motivations extend beyond financial incentives.

The next section calls into question the use of agency theory, more specifically the theme of governance mechanisms, into entrepreneurship and family business. Our intentions are two-fold. First, we wish to acknowledge that the positivist perspective of agency theory only partially explains entrepreneurship and family business. In doing so, we describe the role of governance mechanisms and the need for more agency research emphasizing such mechanisms if the theory is to explain entrepreneurship and family business. Second, by attempting to extend the use of agency theory beyond that of the traditional large corporation, we encounter certain boundary conditions that limit the theory’s explanatory power of current business phenomena. Strategic entrepreneurship, social entrepreneurship, and family business are areas rich with new agency problems, yet, in its present state, agency theory offers only a partial explanation (at best) of these agency problems.

Entrepreneurship and family business

Our evolutionary journey through agency theory focussed on the use of governance mechanisms and the role such mechanisms play in minimizing principal-agent conflicts. We now turn our attention to strategic entrepreneurship, social entrepreneurship, and family business. These areas of study all present their own complex agency problems and we purport that while agency theory may have some viable explanatory power, it lacks comprehensiveness thus limiting its usefulness in these realms.

Strategic entrepreneurship

Much of the past research has focussed on equity-based governance mechanisms in large firms such as management’s equity (Walking and Long, 1984), executive stock holdings (Agrawal and Mandelker, 1987), or employee stock ownership (Barney, 1988) and so forth. The primary interests of these studies investigated the

182 MD 54,1

(12)

opportunity-seeking behavior of managers, executives, and employees, respectively.

However, if we are investigating entrepreneurial ventures, there is an additional behavior of relevance, one that focusses on advantage-seeking behaviors.

Whereas large established firms look to management for managerial and organizational expertise, entrepreneurial ventures also require management to provide knowledge and human capital. Entrepreneurial organizations are constantly seeking ways to leverage innovation as means to disrupt markets. This strategic approach requires a different way of thinking and acting, which poses different agency issues. Strategic entrepreneurship involves both opportunity-seeking and advantage- seeking behaviors (Ireland et al., 2003). In this realm, ownership of knowledge and access to human capital, which could provide the organization with competitive advantages, may not be owned nor controlled by the firm. Given this, how is the relationship among top executives affected?

In theory, the firm engages in innovative activities in pursuit of competitive advantage (Audretsch et al., 2009). Investigating the motivations of individuals is complex enough, but those complexities are compounded when simultaneously looking at opportunity-seeking and advantage-seeking behaviors that are not owned by the organizations. For instance, consider if an entrepreneurial firm hires a CEO who has multiple patents registered in her name. The entrepreneurial firm sees complimentary value in patents the firm could leverage with existing products resulting in synergies and competitive advantages. Should the firm hire the CEO or simply purchase the rights to access the patents?

From a positivist perspective, contract variations could exist in this scenario, each with a different level of control for the firm and the patent holder. First, the firm could simply purchase licensing rights to use the patent. In this regard, the firm has specifically what it wants (e.g. access to the patent technology), but no access to the knowledge or human capital possessed by the patent holder. The patent holder would maintain full control of her work and would be free to engage in other self-interested behaviors to maximize utility. The governance mechanisms here would likely be simple and straightforward to outline the conditions of the license.

Second, the firm could extend an offer to the patent holder, as CEO of the firm.

The resulting“contract”could take one of many shapes. In this case, the maximum utility from the patents would likely come through some type of equity ownership for the CEO, in addition to some level of strategic decision-making regarding the use of the patented technology. These necessary governance mechanisms are more complex and require careful consideration. For example, if the CEO is offered little or no strategic decision-making input for the use of this or future patents, the mechanism intended to benefit the firm may stifle her desire to create new innovations. Since entrepreneurial firms rely on innovation to survive and grow, this could be a detriment to the firm’s future performance. In order to obtain competitive advantages, organizations must possess or control key resources.

Nonetheless, agency theory has a role in explaining how organizations gain control and use resources. In looking at its role in entrepreneurial firms, we illustrate how the need for opportunity-seeking and advantage-seeking behaviors in strategic entrepreneurship could bring about other agency problems. Thus, the different agency issues create a need to create differing governance mechanisms. The duality of assessing both opportunity and advantage seeking behaviors is complex and we call into question whether agency theory is robust enough to explain both perspectives. In lieu of looking for the optimal contract as proposed by organizational scholars and micro-economists,

183 Agency theory

(13)

for entrepreneurial firms, we argue that a balance, steeped in compromise is needed.

Compromise is the glue that will allow organizations to continue to be innovative while growing and addressing the interests of principals and agents alike, yet in its current form, agency theory is inadequate in its discussion of compromise.

Social entrepreneurship

While strategic entrepreneurship provides insight into entrepreneurial ventures, there are numerous types of entrepreneurial ventures that pose unique agency issues. One in particular, social entrepreneurship, has gained attention in popular press and academic research (Shortet al., 2009). From a popular press perspective, the USA is fertile ground for “feel-good” stories, where solutions to a social problem are of interest. On the other hand, academic research is enamored with offering theoretical explanations for human and organizational rationale. Hence, social entrepreneurship provides a promising foundation for both.

For our intents and purposes, we view the primary mission of the social entrepreneur as creating societal value by addressing and solving social problems (Dacinet al., 2011). Personal compassion (for those affected by social problems) is at the heart of social entrepreneurship (Dees, 2007). Also, at the core of this mission is a nexus of potential agency issues, as social entrepreneurs wrestle with organizing market- based resources to address social problems.

Social entrepreneurs can be viewed as embedded agents (Holm, 1995; Seo and Creed, 2002). In other words, various institutional forces are at work, providing motivated individuals (namely, those who possess the cognition and access to capital) the opportunity to engage in entrepreneurial agency. Given the multitude of interests and motivations, the social entrepreneurial process has multiple bottom lines (Grimes et al., 2013). As a result, complex agency issues exist requiring unique governance mechanisms.

Typically, central to complex social problems, a vulnerable party exists. For instance, in the USA, childhood hunger is a looming social problem. At the crux of the problem, children are unable to function to the best their ability at school (or in life) due to malnourishment. In this case, the children and their plight, provide the compassion that drives the social entrepreneur. Since social entrepreneurship is bringing to bare institutional resources (e.g. federal grant money, financial and other tangible donations from businesses, private employee volunteer hours), agency issues may arise among many principal-agent relationships.

These agency issues require sophisticated governance mechanisms to ensure that the mission is not compromised due to the mishandling of resources. At times, the social entrepreneur may play the role of agent (namely, when receiving funds and grants from corporations and other agencies) or that of the principal (namely, when distributing resources to those in need). In its current state, we call into question whether agency theory explains both roles for the same individual. From our perspective, there are grounds for partial explanation, yet, to what degree is still unknown? At present, agency theory offers reasonable explanations of behaviors of independent principals and agents. However, complexities arise when an individual may be a dual principal/agent. While agency theory may offer insights from the perspective of an individual principal and separate agent, social entrepreneurship illustrates the failed linkage between theoretical developments and the use of the theory to explain actual agency issues.

184 MD 54,1

(14)

Family business

Third, we address the usefulness of agency theory in regards to family business.

If governance mechanisms limit the agent’s self-serving behavior (Eisenhardt, 1989), what mechanisms are in place to limit the self-serving behaviors of family business owners? From the perspective of owner-manager agency costs, family owners most often possess the knowledge and votes to limit managerial exploitation (Anderson and Reeb, 2003). However, is the same true when there are varying levels of ownership within the family? Additionally, family business owners wish to maintain control of the firm to satisfy family objectives such as wealth, status, or power (Claessenset al., 2002).

Furthermore, family business must occasionally address the “rotten child theorem” (Becker, 1974) which states that families often support (i.e. employ)“rotten children”

due to reasons related altruism. In other words, from the perspective of agency theory, a family may support a bad agent, even at a cost. As with such, difficult to assess agency issues exist.

When there are multiple family owners in a business, agency issues are more problematic as family owners have parochial agendas that may be at the expense of other shareholders (Bertrand and Schoar, 2006). For instance, if the majority family owners are more concerned with providing employment to future generations, they may not be inclined to hire the most qualified employees. This action is not in line with the intentions of the other shareholders who likely emphasize profit maximization. Subsequently, the action may result in suboptimal company performance that may lower returns for minority shareholders. In this instance, the usefulness of agency theory is questioned.

Do the principals holding a majority of power now act as a“majority”principal and the remaining minority holders of power act as agents? In its present state, the theory lacks sufficient explanatory power to address this complex issue and the underpinnings that articulate the evolution of agency theory offers little insight.

Furthermore, as a family controls the business via a super voting share structure, its voting rights exceed its cash flow rights and agency costs rise (Le Breton-Miller and Miller, 2009). Given this, the family controls the business without assuming the costs or risks typically associated with ownership (Morcket al., 2004). The lack of alignment with risk and reward may lead to decisions that benefit the family, but not the business.

Thus, in its current state, we question whether the theoretical arguments that agency theory addresses are aligned with the practical problems of familial ties and the duality of living as family and operating a family business.

With these looming challenges, a number of questions regarding governance mechanisms are of paramount interest. First, what motivates a family business to employ governance mechanisms to help police overzealous family behavior? Since many family businesses are private companies, this challenge may seem insurmountable. A possible solution could lie in the education of family owners. More specifically, continuing education courses geared to assist family business may be a fruitful start. We expand upon this in our discussion, limitations, and future research section. Second, borrowing a page from the principal-agent perspective, a detailed contract, specific to the familial situation may hold value. In this instance, the contract will specify details of ownership in an effort to mitigate owner-owner agency issues. However, if we consider familial interests, the contract would be overly complex at best, but more likely, not sufficient to address the needs of all parties involved. Therefore, such a contract is not likely to be signed by anyone. Nonetheless, these conflicts still exist and one must question the usefulness of agency theory as a foundational theory to address the complicated relationship issues inherent in family businesses.

185 Agency theory

(15)

Discussion

Today’s globalized economy presents additional complexities to various agency relationships that did not exist 80 years ago when Berle and Means (1932) did the majority of their work. Modern topics such as continued technological improvements, the entrepreneurial mindset, differences in education, and ever-changing media and government relationships with business pose potential threats to the long-term viability of agency theory as a means of explaining complex principal-agent relationships. By examining the background of agency theory we have shed light on the development of some of its fundamental aspects. This is important to demonstrate why the theory was once well positioned to explain business happenings and phenomenon at the time. However, as expected, business has evolved necessitating the urgency to advance current theories as well as develop new theory that better explains the current business environment, when appropriate (Zingales, 2000). Accordingly we set out by asking two questions: first, what are the underpinnings of agency theory;

and second, what are the boundary conditions and implications for agency theory having been developed nearly a century ago? By giving attention to these questions we believe to have contributed to the literature by presenting a deeper understanding and unpacking the theory by addressing the environment during its origination; explaining the evolution of the theory as it applies to management and entrepreneurship research;

and identifying boundary conditions of the theory which lead to certain shortcomings, implications and future research for both research and practice. In the follow paragraphs we discuss five agency problems where the modern business environment appears to at least partially baffle agency theory and agency theorist. For an overview of the forthcoming boundary conditions and implications, please see Table I.

First, we would be remised if we did not discuss those challenges posed by innovative corporate thinking. For instance, when UPS’s unionized employees went on strike in 1997, FedEx began to gain market share by using independent contractors (see Witt and Wilson (1999) for a more detailed overview). This example, in accordance with our strategic entrepreneurship section poses new types of principal-agent problems. In this case, FedEx engaged in an aggressive campaign to integrate the Roadway Packaging Systems business into the FedEx business model. This drive for integration resulted in standardization of trucks, contractor uniforms, and route details, among other activities, to provide a consistent experience for FedEx customers. On the surface, these

“integrations” seemed logical; however, when independent contractors began to complain, a new type of principal-agent conflict emerged, one that agency theory may but has not yet explained. From the independent contractor’s perspective, FedEx was treating them like employees, but not compensating them as such. From FedEx’s perspective, these requirements were in the best interest of the independent contractor and the company because it protected the brand image of the organization. Due to these differences in interests, several independent contractors in various states brought a class- action lawsuit against FedEx claiming that the company was violating labor laws.

Perhaps agency theory could offer a solution for the independent contractor issue at FedEx (namely, via compromise), but it may offer more questions than answers. In the modern business, companies are scrutinized for overzealous advantage-seeking behaviors, especially those where the company is pitted against an individual (e.g. as seen in the independent contractor example). Lawsuits, regulatory fees, and the opinion of public court span beyond the principal-agent contract, as defined in agency theory.

Second, as social entrepreneurs assemble resources to address social problems, an entirely new nexus of principal-agent issues arise. While many businesses will accept

186 MD 54,1

(16)

some form of a socially constructed challenge for the greater good, agency theory in its current state does not adequately address those motivations. From a pure economics perspective, companies would only engage with social entrepreneurs for the sheer benefit of future profits. However, addressing issues to socially driven problems are often complex and may extend for an indefinite period of time. Hence, it is not likely

Domain Agency problem

Boundary

condition Implications Future research Strategic

entrepreneurship

The duality of addressing both opportunity and advantage seeking behaviors in firms, especially those engaged in fostering innovation

Ever-evolving legal issues associated with common employment relationships blur the defined relationship between principal and agent

Firms using contract and 1,099 employees challenge agency presumptions pointing to a disconnect between theory and practice

Further refine theory to account for new principal and agent employment relationships

Social

entrepreneurship

Dual bottom lines of social

entrepreneurs shift their role from principal to agent to benefactor

The ability to address multiple contracts and relationships simultaneously

Limitations exist with interpreting actions associated with dual roles;

limited explanatory power

Consider using aspects of social exchange theory and network theories to explain complexities Family business Differing priorities

of majority and minority family owners Family altruism may benefit family members, yet jeopardize family firm performance

Sole focus on economic motivations and intentions while ignoring familial obligations

Complex issues of family relations and business are intertwined, yet only addressed from an economic perspective

Expand theory to more clearly address family dynamics Potential use of sociology-based theories in lieu of agency theory Social media Information

asymmetry is created from social posts

Legal and moral issues associated with the monitoring of actual and potential agents

The use of socially intended

information as a basis for screening and monitoring actual and potential agents

No enforceable contract present for potential agents;

enforcing or adjusting contract terms based on unverified and potentially inaccurate information

Need theoretical development to include implied contracts (potential agents) and monitoring provisions (actual agents)

Evolving stakeholders

Addressing the specific and often conflicting objectives of multiple stakeholders Reduction of principal information asymmetry levels playing field

The ability to handle multiple interests from stakeholders

The economics- based perspective of agency theory provides a limited understanding of differing stakeholder relationships and values

Examine network theory and the closeness of ties to establish a more robust account of various

stakeholders with differing interests

Table I.

Summary table of agency problems, boundary conditions, implications, and future research

187 Agency theory

(17)

that engaging in these activities will result in profits. Accordingly, why do companies engage? The answer could lie in the core values of the organization, which is at the heart of the company’s social and moral compass. However, what the company is and what they intend to be is not part of the agency theory conversation. To better understand these motivations, social exchange theories, in conjunction with a more economics-oriented agency theory may provide more insights for agency theories.

Thus when considering the perspective of the social entrepreneur, the role of principal- agent is often blurred. At times, the social entrepreneur acts as a principal to potential benefactors of her efforts. Yet, when dealing with companies and government agencies, she may be more of an agent. The duality of the role played by the social entrepreneur is not in a vacuum, where it is clear which hat may be worn at any given time. Instead, the social entrepreneur is at this nexus of this principal-agent intersection and the issues that stem from this intersection are very real and complex. Agency theory is equipped to address one-on-one relationships, yet struggles with many-to-one relationships as with the social entrepreneur. New theoretical developments are needed to offer explanation. In cases where the theory is severely constrained, other theories may be more appropriate to further explain these complex principal-agent issues (e.g. network theory, or sociology-grounded theories).

Next, family businesses pose new and challenging principal-agent issues because the matters of family extend beyond the sometimes-limited economic leanings from agency theory. Agency theory assumptions often ignore the significance of social realities by placing emphasis on self-interest and economic opportunism (Granovetter, 2005). Thus, the social issues associated with familial ties are minimized and often misunderstood. In some instances, the primary owner of the family business may sacrifice economic gains in pursuit of family harmony. Yet, agency researchers have noted that family businesses are more likely to experience performance issues due to underinvestment and company cultural issues stemming from nepotism as family business owners extract valuable resources for personal gain (Le Breton-Miller and Miller, 2009). However, what is missing from this perspective is consideration of the socially embedded links to family. True, an underinvestment in the business may result in a suboptimal financial performance, but the underlying motivation may have no bearing economically. While there are clear principal-agent issues in the family business, limiting one’s vantage point from only an economic perspective will not unearth the socially embedded issues that may drive decisions within the family firm.

In this case, perhaps other theories such as social embeddedness and stewardship theory may be better suited to address principal-agent issues in family business, in lieu of the economics-based agency theory. Given family businesses make up a significant part of most economies, hence warranting increased attention from agency theorists.

Thus far we first explored the underpinnings of agency theory which are a necessary and important aspect of understanding the future and developing theory (Booth, 2003;

Lamond, 2005). Second, we provide and discuss areas in entrepreneurship that present difficulty to agency theory such that the theory only partially explains strategic/social entrepreneurship and family business. Lastly, we shed light on modern phenomenon that agency theory poorly explains: social media and modern stakeholder relations. Social media provides an inexpensive and convenient means of broadly communicating information to multiple audiences simultaneously. Individuals and organizations use social media to inform followers of happenings deemed of interest. Given the public domain of these media outlets, social media sites are increasingly being used as a means to screen candidates for jobs (Brown and Vaughn, 2011) and monitor applicants seeking

188 MD 54,1

(18)

admission into colleges and universities (Vatamanescu and Constantin, 2015) hence creating newfound principal-agent issues. In the case of college students seeking jobs, the students and HR professionals from the hiring companies have conflicting views of the ethical nature and perceived value of said screening (Curranet al., 2014). Yet, legally, companies are within their rights to use social media in its screening of potential candidates. This invites questions of boundaries and governing mechanisms needed to prevent and control misuse. Powerful theories are generally capable of providing useful explanation for evolving phenomenon. However, agency theory appears to be limited in accomplishing this task. Given the numerous potential principal-agent contract variations possible, open-mindedly approaching this issue is necessary. Seeking an optimal contract for an employers’use of social media in screening candidates could lead to undesired legal challenges. Furthermore, the disparity in the perceived value of the information posted on social media sites creates information asymmetry, which is at the heart of principal-agent conflicts. College students perceive the information contained in most posts as meaningless, while corporate recruiters view these posts as sources rich with ethical information about potential employees. We contend that agency theory has fallen short in explaining this phenomenon and more work to understand the governing mechanisms associated with these relationships is needed.

Finally, new stakeholder problems also represent modern business phenomena and are at odds with traditional agency problems. Changes in the economy and technology have educated stakeholders of their power and businesses’responsibilities toward the community. Managers are also faced with the responsibility of balancing multiple interests including recognizing the importance of human capital within organizations, which is often the most important factor in building a competitive advantage (Pfeffer, 1998). Agents have to spend time and energy dealing with potential problems with workers, since workers have an easier time of enforcing their property rights (i.e. not working as hard) than do owners (Alchian and Demsetz, 1972).

Agency theory must consider these influences, especially since it may no longer be the principal that managers need to heed most. This debt to stakeholders is strengthened with the proliferation of ethics courses in business schools and the government mandate of ethics programs (Ferrell et al., 2014). Managerial behavior is often influenced by education and training (Dearborn and Simon, 1958) and institutions will certainly influence the behaviors and awareness of how executives handle conflicts between stakeholders. One such (and current) conflict may be between owners, government, and workers over minimum wage. Perhaps, multiple perspectives would mean an increase in agency problems as most ethics books and scholars seem to argue that managers should be more beholden to stakeholders than shareholders (Ferrellet al., 2014). A fundamental refinement of the theory could allow future exploration of the principal-agent conflict.

In addition, the proliferation of media, whether cable networks, internet websites, or the aforementioned social media, means that stakeholders have greater power to spread their messages to either inform or to cause trouble. Today almost any individual with a grievance could be an aspiring reporter spreading the word instantly via blogs or social media. Previously local problems, such as an upset worker throwing packages due to labor grievances, can go viral much more easily (e.g. United Airlines breaks guitars;

Berger, 2013). Thus agents need to pay even greater attention to other stakeholders– perhaps causing more conflict with shareholders. In addition, the wide spread use of social media may mean even greater influence from shareholder rights groups as they have greater ability to mobilize. Agency scholars should develop theories to draw attention to media. Perhaps the increase in media and the dissemination of information

189 Agency theory

(19)

may provide principals with better monitoring and enforcement, weakening the influence of the agent. Altogether, the recent development of these varying stakeholder groups poke holes in the logic of agency theory and are in need of greater attention.

Limitations, future research, and conclusion

Our research is not without limitations. For one, we selected major events and people that, through a review of prior research, underpin the times and the theory. While we believe these events and people to be representative, our identification of them should not be considered exhaustive. We have attempted to recreate, as best we could, the thought process and circumstances of previous scholars; we probably have uncovered only a small patch of a richer tapestry (Gaddis, 2002). Our hope is that in the future, scholars can gain insights from our work and continue to uncover more sections of the tapestry to better understand the future of the theory. However, despite these limitations, we believe that by unpacking some of the underpinnings of agency theory we have demonstrated why the theory has some difficult boundary conditions to overcome given the current business landscape.

Further exploration of the boundary conditions of agency theory should provide scholars with fertile ground for a variety of future research. More specifically, future research should aim to develop extensions to agency theory that help explain the boundary conditions we have detailed. If these cannot be explained with agency theory, scholars should take this opportunity to explore and develop theories that are more useful given ever-evolving economic conditions. Other topics may be of interest as well that agency theory appears to neglect. For example, agency theory has a deep concern with capital, both financial and physical, but it does not study human capital of the workers. Managers are aware of this issue as both non-compete contracts and stock options have been used to align interests and protect the firm. However, some managers also face the problem of honest incompetence in creating such arrangements, a topic that agency theory has also not weighed in on. These ideas for future as well as other presented in Table I may be fruitful for advancing the theory.

In conclusion, by examining the underpinnings of agency theory in the context of the modern business environment, it is clear that due to the influences and timing of its development, agency theory has a number of boundary conditions that carry strong implications for the future of the theory. Our hope is not to discourage future researchers from using agency theory, but rather to spur further and necessary theoretical development and refinement. By doing so, we will gain a better understanding as to whether agency theory can be modified for maximum usefulness in today’s business world or if new theories will need to be developed to accomplish this feat.

References

Agrawal, A. and Mandelker, G.N. (1987),“Managerial incentives and corporate investment and financing decisions”,The Journal of Finance, Vol. 42 No. 4, pp. 823-837.

Alchian, A.A. and Demsetz, H. (1972), “Production, information costs, and economic organization”,The American Economic Review, Vol. 62 No. 5, pp. 777-795.

Anderson, R.C. and Reeb, D.M. (2003), “Founding-family ownership and firm performance:

evidence from the S&P 500”,The Journal of Finance, Vol. 58 No. 3, pp. 1301-1327.

Arrow, K.J. (1971),Essays in the Theory of Risk Bearing, Markham, Chicago, IL.

Arrow, K.J. (1985),“The economics of agency”, in Pratt, J.W. and Zeckhauser, R.J. (Eds),Principals and Agents: The Structure of Business, Harvard Business School Press, Cambridge, MA, pp. 37-51.