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Recent thinking about top management has been influenced by alternative models of man.l Economic approaches to governance such as agency theory tend to assume some form of homo-economicus. which depict subordinates as individualistic. opportunistic, and selfserving. Alternatively, sociological and psychological approaches to governance such as stewardship theory depict subordinates as collectivists, pro-organizational. and trustworthy. Through this research, we attempt to reconcile the differences between these assumptions by proposing a model based upon the subordinate's psychological attributes and the organization's situational characteristics.
Organization theory and business policy have been strongly influenced by agency theory, which depicts top managers in the large modern corporation as agents whose interests may diverge from those of their principals, the shareholders where both parties are utility maximizers (Jensen & Meckling, 1976). According to agency theory, losses to the principal resulting from interest divergence may be curbed by imposing control structures upon the agent. Although agency theory appears to be the dominant paradigm underlying most governance research and prescriptions, researchers in psychology and sociology have suggested theoretical limits of agency theory (Hirsch, Michaels, & Friedman, 1987; Perrow, 1986). In particular, assumptions made in agency theory about individualistic utility motivations resulting in principal-agent interest divergence may not hold for all managers. Therefore, exclusive reliance upon agency theory is undesirable because the complexities of organizational life are ignored. Additional theory is needed to explain relationships based upon other, noneconomic assumptions (Doucouliagos, 1994).
Although agency theory addresses manager-principal interest divergence, additional theory is needed to explain what, if anything, causes interests to be aligned. Stewardship theory has been introduced as a means of defining relationships based upon other behavioral premises (Donaldson & Davis, 1989, 1991). Stewardship theory defines situations in which managers are not motivated by individual goals, but rather are stewards whose motives are aligned with the objectives of their principals. Because stewardship theory is relatively new, its theoretic contribution has not been adequately established. Previously, researchers have contrasted agency and stewardship theories (e.g., Donaldson & Davis, 1989, 1991, 1994; Fox & Hamilton, 1994), but failed to examine the psychological and situational underpinnings of stewardship theory. Clear understanding of the characteristics of the manager and of the situation are essential to understanding manager-principal interest convergence. Although the assumptions underlying stewardship theory have been...