The Principal's Theory of Mind

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    Abstract

    Agency theory is one of the most important foundational theories in management research, but it rests on tenuous cognitive assumptions. We combine classical agency theory with a realistic theory of the intrinsically imperfect human potential for interpersonal sensemaking. This allows us to systematically show how the principal’s ability to mentalize with the agent influences value creation in principal-agent relations, and to link this to organizational sensemaking instruments.
    Original languageEnglish
    Place of PublicationFrederiksberg
    PublisherInstitut for Strategic Management and Globalization
    Number of pages46
    ISBN (Print)9788791815836
    Publication statusPublished - Jan 2013
    SeriesSMG Working Paper
    Number1/2013

    Keywords

    • Agency theory
    • Value creation
    • Mentalizing
    • Cognitive psychology
    • Reward management

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