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Agency theory and supply chain management: A structured literature review

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Purpose: The paper aims to explain how agency theory can be used to inform our understanding of the dynamics surrounding supply chain behaviours and relationships. Design/methodology/approach: A structured review of the literature using a three-stage refinement process is used. The articles were sourced through online databases and keyword classifications, such as "agency theory", "principal-agent relationships" and "supply chain management". The search initially identified over 86 articles. After further screening these were reduced to 19 for final assessment and comparison. Findings: Despite agency theory's prevailing descriptive and predictive qualities there is scarcity in its application to the SCM discipline. The authors posit that agency theory provides valuable insights for relationship engineering within supply chains where social, political, legal and behavioural dynamics dominate. Practical implications: It is a critical task for managers to understand and mitigate abnormal behaviours across the supply chain. Agency theory serves this need by providing them with a useful tool to respond to transaction cost dilemmas through contractual and non-contractual remedies. Originality/value: This is one of the first studies that examines the current state of agency theory application in the SCM literature and suggests potential avenues for future research.

Original language	English
Pages (from-to)	556-570
Number of pages	15
Journal
Volume	17
Issue number	5
DOIs
Publication status	Published - Aug 2012
Externally published	Yes

Agency theory
Behaviour uncertainty
Collaboration
Literature review
Relationship management
Research results
Supply chain management
Uncertainty management

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Building theory in supply chain management through "systematic reviews" of the literature part 2

Edited by Richard Wilding and Beverly Wagner

1. Introduction

During the last four decades, agency theory has been widely used across a variety of disciplines, but little work has been undertaken with regard to how agency theory might be used to explain relations between organisations within the supply chain (SC). Agency theory is relevant for the situations wherein one party (the principal) delegates authority - in terms of control and decision-making about certain tasks - to another party (the agent) ([23] Eisenhardt, 1989; [55] Mitnick, 1973; [71] Ross, 1973). Seminal contributions made by scholars such as [71], [72] Ross (1973, 1979), [55], [56] Mitnick (1973, 1975), [38] Jensen and Meckling (1976) and [23] Eisenhardt (1989) have substantially improved our understanding about how agency theory informs economic relations ([81] Stock, 1997). Other scholars have employed agency theory to explain relations in different disciplines such as economics and finance (e.g. [74] Sappington, 1991), information systems (e.g. [51] Mahaney and Lederer, 2003), and management (e.g. [21] Eisenhardt, 1985; [22] Eisenhardt, 1988). More recently, supply chain management (SCM) scholars have shown growing interest in using agency theory to understand how participants within the SC manage risks, align incentives and forge relationships (see, for example, [30] Halldórsson and Skjott-Larsen, 2006; [69] Ritchie et al. , 2008; [62] Norrman, 2008; [78] Shook et al. , 2009). However, these works, which were largely inspired by [81] Stock's (1997) suggestion on the application of agency theory in logistics, have only partially contributed to our understanding of SC relationships.

A dearth of SCM studies employing agency theory runs counter to the prevailing value that its descriptive and predictive qualities appear to offer in terms of it representing "[...] a natural fit with supply chain management research" ([39] Ketchen and Hult, 2007a, p. 576). To date there is no comprehensive review and examination concerning how agency theory has been used to explain relationship development within supply chains. This study aims to take a step forward in addressing this recognised gap in the SC literature by answering the following question:

How can agency theory be used to inform our understanding of the dynamics surrounding supply chain behaviours and relationships?

In order...

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Authors: Fayezi, Sajad ; O'Loughlin, Andrew ; Zutshi, Ambika

Source: Supply Chain Management: An International Journal , Volume 17, Number 5, 2012, pp. 556-570(15)

Publisher: Emerald Group Publishing Limited

DOI: https://doi.org/10.1108/13598541211258618

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Keywords: Agency theory ; Behaviour uncertainty ; Collaboration ; Literature review ; Relationship management ; Research results ; Supply chain management ; Uncertainty management

Document Type: Research Article

Publication date: August 3, 2012

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DOI: 10.1108/13598541211258618
Corpus ID: 54907802

Agency theory and supply chain management: a structured literature review

S. Fayezi , A. O’Loughlin , Ambika Zutshi
Published 3 August 2012
Supply Chain Management

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Agency theory and supply chain management:a structured literature review

Sajad Fayezi, Andrew O’Loughlin and Ambika Zutshi

School of Management and Marketing, Deakin University, Melbourne, Australia

AbstractPurpose – The paper aims to explain how agency theory can be used to inform our understanding of the dynamics surrounding supply chainbehaviours and relationships.Design/methodology/approach – A structured review of the literature using a three-stage refinement process is used. The articles were sourcedthrough online databases and keyword classifications, such as “agency theory”, “principal-agent relationships” and “supply chain management”. Thesearch initially identified over 86 articles. After further screening these were reduced to 19 for final assessment and comparison.Findings – Despite agency theory’s prevailing descriptive and predictive qualities there is scarcity in its application to the SCM discipline. The authorsposit that agency theory provides valuable insights for relationship engineering within supply chains where social, political, legal and behaviouraldynamics dominate.Practical implications – It is a critical task for managers to understand and mitigate abnormal behaviours across the supply chain. Agency theoryserves this need by providing them with a useful tool to respond to transaction cost dilemmas through contractual and non-contractual remedies.Originality/value – This is one of the first studies that examines the current state of agency theory application in the SCM literature and suggestspotential avenues for future research.

Keywords Agency theory, Supply chain management, Behaviour uncertainty, Relationship management, Collaboration, Literature review,Research results, Uncertainty management

Paper type Literature review

1. Introduction

During the last four decades, agency theory has been widelyused across a variety of disciplines, but little work has beenundertaken with regard to how agency theory might be usedto explain relations between organisations within the supplychain (SC). Agency theory is relevant for the situationswherein one party (the principal) delegates authority – interms of control and decision-making about certain tasks – toanother party (the agent) (Eisenhardt, 1989; Mitnick, 1973;Ross, 1973). Seminal contributions made by scholars such asRoss (1973, 1979), Mitnick (1973, 1975), Jensen andMeckling (1976) and Eisenhardt (1989) have substantiallyimproved our understanding about how agency theoryinforms economic relations (Stock, 1997). Other scholarshave employed agency theory to explain relations in differentdisciplines such as economics and finance (e.g. Sappington,1991), information systems (e.g. Mahaney and Lederer,2003), and management (e.g. Eisenhardt, 1985; Eisenhardt,1988). More recently, supply chain management (SCM)scholars have shown growing interest in using agency theoryto understand how participants within the SC manage risks,align incentives and forge relationships (see, for example,Halldorsson and Skjott-Larsen, 2006; Ritchie et al., 2008;Norrman, 2008; Shook et al., 2009). However, these works,

which were largely inspired by Stock’s (1997) suggestion on

the application of agency theory in logistics, have only

partially contributed to our understanding of SC

relationships.A dearth of SCM studies employing agency theory runs

counter to the prevailing value that its descriptive and

predictive qualities appear to offer in terms of it representing

“[. . .] a natural fit with supply chain management research”

(Ketchen and Hult, 2007a, p. 576). To date there is no

comprehensive review and examination concerning how

agency theory has been used to explain relationship

development within supply chains. This study aims to take a

step forward in addressing this recognised gap in the SC

literature by answering the following question:

How can agency theory be used to inform our understanding of the

dynamics surrounding supply chain behaviours and relationships?

In order to answer this question a structured literature review

has been completed by using online databases and keyword

classifications, such as, agency theory, agency relationships,

principal-agent relationships, incentive systems, supply chain

management, and risk management. The search initially

identified in excess of 86 articles that were published between

1973 (the start date is from Ross’s and Mitnick’s original

contributions in 1973)[1] and 2011. After further analysis

using keyword classifications (see section 4) the number of

available articles relevant to this study was reduced to 19.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1359-8546.htm

Supply Chain Management: An International Journal

17/5 (2012) 556–570

q Emerald Group Publishing Limited [ISSN 1359-8546]

[DOI 10.1108/13598541211258618]

Received 11 October 2011Revised 30 January 201213 April 2012Accepted 8 May 2012

Page 2: Agency theory and supply chain management: a structured literature review

The authors provide an explanation of agency theory, in

terms of its branches and associated models and frameworks,in the next section. This is followed by a brief discussion on

the methodology adopted for the study. Within the analysis

section, SCM applications of agency theory have beenexplained and industry and methodology themes identified.

How agency theory can be used to explore supply chainbehaviour is reviewed within the discussion section. This is

complemented by a brief explanation concerning thelimitations of the theory. Included in the final section of the

paper are concluding remarks, implications for managementand opportunities for further research.

2. Agency theory

2.1 A dichotomous view

From a management perspective, the evolution of agencytheory can be dated to the 1960s and 1970s (Eisenhardt,

1989). Nevertheless, its origins can be found in the works oneconomic risk analysis where it began by addressing a

common problem in organisations, individual-group goalincongruence and its impact on risk-sharing behaviour

(e.g. Arrow, 1985; Wilson, 1968, cited in Eisenhardt,1989). This is reflected in the theory’s recognition of the

broader agency problems as entailing a portfolio of issues that

need to be managed under conditions of uncertainty. Agencytheory, in its modern form, largely originates from the work of

Mitnick (1973) and Ross (1973), and embraces the areas ofpolitical science and economics, which broadens its

application beyond simple contract relations. FollowingMitnick’s (1973) and Ross’s (1973) lead, agency theory was

subsequently adapted and used in a variety of other disciplinessuch as sociology (by Shapiro, 1987), management (by

Eisenhardt, 1989) and in work involving the theory of the firm(by Jensen and Meckling, 1976).

In agency relationships, one party (the principal) delegateswork to another party (the agent) (Jensen and Meckling,

1976; Ross, 1973; Eisenhardt, 1989). When the agent isacting for the principal it resembles behaviours such as

performing for the benefit of the principal or acting as theprincipal’s representative or employee (Mitnick, 1973). As

Eisenhardt (1989, p. 58) points out, while the profitmaximisation approach and self-interest persists, “[. . .] the

focus of agency theory [centres] on determining the mostefficient contract governing the principal-agent relationship

[. . .]”. The notion of the contract is used here as a metaphorto describe the agency relationships (Jensen and Meckling,

1976) and it is designed based on the outcome(e.g. commissions) or behaviour (e.g. salaries) of the agent

(Eisenhardt, 1989). In agency relationships, typically, the

principal will seek to minimise the agency costs, such as,specifying, rewarding and monitoring, and policing the

agent’s behaviour, while the agent works towardsmaximising rewards and reducing principal control

(Fleisher, 1991). Efficient management of agency problemssuch as information acquisition (or communication),

preference mismatch (or conflict of interest), effort (ormoral hazard) and capability (or adverse selection), mainly

associated with the agent (Fleisher, 1991), is also imperativeto any principal-agent relationship.

Developments in agency theory are largely based on twoimportant streams of inquiry, namely, principal-agent

research and positivist agency theory. The classical approach

to understanding agency theory has historically followed the

principal-agent relationships route, which assumes that theprincipal and agent will attempt to maximise their positions

through individual interpretation of the contract, ashighlighted earlier. The principal-agent research owes much

of its development to the work of economists, who have usedself-interest, bounded rationality and agent risk aversion as

the principal determinants for mathematically modellingrelationship building (Eisenhardt, 1989). This work has also

been influential in development of the normative account ofthe agency theory (i.e. design of optimal contract-based

incentives to align principal and agent interests). The latterapproach (i.e. positivist agency theory) has contributed to our

understanding of real world behaviours in terms of agencylogic (descriptive agency theory) (Mitnick, 2006). According

to Mitnick (2006), both approaches are helpful in assistingresearchers and managers to grasp the complexity of agency

theory and its attributes. However, the mathematical andnon-empirical orientation of the principal-agent research,

along with its lack of real world application (Jensen, 1983),have been the primary causes of this stream of research

stagnating academically, particularly in organisationalresearch.

Positivist agency theory (PAT) has largely evolved in orderto overcome many of the shortcomings found in principal-

agent research, in particular, the issue of complexitysurrounding real world relationship dilemmas (Eisenhardt,

1989). PAT seeks to synthesise political science, expertagency, the law of agency and sociology into a single

framework, which in turn attempts to explain howrelationships in business and government develop, and

offers suggestions as to how they might be managed moreeffectively (Shapiro, 2005). PAT also provides a useful

framework for explaining how problems surrounding theissue of the separation of control (for example, agents acting

independently) from ownership (the principal’s desire tomanage and maximise their resources, see Berle and Means,

1932) can be minimised (Fama and Jensen, 1983; Nilakantand Rao, 1994; Halldorsson and Skjott-Larsen, 2006). PAT is

thus useful for explaining non-rational behaviour of agents(and principals) when, for instance, an expert agent might be

unwilling to share sensitive information with its principalbecause of lack of trust which underpins SC relationships.

2.2 Hidden information/action model

Two important challenges in agency relationships aremisrepresentation of ability (adverse selection) and lack of

effort (moral hazard), both of which are attributed to theagent. Focusing on these, hidden information and hidden

action models, respectively, have been specifically developedto assist in designing an appropriate contract (Arrow, 1985;

Bergen et al., 1992). These models work on the assumptionthat principals are aware of the nature of the task and the

capabilities required (by the agent) to successfully accomplishthat task (Bergen et al., 1992). Hidden information models

focus on the problem of agent selection, specifically, thepotential for falsification of skills and abilities of the agent

(either at the time of hiring or during the activity). Accordingto Holmstrom and Milgrom (1987), the main benefit of

hidden information models is that they can assist in designinga contract which can be used to motivate the agent to takeappropriate observable action, for example, a requirement for

periodic reports on the condition of a rented asset to inform

Agency theory and supply chain management

Volume 17 · Number 5 · 2012 · 556–570

the owner about any faults. Furthermore, hidden information

models focus on making agent capabilities explicit through the

use of various management processes, such as, screening(e.g. personal interview), signalling (e.g. agents’ signal on

their capabilities) or providing opportunities for self-selection(e.g. training programmes for new recruits) (Bergen et al.,1992).

In situations where an agent’s action is difficult to observe(largely due to the complex nature of the task), the principal is

exposed to a heightened risk of opportunism by its agent. Inessence, there is an opportunity for the agent to both evade

control and misrepresent its capabilities (Bergen et al., 1992).

Hidden action models deal with the design of the contract,which can be used to mitigate the moral hazard problem and

motivate the agent to take appropriate action (Holmstromand Milgrom, 1987). According to Bergen et al. (1992),

principals are assumed to be risk-neutral whereas agents are

typically risk-averse, which they believe is a mistake becauseof the fundamental differences in risk calculation strategies.

The rationale underpinning this approach is that becauseprincipals have more power to diversify their investments,

agents are highly dependent on the principal and are less

likely to engage in inappropriate behaviour (Eisenhardt, 1989;Bergen et al., 1992). This assumes that capabilities and

contractual power exist in a uniform manner acrossrelationships, and that agent choice is limited. Evidence

suggests, however, that agents are often prepared to accept

greater risks, precisely because power and choice options donot exist as constants, and are often prone to dramatic change

as industrial sectors and economies evolve (see, for example,Basov and Bardsley, 2005; Holmstrom and Milgrom, 1987).

These arguments serve to raise questions about the extent to

which the principal-agent relationship might be conditionedby factors other than contractual obligations and limited

capability risk assessments (Eisenhardt, 1989). This becomes

increasingly important when applied to supply chainoperations, where factors relating to knowledge,

commitment and trust often outweigh contractualrelationships (O’Loughlin and Clements, 2007).

3. SCM theory and practice

Many SCM researchers have highlighted the need for greaterpractical application of organisational theories (see, for

example, Shook et al., 2009; Stock, 1997; Ketchen and

Hult, 2007b; Halldorsson et al., 2007; Ketchen and Hult,2007a), and in doing so have recognised organisational

theory’s pivotal role in explaining, describing, and predictingcomplex organisational behaviours (Flynn et al., 1990). These

researchers have also been instrumental in identifying the

significant bias towards transaction-cost economics (TCE) inthe literature (Burgess et al., 2006). TCE argues that during

any economic exchange, the cost of the product or serviceshould also include all hidden costs (Williamson, 1981,

2002). For example, when establishing a relationship between

a buyer and supplier, hidden costs might include time spenton developing the relationship, the drawing up of contracts by

a lawyer, or travel between various locations. The explicitfocus for TCE is the reduction of transaction exposure by

accounting for all organisational costs (i.e. transaction and

production costs) (Williamson, 2002). Alternatively, SCrelationships are often intangible and TCE does not provide

a sufficient explanation of social, political, legal and

behavioural dynamics. TCE exclusively translates the many

trade-offs within a make or buy decision into cost, which

mainly implies tangibility.Consequently, a fundamental problem with TCE is that it

makes assumptions about how relationships are structured

and the ensuing forms of leverage that develop. It is the

authors’ contention that TCE overlooks two key

considerations; the first involves contractual obligations and

the way in which transaction costs are often dissipated

throughout the SC. The second problem centres on the locus

of control within SCs and, in particular, how often minor

players are able to exert considerable leverage through

structural manipulation. For example, it has been widely

noted that within some of the “[. . .] best value supply chains

[. . .]” issues such as time, quality, risk and flexibility can be

easily manipulated by second tier agents (Ketchen and Hult,

2007a, p. 573). Arguably, shortcomings of TCE with respect

to explaining SC relationship dynamics can be largely offset

through the application of agency theory. Essentially, the

authors posit that agency theory provides a mechanism that

may be used to explain how players (both independently and

as a collective) within the SC respond to transaction cost

dilemmas where rational and non-rational behaviour occurs

(Ketchen and Hult, 2007a). In addition, Stock (1997) posits

that agency theory may also assist managers in understanding

SC behaviour by focusing attention on the following issues:. the development of inter- and intra-organisational

relationships;. the maintenance of complex relationships between

suppliers and customers (e.g. vendors and third-party

logistics providers);. the dynamics of risk sharing, capital outlay, power and

conflict between channel intermediaries; and. identifying the costs and benefits of SC integration.

In spite of its recognised explanatory power, within the SCM

literature only a limited number of studies have used agency

theory as their primary theoretical foundation, as listed in

Table I. There have been arguments outside the SCM

research that combined application of TCE and agency

theory can be more promising (e.g. Williamson, 1988).

Conversely, concerns have also been shown in treating them

as complementary theories (e.g. Krafft et al., 2004). This

debate while important is out of scope of this paper. Further

deliberation on the significance of agency theory and how it

can be used within SCM is presented in the analysis and

discussion sections of this paper. Prior to that the

methodology used for this paper is explained next.

4. Research methodology

4.1 Selection of articles

The methodology used in this study is documentary research

using electronic databases and data reduction procedures to

collect information about a specific phenomenon (Platt,

1981), in this case, agency theory and its application to the

SCM. Following similar review studies (see, for example,

Burgess et al., 2006; Giunipero et al., 2008; Vanany et al.,2009), the authors have designed a structured process for

selection of the appropriate literature. The strategy employed

seeks to identify the relevant information through coded

reviews and was undertaken as a separate process (to the

references used throughout this paper) in order to identify the

Page 4: Agency theory and supply chain management: a structured literature review

Methodology

Objectiveofstudy

Page 5: Agency theory and supply chain management: a structured literature review

required articles. The literature survey has been undertaken

using online databases, such as, Emerald, ScienceDirect,

Inderscience and ABI/Inform Global Proquest. In this regard,

a three-stage refinement process using data reduction

procedures (e.g. keywords, title, abstract and conclusion)

has been utilised.In the first stage codification of keywords and sentence

strings, such as agency theory, agency relationships, principal-

agent relationships, incentive systems, supply chain

management, and risk management were used to facilitate

the search. Results obtained through each database (using

different combinations of the keywords) were then cross-

compared, compiled and checked for possible duplications.

This yielded 86 articles published between 1973 and 2011.

This stage was limited to refereed journal articles to ensure

the quality of the documents and that they had gone through

a strict review process.Title and keywords of the identified articles were screened

in the second stage. If the authors were unsure about the

suitability and relevance of particular articles they were

included in the sample as a precautionary measure. A total of

54 articles (out of initial 86) were selected through this

process. After a further round of coding 19 articles (out of 54)

published between 1996 and 2011 in various journals (see

Figure 1) were identified. This third stage was accomplished

after reviewing the abstract and conclusion of all 54 articles.To ensure that most of the specific SCM articles which

employed agency theory were selected the authors also

checked the full bibliography list of the final 19 papers. While

no journal article was found to be missing from the results a

few number of conference and working papers (see Appendix)

were identified. These have been used in the general

discussion part of the paper but not included in the main

analysis, as the authors could not be certain of each paper’s

credentials and whether a peer review process had been

undertaken. The inclusion criteria used in stage three centred

on whether SCM (and related aspects such as procurement,

manufacturing and logistics) and agency theory applications

discussed within the abstract and/or conclusion of the

respective article (for example, articles by Ritchie and

Brindley, 2007; Narayanan and Raman, 2004, were

discarded). Stages 1-3 were performed manually and aspreadsheet database was built with a search and checkfunction to ensure criteria compliance was met.

4.2 Review process

To aid the content analysis, an instrument for collecting themain facts within each of the 19 articles was also designed.These facts included, but were not limited to, author(s), area,industry, methodology, independent/dependent variables andobjective (see Table I). This information was then used toidentify the main themes for agency theory and SCMresearch, discuss the findings and finally draw theconclusions.

5. Analysis

5.1 SCM agency theory applications

From the analysis conducted, a number of important researchissues and themes were identified. Table I shows the contentanalysis framework that was also used to elicit relevantinformation from each of the 19 specific SCM papers. Thissection presents a cross-comparison of this information acrossbroader themes, such as, level and context of application andrelationship factors (i.e. relations, information, risk andobjectives).

The analysis showed that agency theory has been usedacross various areas (e.g. procurement, manufacturing andlogistics) relating to SCM. What is evident from Table I isthat, positivist agency theory (PAT) plays a dominant role inSCM research. This is clearly an indicator of PAT’s utility forSC investigations. Moreover, the identified pattern follows theidea which views PAT as being more accessible toorganisational researchers mainly due to its non-mathematical, real-world oriented nature (Jensen, 1983).Table I also shows that the majority of SCM studies usingagency theory are concerned with general buyer-supplier(principal-agent) relationships. This approach is in line withhistorical applications of agency theory within otherdisciplines, and can be broadly classified as intra-(e.g. employer-employee) and inter-organisational(e.g. supplier-retailer) categories. However, as supply chainsoften consist of multiple actors, by adopting a parsimonious

Figure 1 Journals with agency theory application within SCM

Page 8: Agency theory and supply chain management: a structured literature review

approach to SC relationships, many researchers have tended

to overlook some of the more important dynamics taking

place within the SC. In order to counter this weakness,

scholars have attempted to address it by discussing SC agency

relationships in the form of triadic and tetradic relationships

(see Agrell and Norrman, 2004; Agrell et al., 2004; Cheng

and Kam, 2008; Hornibrook, 2007). These intricate network

perspectives are instrumental in helping managers and

researchers understand the realities of SC behaviour, as they

illustrate just how complex SCs can be, particularly where

there are multiple principals and agents (Wilding, 1998; Choi

and Krause, 2006; Surana et al., 2005).The SCM literature that does use agency theory has

focused on Eisenhardt’s (1989, p. 70) conceptualisation of

“theory-relevant contexts”; specifically when:. there is substantial goal conflict between principals and

agents (e.g. suppliers and buyers);. there is sufficient outcome uncertainty to trigger the risk

(e.g. new product development); and. evaluation of behaviours is difficult (e.g. high-tech

intensive agents) (see, for example, Simatupang and

Sridharan, 2002; Morgan et al., 2007; Whipple and Roh,

Zsidisin and Ellram (2003) have pointed towards a greater

tendency amongst purchasing organisations to mitigate risks

by deliberately manipulating a supplier’s behaviour to achieve

greater compliance (e.g. supplier development, certification

and co-developing of target costing), rather than managing

agent activity through the implementation of buffers

(e.g. safety stock and multiple sourcing). Zsidisin et al.(2004, p. 399) note that “[e]ach of the agency theory variables

may have an influence on the extent to which purchasing

organizations need to assess supply risk”. For example,

Zsidisin and Smith (2005) show how in the aerospace

industry, compliance strategies (such as early supplier

involvement) have not only been used as a means of

gathering information about behaviours of suppliers in order

to mitigate risks and strengthen the principal and agent

relationship, but also to lock suppliers into the SC.Norrman (2008) extended Zsidisin and Smith’s (2005)

work by examining how Agilent and Hewlett Packard have

implemented supplier buffers, and concluded that agency

relationships are likely to be more effective if both contractual

and relational concerns are factored into relationship

structures. Norrman (2008) further identified that problems

associated with a shift in organisational culture are most likely

to be the major barriers toward successful implementation of

risk sharing contracts. Underpinning the cultural shift was

also a problem of trust and how this either impinges on, or

exacerbates, the risk-taking attitudes and activities of the

agents. Norrman (2008) goes on to raise questions about

whether contract incentivisation and reward strategies are

sufficient to produce more compliant agent behaviour within

the supply chain, and instil a greater sense of what is identified

as purchased trust, where risk and reward appear to be

equally balanced. Focusing on incentives and goals for

mitigating the risk of agent opportunism, Hornibrook (2007)

has suggested that there is a need to distinguish between

short-term financial and long-term social incentives, as well as

understanding how shared and independent goals might

impact potential opportunism. Evidence suggests that both

principals and agents might be inclined to moderate

opportunistic behaviour where the trade-off between

financial and social incentives is more clearly defined(O’Loughlin and Clements, 2007).

Tiered SC networks are explored by Cheng and Kam

(2008), who have proposed a conceptual framework for theanalysis of risk in alternative network structures – ranging

from the classical single agent and single principal through tothe highly complex, tiered, multiple agent and multiple

principal relationships. Cheng and Kam (2008) use agencytheory to predict how participants respond to risks, which are

outside of their control. They concluded that networkcollaboration is largely contingent upon the structure of the

network, the functional role of each collaborator and, inparticular, how principals and agents structure agreements,

organise incentives, embrace trust and commitment, visualiseshort- and long-term opportunities. Agency theory hence can

offer the opportunity to understand the contextual factors andtheir implication for managing network collaboration

(Danese, 2011). In addition, how supply performance isassessed needs to be taken into consideration, especially in

tiered-multiple SC networks (see also Ritchie et al., 2008).Table II maps out the 19 papers used in the analysis along

the both research themes discussed earlier (i.e. level/context

of application and relationship factors). The numbers shownin Table II correspond to the numbers assigned to each paper

within Table I. The four relationship factors have beenextended in order to accommodate the eight relationship

variables that are mostly discussed within the literature (see,for example, Clements and Wilson, 2009; Fawcett et al.,2008; Lambert et al., 1996; Min et al., 2005; Simatupang andSridharan, 2005). Partial and full gaps have also been shown

using differen colours.It is important to note that relationship variables, such as,

information sharing and incentive alignment, which are oftenconsidered as the foundations of the agency theory, have been

extensively researched. Conflict resolution and goalcongruence between SC participants have also been

investigated with the aim of paving the way towards a more

synchronised SC. Extending the conflict dynamic further,understanding how trust evolves in the SC has become a

central focus for many researchers as it holds the key to howrelationships are managed and maintained within the SC.

While Table II provides a more comprehensive view ofagency theory’s current status within the discipline it also

identifies gaps within the research. For example, as the level ofapplication ascends (from dyadic to tetradic) the number of

articles investigating the identified relationship variablesdescends. This indicates an obvious gap in the literature

which might limit management’s understanding of thechallenges and choices within complex SCs where an actor’s

behaviour is prone to uncertainty. In addition, the authorsanalysis identified that little research has been undertaken

involving agency theory and its implications for effectivesupply chain communications.

5.2 Industries and methodologies used

As mentioned in the research methodology section, 19 articleswere reviewed which have been summarised using a number

of categories, such as, industry, methods used, and purpose oftheory. The findings show that in SCM, investigations have

taken place across a wide range of industry sectors, fromelectronics, manufacturing, and telecommunication to high-

tech, aerospace, food, and groceries (see Table I). The broad

Page 9: Agency theory and supply chain management: a structured literature review

spectrum of industry application highlights the utility of

agency theory for use within different industrial settings.The majority of research that uses agency theory to explain

relationships in the SC is empirical (approximately 73 per

cent) (see Table I and Figure 2). The literature also highlights

a number of important conceptual frameworks (see, for

example, McMillan, 1990; Logan, 2000; McCue and Prier,

2008; Shook et al., 2009). The small number of SC papers

that use agency theory to assist with modelling (see Figure 2)

might be attributed to the fact that the discipline largely sees

itself as practitioner driven, and that SCs have historically

been conceived of as dynamic entities that cannot be easily

modelled (Agrell and Norrman, 2004). It is also important to

note that the literature review revealed a gap in understanding

of the relationship that exists between SC and agency theory.SCM has sought legitimacy through a variety of different

disciplines, such as, third-party logistics as well as process-

driven management methods and techniques, which are

largely based on pragmatism (Golicic et al., 2005).

Conversely, agency theory has adopted a more populist

following, centring on organisational sensitivity and inductive

reasoning (Heracleous and Lan, 2011). While not polar

opposites, their differing epistemologies do present a

challenge for researchers, who wish to explain relationship

behaviour in supply chains. This does not invalidate their

utility, far from it, but it does provide one possible explanation

for the paucity of research.

6. Discussion of the findings

In addition to the findings obtained through the analysis, the

extant body of knowledge around agency theory has been

used to augment, support and critique (where deemedappropriate) the identified SCM agency theory applications.Analysis of SCM agency theory applications shows that

agency theory provides a useful basis for understanding thediverse range of relationship activities within SCM (Agrellet al., 2004; Norrman, 2008; Agrell and Norrman, 2004).Based on the literature, mutual information, risk and reward

sharing (Cooper et al., 1997; Lee and Whang, 2000),integrated relations and processes (Cooper et al., 1997;Bowersox and Closs, 1996; Clements and Wilson, 2009), goalcongruence across the chain (La Londe and Masters, 1994),

and establishment and maintenance of long-term businessrelationships (Cousins, 2002) are areas where agency theoryhas proved most useful. Therefore:

P1. Agency theory can be used to inform contractualresponses to outcome/behaviour uncertainty of agents(or principals) within the SC relationships.

The authors’ review of the specific SCM articles which usedpositivist agency theory (PAT) reveals its usefulness as a toolto understand, diagnose and mitigate abnormal behaviourswithin the SC relationships – from both a reactive and

proactive perspective. This however should not be interpretedas trivializing principal-agent research and its applicationwithin the SC. Agency theory identifies behavioural change bySC actors and sheds light on activities involving principal and

agent, self-interest, risk aversion, lack of trust, goal conflictand imperfect policy implementation (Simatupang andSridharan, 2002). More importantly, it identifies howcontractual responses might attenuate the tensions through,

for example, information sharing, incentive alignment, andbehaviour/outcome-based coordination (Knoppen andChristiaanse, 2007). Accordingly:

P2. PAT provides a holistic view of the potential causes of(and remedies for) the abnormal behaviour of agents(or principals) within the SC relationships.

The central tenets of agency theory have been used topartially show that where zones of tolerance (Wilson, 2006)and relationship elasticity (Zomorrodi and Fayezi, 2011)dominate supply chain relationship development, behavioural

abnormalities are less likely to occur because the principal-agent relationship is more clearly defined. Why is this useful?In short, it is because agency theory is able to deal with someof the more complex elements of SC relationship intangibility,

as well as co-exist with the more pragmatic approachesassociated with complicated networks. Consequently:

P3. PAT extends views centred on task and transaction by

attending to specific attributes of agents (or principals)operating within the SC.

Table II Overview of the analysis across the research themes

Relationship factors

Relations Information Risk * * * Objectives

Level of application Trust Commitment Communication Information sharing Incentives Investments Conflict Congruence

Dyadic 1p, 3, 9p, 11p, 13 1p * – * * 2, 3, 4, 5, 6, 11, 13, 18 3, 4, 13, 14 1, 11 * 3, 4, 6, 8, 18 2, 3, 4, 5, 9, 11

Triadic 15p, 17p * – * * – * * 7, 15 * 14, 15, 17p – * * 17 * 7, 17 *

Tetradic 19p * 19 * – * * 19 * 14 * – * * 19 * – * *

Notes: *Partial gap; * *Full gap; * * *2, 5, 6, 8, 9, 10, 12, 13, 14, 16, 17, 19 (in these papers the term risk is used in general without any specification);p=partially, e.g.: 1p means that paper 1 has partially addressed its corresponding relationship factor

Figure 2 Research design in SCM studies

Page 10: Agency theory and supply chain management: a structured literature review

The three propositions discussed above refer to the potential

ways that agency theory may be employed to understand andcontrol behaviour across SC relationships. From the analysis

it was found that information sharing and incentivisation havereceived considerable attention in agency theory-basedexplanations of relationship/behaviour-contract alignment.

More importantly, communication as an aspect ofrelationship development within the SC has received less

attention by scholars. This is in contrast to the potentialinfluence of inter-organisational communication on themitigation of behavioural uncertainty across the SC. It is

therefore suggested that more work needs to be undertaken inthis area to fully understand how agency theory might better

explain SC relationships and behaviours.In light of the above discussion, in order for researchers to

effectively employ agency theory in their SC investigations,

some important points need to be further considered. First,many authors have reduced SC interactions to a simple dyadic

relationship (e.g. Zsidisin and Ellram, 2003; Whipple andRoh, 2010). Part of the problem stems from the fact thatsome SCs are now so complicated that to be modelled

efficiently requires many years’ work; see the F-35’s GlobalSupply Chain, which has over 1,300 suppliers from nine

countries and 48 US states. It is also regarded as the mostexpensive and complex project in US defence history(Levinson, 2011). Nevertheless, an argument that is also

widely used in the literature is that whatever happens in singlerelationships needs only to be multiplied in order to

understand the whole of the SC. As O’Loughlin andClements (2007) have pointed out, this reduces SCs to avery simplistic level of sophistication. Furthermore, within the

literature, researchers have tended to approach theserelationships as being almost linear by design, and have

promoted the principal’s viewpoint as being that of thedominant partner (see, for example, McMillan, 1990; Lassarand Kerr, 1996; Zsidisin et al., 2004). Conversely, evidence

suggests that in many SCs dominance depends on channelprimacy, and not whether an organisation acts as principal or

agent (O’Loughlin and Clements, 2007).

6.1 What are the limitations for agency theory in SCM

Whilst not invalidating the agency theory’s value in terms ofexplaining SC relationship behaviour, the limitations of this

theory need to be acknowledged. For example, an over-emphasis towards economic drivers has become an importantarea of weakness in agency theory use (Heracleous and Lan,

2011). This is in part an historical legacy, and also occursbecause many SCs have traditionally been conceptualised as

economic exchange mechanisms, rather than being comprisedof complex social and economic relationships (Bergen et al.,1992; Hirsch et al., 1987). Further within SCM research, the

so-called “economist blinders” (Shapiro, 2005, p. 268) act tolimit the explanatory power of agency theory by directly

obscuring it from an organisation’s behaviour, which is bothcomplex and not easily reduced to numbers.

Agency theory’s view of the flawless principal and imperfect

agent relationship is also questionable. As Perrow (1986) hascommented, agency problems (i.e. adverse selection, moral

hazard) are not restricted solely to the agency side of therelationship, but also exist on the principal side. This becomesvital within the context of SCM as the inter-dependency that

makes up the SC means that principals and agents often swap

roles. Figure 3 illustrates how the dynamic principal-agent

relationship might function in a traditional SC, for instance, a

particular distributor who is acting as the principal of a

manufacturer (agent) while at the same time playing the role

of agent for the wholesaler (principal). The link between

principals and agents is through information and material

flow pipelines, which are in turn moderated by contract

mechanisms.Increased complexity (i.e. extended networks of principals

and agents) is another issue which is not articulated well within

classical agency theory. The “hydra factor”, as Adams (1996,

p. 16) had termed it, is a feature of the multiple agency

relationship and has come to dominate many SCM

environments. In short, the existence of multiple principals

and agents makes information balancing and the monitoring of

behaviour more challenging. Particularly, when agents have

competing interests over the delegated task, and the portfolio of

heterogeneous agents makes the governance of these dynamic

relationships more complex and problematic (Cheng and Kam,

2008). At best, the supply chain literature points toward

incorporating partner-specific characteristics in tailoring supply

chain initiatives with an agent or a cluster of – more

homogeneous – agents (see, for example, Zu and Kaynak,

2012 in the context of supply chain quality management).The measurement tools employed by agency theory also

need to be considered. Evidence from the literature suggests

that measurement design problems are mainly a result of the

lack of rigorous testing, as opposed to the limitations of

agency theory itself. This was highlighted by Bergen et al.(1992) who suggested that researchers must pay more

attention to the dynamic nature of the relationships and

questions, such as, how agency problem mitigation, through

incentive mechanisms, might alter along the tenure of

principal-agent relationships. This is important because, for

example, growing concerns with environmental uncertainty,

as an agency variable, should not only be seen as an objective

measure (e.g. a purely financial measure) but also through

subjective dimensions (i.e. as perceived uncertainty by the

agent(s) and principals) (Bergen et al., 1992). This is

becoming very important where principal-agent SC

relationships are increasingly being influenced by third party

regulation. For example, the growing acceptance and

inevitability of carbon tax measures and policies mean that

both the principal and agent have to engage in even more

complex negotiations in order to maintain a consistent

working relationship (Mason-Jones and Towill, 1998;

Commonwealth of Australia, 2011; Department of Energy

and Climate Change, 2011; Sanchez-Rodrigues et al., 2008).

Figure 3 The principal (P)-agent (A) model of traditional supply chain

Page 11: Agency theory and supply chain management: a structured literature review

In spite of these limitations, it is important to note that agency

theory’s explanatory power, especially with regard to

relationship dynamics, still provides robust basis forunderstanding the behaviour surrounding contractual

relationships, whether implied or legal and rational or

irrational, that are found within the SC. However, some ofthe deficiencies of the theory might be mitigated by

integrating other relational theories such as TCE

(Williamson, 1981), game theory (Nagarajan and Sosic,2008), resource-dependence (Pfeffer and Alison, 1987) and

relational exchange (Heide and John, 1992).

7. Conclusion

The aim of this paper was to highlight the status of the

application of agency theory and to address the question ofhow can agency theory be used to inform our understanding

of the dynamics surrounding supply chain behaviours and

relationships? Documentary research was undertaken toextract the level of current understanding around the topic.

In doing so, the analysis was performed using electronic

databases and a three-stage refinement process which resultedin identification of 19 papers that have employed agency

theory for explaining SCM issues. It was observed that within

the SCM domain, the researchers have used a variety ofindustry settings. Managerial implications and avenues for

future research are discussed in the next sections.

7.1 Implications for management

Multi-disciplinary analysis of agency theory studies has shown

that the managerial implications of this theory can range fromrelationship establishment and development to relationship

maintenance and even termination within the SCenvironments. This could entail both downstream and

upstream processes as well as the internal operations of the

primary supply chain partners. In holistic terms, agencytheory is a useful tool for managers to diagnose and segregate

their portfolio of relationships. Regardless of the fact that the

organisation has a transactional or partnership relationshipwith its partners, it is a critical task for managers to

understand and mitigate behavioural uncertainty across the

SC. Several anecdotal cases can be identified in the literaturewhere the sources of operational problems have been related

to ineffective management of inter-organisational

relationships, and/or where the distrustful atmosphere hastriggered the opportunistic behaviour of the partners

(Cousins, 2002; Ritchie et al., 2008; Richey et al., 2010).In essence, agency theory can explain how players (both

independently and as a collective) within the SC respond to

transaction cost dilemmas where rational and non-rationalbehaviour occurs (Ketchen and Hult, 2007a). Hence,

abnormal behaviours of network partners can be analysed

and, subsequently, counterbalancing remedies can be devised.This process, in turn, might contribute to the development

and maintenance of a trusting atmosphere in business

relationships. Moreover, it is invaluable in either increasingor decreasing the tolerance threshold of managers (with

respect to re-engineering their supplier/customerrelationships) who are constantly dealing with complex

organisational behaviours within their SC.As noted above the implications are applicable to various

outbound and inbound processes and practices such as

vendor-managed inventory (VMI), just-in-time (JIT),

collaborative planning, forecasting and replenishment

(CPFR), enterprise resource planning (ERP) and efficient

consumer response (ECR). All these practices are

relationship-intensive and their implementation requires a

high level of task or authority delegation across principals and

agents participating in a SC. The successful implementation

of SC processes and activities could be provisioned by

catering for agent-specific conditions through dynamic

contractual relationship. Agency theory may help managers

to factor social, economic, political and behavioural aspects

into their contract decision-making, by undertaking adaptive

measures around incentivisation, information sharing and

goal congruence. Researchers could also use agency theory to

assess the implementation, success or failure of the above-

mentioned practices from the SC relationships perspective.

7.2 Suggestions for future research

The authors posited that agency theory is suitable for

studying SCM. Conversely, it was found that the extant

literature is subject to many gaps and this highlights the need

for further research. Future studies should explicitly recognise

the application of agency theory for studying issues such as

information sharing, risk/reward sharing, and establishment/

maintenance of inter-organisational relationship at the SC

level of analysis (as opposed to the prevailing dyadic

investigations in the literature). Further attention also needs

to be paid to the assumptions underlying agency relationships

within SC environments. This is significant as supply chains

that span country borders and even continents, might be

affected by cultural variation (Brown Johnson and Droege,

2004). The theoretical lens that agency theory provides can

support managerial decision-making and strategy

formulation, specifically with respect to supplier and

customer relationships. Supply chain communications is

another area where agency theory might help to explain the

influence of effective inter-organisational communication on

the mitigation of behavioural uncertainty across principals

and agents transactions.The authors also recommend application of agency theory

in the study of collaboration and uncertainty/change across

the SC (see, for example, Plambeck and Gibson, 2010).

Collaboration can be seen as relational integration between

multiple principals and agents based on the efforts in

information exchange, goal congruence, and incentive

alignment which have the potential to induce trust and

reduce uncertainty for the effective management of supply

chains. Future research can investigate how agency variables

such as goal conflict, information asymmetry, and risk

aversion can be altered to achieve positive outcomes

through effective collaboration. This research also has

implications for the uncertainty mitigation between

principals and agents that might ultimately result in reduced

uncertainty along the SC. Conceptual in nature but drawing

on both theoretical and empirical agency theory studies, this

paper discussed a tool for managing complex SC behaviours

and relationships. As noted previously, integrating agency

theory with other organisational theories, such as, TCE and

relational exchange offers promise in potentially offsetting its

limitations. Perhaps, as the complexity of SC relationships

necessitates, case study investigation in industry-specific

supply chains can augment the conceptual discussion of this

Page 12: Agency theory and supply chain management: a structured literature review

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Appendix. List of conference and working papersrelated to agency theory and SCM

Agrell, P. and Norrman, A. (2004), “Understanding supply

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organisations”, working paper 147, 24 July, Kent BusinessSchool, University of Kent, Canterbury.

Plambeck, L. and Gibson, P. (2010), “Application of agencytheory to collaborative supply chains”, paper presented atthe Oxford Business & Economics Conference (OBEC),28-30 June, Oxford, available at: www.gcbe.us/2010_OBEC/data/Peter%20Gibson,%20Lena%20Plambeck.doc(accessed 19 January 2012).

Zhang, Y. and Li, C. (2006), “A principal-agent approach toincentive mechanisms in supply chains”, paper presented at

the IEEE International Conference on Service Operations

and Logistics, and Informatics (SOLI), 21-23 June,

Shanghai, available at: http://ieeexplore.ieee.org/xpls/ab

s_all.jsp?arnumber¼4125606&tag¼1 (accessed 19 January

Corresponding author

Sajad Fayezi can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected]

Or visit our web site for further details: www.emeraldinsight.com/reprints

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Making agency theory work for supply chain relationships: a systematic review across four disciplines

International Journal of Operations & Production Management

ISSN : 0144-3577

Article publication date: 16 August 2022

Issue publication date: 19 December 2022

Contemporary supply chain relationships inherently rely on delegation of work between organizations and, thus, are subject to agency problems for which a wide range of governance mechanisms exist. This review of agency theory (AT), across four distinct fields, explains the connection between governance mechanisms and supply chain relationship types.

Design/methodology/approach

The study uses a systematic literature review (SLR) of articles using AT in a supply chain context from the operations and supply chain management, general management, marketing, and economics fields.

The authors categorize the governance mechanisms identified to create a typology of agency relationships in supply chains.

Research limitations/implications

The developed typology provides parsimonious theory on different forms of supply chain agency relationships and takes a step towards a “supply chain-oriented agency theory” explaining and predicting relationship types and governance in supply chains. Furthermore, a future research agenda calls for more accurate measuring of agency costs, to examine residual gains alongside residual losses, to take a dual-sided perspective of agency relations and to adopt AT to examine more complex supply networks.

Practical implications

The review provides a menu of governance mechanisms and describes situations under which these mechanisms could be deployed to guide managers when developing their supply chain relationships.

Originality/value

The first review to combine and elaborate views from four major disciplines using AT as a lens to supply chain relationships. Expanding the traditional set of governance mechanisms provides academics and practitioners with a bigger “menu” of options to consider.

Agency theory
Information asymmetry
Supply chain relationships
Buyer-supplier relationships
Systematic literature review

Matinheikki, J. , Kauppi, K. , Brandon–Jones, A. and van Raaij, E.M. (2022), "Making agency theory work for supply chain relationships: a systematic review across four disciplines", International Journal of Operations & Production Management , Vol. 42 No. 13, pp. 299-334. https://doi.org/10.1108/IJOPM-12-2021-0757

Emerald Publishing Limited

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1. Introduction

Over the last decades, we have witnessed increasing supply chain complexity as firms seek improvements in their competitive advantage through the delegation of activities to partners with specialized knowledge, resources, and capabilities. These supply chain relationships take various forms such as transactional buyer-supplier relations, strategic partnerships, service triads, alliances, and distribution channel relations. However, the common denominator is that they involve two or more independent organizations with individual goals and incomplete transparency of one another's operations ( Gibbons, 2005 ; Vosooghidizaji et al. , 2020 ). In theoretical terms, such relations are subject to agency problems, namely the self-interest of the other party (typically the agent), which creates incentive design and monitoring (i.e. governance ) challenges ( Lassar and Kerr, 1996 ).

Let us consider a typical supply chain relationship: a buyer-supplier relationship. Here, the buying firm (the principal) has access to a market but requires the capabilities of a supplier (the agent) to fully claim the market's value. This creates two generic categories of agency problems resulting from asymmetric information and potential goal incongruence between the parties ( Zu and Kaynak, 2012 ): (1) adverse selection due to the supplier's unknown capabilities before signing the contract ex ante , and (2) moral hazard due to the supplier's hidden action after signing the contract ex post . As such, parties must agree on a contract monetarily aligning goals and defining responsibilities, but contracts are often incomplete and should be complemented with governance and coordination mechanisms such as monitoring, shared practices, and social contracts ( Malhotra and Lumineau, 2011 ).

Given the fact that formal and informal governance and coordination mechanisms are the cornerstones of effective supply chain management ( Cao and Lumineau, 2015 ), it is perhaps surprising that agency theory (AT) has remained a relatively underutilized lens in operations and supply chain management (OSCM) when compared to other mainstream theories such as transaction cost economics (TCE). AT's advantage is that it analytically focuses on the relationship between two asymmetrically informed parties ( Barney and Hesterly, 2006 ) rather than proxies such as transactions, as in TCE.

So, what explains such under-utilization of AT in OSCM as well as more generally in literature on inter-organizational relationships (IORs)? In their review, Fayezi et al. (2012) point out that OSCM scholars have predominantly relied on so called positivist agency theory (PAT), which is widely used to examine the relationship between firm's owners and managers, i.e. corporate governance ( Barney and Hesterly, 2006 ; Eisenhardt, 1989 ), hence limiting the wider utilization of the theory in a supply chain context. Moreover, AT has been criticized due to its narrow model of human behaviour and excessive focus on self-interest and opportunism ( Bosse and Philips, 2016 ), which tend not to fit well with the relational perspective in OSCM (see, e.g. Lumineau and Oliveira, 2020 ).

Whatever the reasons, we argue for a more in-depth examination of the past use and fit of AT to study supply chain relationships, and for a synthesisation of governance mechanisms and different types of relations. Therefore, our paper seeks to address the following research question: How can agency theory explain and predict types of supply chain relationships (both downstream and upstream) and their governance? More specifically, we examine the extent to which the key components of AT explain various relationship forms but also address potential weaknesses of the theory that would benefit from further elaboration. In doing so, we make several important contributions.

First, we provide a systematic literature review ( Durach et al. , 2017 ) of the use of agency theory in studies of supply chain relationships. Critically, we spanned our search across four key disciplines – OSCM, general management (MGMT), marketing (MARK), and economics (ECON) – to identify potential similarities and divergent perspectives. This inter-disciplinary approach, the first of its kind, is an important contribution as recognizing relevant research across disciplines is key to theory development and understanding complex phenomena ( Tanskanen et al. , 2017 ), thereby ensuring the OSCM can address current and future challenges ( Sanders et al. , 2013 ). This multi-disciplinary approach, capturing in essence leading studies on agency relationships in inter-organizational contexts, whether they are labelled as supply chain management or not, also enables us to significantly expand the earlier review efforts of Fayezi et al. (2012) . We thus include papers covering all supply chain agency relationship settings, including upstream buyer-supplier relations, downstream distributing relations, horizontal alliances, as well as those beyond the dyad such as triadic agency settings or those with multiple agents working for a single principal.

Second, based on integration of past literature across the four disciplines, we have categorized fourteen key governance mechanisms aimed at curbing agency problems (further clustered into four dimensions). In doing so, we evidence a more extensive and fine-grained set of mechanisms than the monitoring and incentives that have dominated traditional discourse since Eisenhardt's (1989) seminal article. This integration across the four neighbouring disciplines aims to unify the discussion on AT and supply chain relations, linking so far somewhat disconnected discussions across different disciplines.

Third, we develop a typology of supply chain agency relationships that together with a set of propositions provides a clear linkage between governance mechanisms and different relationship types. We show that agency risk, defined as probability multiplied by impact, is a key concept explaining the viability of different relationship types. This enables both a coherent theoretical discussion as well as a better managerial understanding of which governance mechanisms are best suited under which condition.

Finally, we provide an agenda for future research, calling for better operationalization of agency costs; further exploration of residual gains alongside traditional residual losses ; dyadic analysis of agency problems that incorporates principal and agent perspectives; and using AT as a lens to explore more complex supply networks (e.g. triads, agency chains, common agency, dynamic agency roles) in contemporary OSCM contexts, with a particular focus on sustainability and digitalisation agendas. In doing so, we take an important step towards a “supply chain-oriented agency theory” and suggest empirical approaches to investigate previously overlooked areas. We hope that our work will make agency theory more accessible to OSCM researchers as well as representatives of neighbouring disciplines studying supply chain related topics.

2. Methods and materials

This section first describes the theoretical premises behind our methodological choices. After this, we provide a detailed description of the methods used to retrieve and analyse an appropriate sample of AT articles focusing on supply chain relationships and the approach to subsequent analysis.

2.1 Theoretical premises

A successful integration of existing research via systematic literature review (SLR) requires strong a priori theoretical guidance in the development of research questions and subsequent SLR process ( Durach et al. , 2017 ). Hence, our premises are derived from AT's core assumptions on information asymmetry, goal incongruence between parties, as well as portraying actors as rational and self-interested decision-makers. This does not mean that we are blindly restricted by these assumptions, but they serve as boundary conditions to better manage our SLR process, e.g. by restricting our inquiry to those papers using only AT as a predominant theory.

First, we use the agency relationship as our unit of analysis, which encompasses the contract but takes a broader perspective to the relationship between the principal and the agent. While for example Eisenhardt (1989 , p. 58) defines the contract governing the relationship between the principal and agent as the unit of analysis, she, as well as other key AT references ( Ross, 1973 ; Jensen and Meckling, 1976 ; Barney and Hesterley, 2006 ) explicitly explain the theory as directed at the agency relationship . Eisenhardt herself ( 1989 , p. 58) notes how “agency theory attempts to describe this relationship using the metaphor of a contract”, suggesting the theory has a broader scope and the contract is only (an empirical) proxy. As Jensen and Meckling (1976) note, the contractual arrangements are only a small part of the general agency problem and associated costs, and the theory has been extended to many different relationship types ( Barney and Hesterly, 2006 ). Additionally, a contract to economists is a complex optimization problem to derive optimal compensation structure, which is far removed from the term's common usage as a legal document. Indeed, our review results indicate the de facto unit when using agency theory in supply chain relationships is often the relationship, not only (or not even) the contract. This is also in line with our analysis relying on the core assumptions of information asymmetry and goal incongruence, which are related to, but extend beyond the contract.

Secondly, from an analytical perspective, we focus on a hypothetical focal firm in the supply chain to describe agency relations in all directions, upstream, downstream, and horizontal. We also included all agency relationships studied whether in a dyad, triad or a more complex network. The analytical focus simply means that to generalize the findings, we use the focal firm perspective, which we take as the principal having relationships in many directions. This assumption deviates from some of the former conceptualizations of agency relationships in supply chains, which tend to narrowly treat the downstream party as the principal (cf. Figure 3 in Fayezi et al. , 2012 ).

2.2 Systematic literature review process

To control for research quality in epistemologically diverse management research, limiting searches to top field journals has become a standard practice in management reviews ( Tranfield et al. , 2003 ; Durach et al. , 2017 ). Hence, we systematically reviewed leading journals in the selected disciplines based on the criteria that the journal is either listed in the University of Dallas (UTD) journal list or has ranking of four (or four star) in the Academic Journal Guide (AJG) by Chartered Association of Business Schools (CABS) [1] . In total, we searched 26 journals for supply chain-oriented agency theory articles. In ECON, we chose only four-star journals given that there are over 20 four or four-star journals (we also excluded Annals of Statistics which is an outlet for statistical methods development). We included Management Science and Operations Research within the OSCM group of journals since they both are listed in UTD journal list (without any specific discipline label but alongside with OSCM journals) and share strong intellectual legacy between two major OSCM outlets of Manufacturing and Service Operations and Production and Operations Management , albeit in AJG they are placed in their own field.

2.2.1 Article retrieval

We searched the 26 journals (title-keyword-abstract) using four major databases (Web of Science, EBSCO Business Source Complete, ABI/INFORM, and Scopus) from the start of the journal until the end of 2021 by using a generic AT-related search string ( “agency theory” OR “principal agent” OR “agen* problem” OR “agen* relation*” ) . By doing this, we sought to retrieve all articles from the selected journals, which would use AT as a predominant theoretical lens. After merging the results and removing duplicates, we were left with 1,259 articles for manual abstract screening.

Next, we included only articles explicitly discussing any organization-to-organization relationships which could inform us on agency problems (and their mitigation) that a focal firm faces in a supply chain context (excluding, e.g. corporate governance articles). We saw this manual selection as the only option given the fact that different disciplines discuss supply chain type of relations using different terms such as inter-organizational relationships, franchising relations, buyer-supplier relationships, etc.

Two independent evaluators conducted abstract screening utilizing a traffic light approach (red = excluded, yellow = unsure, green = included). All articles receiving a disputed decision were discussed to reach a unanimous decision. This resulted in 76 articles being accepted, 1,006 articles being rejected, and 177 unsure articles passed for a further full text review to assess their suitability. The full text review of the yellow cases by the two evaluators led to the inclusion of an additional 36 articles. While reviewing the full-text of the included sample, we discarded 17 initially green-listed articles as “false positives” not meeting the criteria of being explicitly focusing on supply chain context and using AT as a predominant theory, leaving the final sample of 95 articles.

2.2.2 Analysis and coding

Four researchers engaged in a rigorous three-stage coding process preceded by a pilot coding. In the pilot coding, we jointly crafted an initial coding scheme and instructions with which each researcher coded the same two articles from each field independently (in total 8 articles). After this, the coding results were compared, and coding scheme and instructions were further developed to mitigate any discrepancies.

In the actual three-stage coding, the sample was divided among four researchers so that each researcher coded articles belonging to a certain discipline. In the first round, we coded all the research design related matters such as research question, research approach, method, study context and data. Related to the study objectives, we also coded the type and direction of the relationship, supporting and complementary theories used, and identified the principal and the agent (if clear) in each relationship.

In the second, and more extensive round, we focused on the explicit results of each paper. We coded the concepts discussed in each paper as well as their operationalization (i.e. variables) together with the claimed and tested relationships. We also focused more on coding categories specifically related to AT, such as agency problems, agency costs, and governance mechanisms, described in the papers as well as the papers' contributions.

The third and final round of coding aimed to identify categories of governance mechanisms used to curb agency problems. In order to generate a reasonable number of categories while maintaining the richness of the material, we undertook inductive categorization resembling qualitative data analysis ( Gioia et al. , 2013 ). During the previous coding stage, we had listed the governance mechanisms using the specific language of each article. At this stage, we moved up the ladder of abstraction by identifying common patterns. After several iterations, we categorized fourteen key governance mechanisms, which we further aggregated into four distinctive dimensions. These categories and aggregate dimensions formed a basis for our further theorizing efforts and formulation of our supply chain agency relationship typology.

3. Summary of synthesis sample – similarities and differences between disciplines

Even a high-level analysis of our synthesis sample reveals an interesting finding: there appears to be both within-discipline and between-discipline variation in terms of research approaches. More specifically, our synthesis sample containing the four disciplines seems to be separated by the classic dichotomy between more empirical positivist agency theory and more mathematical principal-agent research ( Eisenhardt, 1989 ). Roughly speaking, general management, marketing and so called “empirical operations management” tend to follow the former tradition while economics and operations research (here treated as part of OSCM discipline) follow the latter. Table 1 [2] , summarizing the relationship types and employed methods, captures this variation. In the following, we provide a short synthesis of the key differences between these two distinctive domains with particular focus on principal-agent research, which is arguably less familiar to the empirical OSCM readership.

3.1 Positivist agency theory versus principal-agent research

According to Eisenhardt's original formulation ( 1989 ), positivist agency theory tends to focus on governance mechanisms aimed at curbing self-interested behaviour of agents especially in intra-organizational corporate governance. Our review reveals a similar tradition for the inter-organizational context in the disciplines of MGMT, MARK and empirical OSCM. As the subsequent sections of this paper show, past research has explored a wide range of different governance mechanisms in various relationship types (see also Table 1 ). However, whilst the traditional dichotomy between outcome-based and behaviour-based mechanisms holds, these have increasingly been combined and complemented with more informal approaches (see, e.g. Rivera-Santos et al. , 2017 ; Wilhelm et al. , 2016 ) summarized in Section 4 of this paper.

In contrast, principal-agent research does not explicitly focus on any “real-world” governance mechanisms but analyses the economic contract between a principal and an agent. Thus, in economics, agency theory is often referred to as contract theory ( Bolton and Dewatripont, 2004 ) or theory of incentives ( Laffont and Martimort, 2002 ). The economic contract is not a contract in legal terms, but simply a compensation scheme under asymmetric information and typically formulated as a set of complicated mathematical equations ( Bolton and Dewatripont, 2004 ). Adverse selection and moral hazard are then used as analytical frameworks to build on a game theoretic set up, where the principal and the agent take turns choosing certain game parameters to optimize their utility functions. Information asymmetry makes it impossible for the principal to deduce the optimal contract, forming the so called “principal's problem” ( Ross, 1973 ). The following simplified example illustrates the issue.

Let's assume that a car manufacturer (the principal) needs to buy a specific component from its supplier. If the buyer knows the supplier's production cost C and this would also be the supplier's reservation utility (i.e. the price a supplier could achieve elsewhere), the buyer can simply offer the supplier a contract with a price of C + 1, that makes the supplier “just indifferent” between selling the product to the given buyer or doing anything else. However, in a principal-agent framework (and often in real life), production cost information is private to the agent and, therefore, the principal does not know production costs and thus distinguish between an efficient ( high type) and an inefficient ( low type) agent. The extra profit gained by a high-type agent (having lower production costs) is called an information rent and is often treated as the minimization object in adverse selection models. Thus, while the agent's type remains unknown to the principal, there is no first-best solution to the principal's problem, which means that the agent's information rent is always higher than zero (leading to an informational advantage for the agent). The common principal strategy is to formulate a menu of screening contracts from which the agent chooses. The crux is to decide a menu of contracts whereby the agent's contract selection reveals their type – referred to as the information revelation principle.

Similarly, in moral hazard models, the principal designs a compensation structure that captures their marginal benefits and the agent's marginal costs, to incentivize the agent to induce highest effort ex post (see, e.g. Anderhub et al. (2002) for a generic illustration and experimental results).

The clear benefit of such models is that they are to some extent indifferent to initial parameters as well as the roles of the principal and the agent. The principal suffering from the information asymmetry can be the buyer not knowing about the supplier's delivery cost (see, e.g. Gao, 2015 ) but can also be the supplier not knowing the buyer's actual demand (e.g. Feng et al. , 2015 ; Gümüş, 2014 ). Thus, the task is simply determining the initial utility functions for both parties as well as the parameters of the task to be delegated and then to attain the mathematical solution which maximises either party's benefit (typically the principal's).

Unfortunately, more parameters, more complex models tend to become, involving higher order differential equations or other optimization techniques such as dynamic programming (see, e.g. Zhang and Zenios, 2008 ). Whilst intellectually appealing, such models oftentimes have limited practical value. Yet, such models are important starting points for more practical compensation structures and policies and therefore more recently even the most complicated models are often backed up at least by numerical examples (see, e.g. Liang and Atkins, 2021 ) or even real data (see, e.g. Iyer and Palsule-Desai, 2019 ; Aswani et al. , 2019 ).

To summarize, positivist agency theory dominates empirical papers and is perhaps the most familiar to an empirical OSCM readership (see, e.g. Fayezi et al. , 2012 ). Yet, there is significant research adopting a principal-agent framework, utilizing economic contract theory, to the supply chain context. The common denominator lies in the assumptions of information asymmetry and goal incongruence between principal and agent. However, beyond this, the two streams have developed as relatively isolated pockets. Interestingly, OSCM seems to be the domain where potential cross-fertilization could occur. For instance, we often see also pure modelling papers published in journals also focusing on empirical research. For instance, Production and Operations Management has published papers belonging to both streams (for principal-agent research see, e.g. Chen et al. , 2014 ; Gao, 2015 ; Gümüş, 2014 ; Dong et al. , 2016 and for the positivist stream see Handley and Gray, 2013 ).

3.2 Relationship types

As indicated in Table 1 , the dominant relationship in OSCM and ECON form is buyer-supplier relationships (BSRs) with the buyer typically assumed to be the principal. In MARK and MGMT, franchising is the most common relationship type. It is noteworthy, but unsurprising, that the downstream relations (franchising and manufacturer-distributor) comprise over 60% of the marketing papers as the discipline often emphasizes management of marketing channel relations. Payor-provider relationships in healthcare provide an interesting and seemingly trending special case in OSCM field appearing in five articles (of which three articles appeared after 2019). Alliances and other networked forms (3 articles) and more specific licensor-licensee relationships (2 articles) remain relatively marginal. Three remaining articles were conceptual articles that did not define a specific relationship type or discussed multiple types organization-to-organization relationships.

While agency theory is geared at the dyadic principal-agent relationship, in reality, such supply chain relationships take place in more complex networks where dyadic relationships are impacted by others in a network ( Choi and Wu, 2009 ). It is thus important to also understand the extent to which this is reflected in the use of the theory. While most articles focused on a dyadic relationship, examples of a triadic agency relationship were also found in relation to service triads in a buyer-supplier context ( Broekhuis and Scholten, 2018 ), and in a franchising context ( Zhang et al. , 2015 ).

Additionally, some studies examined a setting with a principal and competing agents (suppliers or distributors) ( Seshadri, 1995 ; Board, 2011 ; Cremer and Kahlil, 1992 ; Segal and Whinston, 2003 ; Mookherjee and Tsumagari, 2004 ; Li et al. , 2013 ; Gümuş, 2014 ; Obloj and Zemsky, 2015 ; Homburg et al. , 2020 ; Vivian Zheng et al. , 2020 ; Liang and Atkins, 2021 ), competing principals with a single agent, i.e. common agency ( Hu et al. , 2013 ; Kalkancı and Erhun, 2012 ) or an intermediary serving an upstream an a downstream principal ( Lawrence et al. , 2021 ). Multi-tier agency relationship studies are rare, but examples in our sample include the empirical studies by Wilhelm et al. (2016) and Hasan et al. (2020) , and modelling studies by Chen et al. (2014) and Dong et al. (2016) .

3.3 Methods employed

Table 1 further reports the methods employed in the synthesis sample. Overall, articles are balanced between empirical and non-empirical articles. AT has claimed to be strongly positivistic and enjoys relatively strong theoretical maturity; hence it is unsurprising that all of the studies represent the positivist line of thought in terms of epistemology and ontology, i.e. empirical articles predominantly rely on theory testing using quantitative methods, either through surveys or secondary data. The predominant design in the non-empirical papers is mathematical modelling. There is also an increasing trend to utilize multiple methods (coded as multi-methods in Table 1 ), such as survey with secondary data experiments ( Lawrence et al. , 2021 ), interviews with secondary statistical data ( Peltokorpi et al. , 2020 ) or with simulations ( Shevchenko et al. , 2020 ), or modelling with secondary data ( Aswani et al. , 2019 ).

3.4 Units of analysis

As expected, the dominant unit of analysis is either the relationship between, or the (economic) contract between firms. However, this is rarely stated explicitly and the gap between the analytical and empirical unit of analysis can be quite wide. There is a prevalence of principal-sidedness in examining agency issues particularly apparent in the modelling papers and their two very basic principal-agent frameworks as described above. Arguably, one-sidedness is partly caused by the overly “principal-dominant” tenet of AT where information asymmetry is predominantly viewed as one-sided and something that only the principal suffers from.

The one-sided perspective is visible in designs of empirical papers, which typically focus on ensuring the principal's welfare, through contractual mechanisms such as franchising ( Combs et al. , 2004 ) and performance-based contracts ( Roels et al. , 2010 ; Seshadri, 1995 ; Zu and Kaynak, 2012 ). In a similar vein, empirical papers often focus on factors behind supplier opportunism and risk ( Zsidisin and Smith, 2005 ) and mechanisms such as monitoring ( Handley and Gray, 2013 ) and plural governance ( Heide, 2003 ). Even if the data are collected from agents, the interest is often in the principal's welfare (e.g. Massimino and Lawrence, 2019 ). Furthermore, a strong majority of this empirical work involves data collection solely from the principal's perspective, yet the principal's role in the supply chain may vary (see, e.g. Lassar and Kerr, 1996 , for a manufacturer/supplier as the principal; Shane, 1998a , for a franchisor as the principal; Shevchenko et al. , 2020 , for a buyer as the principal).

Just a handful of studies have approached principal-agent issues purely from an agent perspective and focus on, e.g. agent's perceptions of employed coordination and incentive mechanisms ( Celly and Frazier, 1996 ), forms of monitoring ( Heide et al. , 2007 ), levels of goal congruence ( Gilliland and Kim, 2014 ), and the customer's behaviour ( Steinbach et al. , 2018 ). Overall, these studies posit that an agent performs more poorly when they face unfair treatment from the principal.

Some principal-agent papers focus on so called Pareto efficiencies, i.e. the optimal outcomes of the principal-agent relationship/system as a whole. For example, Corbett (2001) analyses the lot sizing problem from perspectives of both parties, Inderfurth et al. (2013) report on a laboratory experiment predicting the performance of the whole supply chain through the agent's (the supplier) choices based on the principal's (the buyer) signals, and Lawrence et al. (2021) provide insights for sellers, customers, and the sales agents in between in their dual agency role.

Finally, a very small set of studies achieve a stronger fit between analytical and empirical units of analysis. Examples of quantitative studies using dyadic data include Handley and Gray (2013) , Lawrence et al. (2021) , and Ross et al. (1997) , whilst Sumo et al. (2016) use non-matched data from both parties. Likewise, qualitative studies in our sample interviewed representatives from both sides (e.g. Argyres, 1999 ; Broekhuis and Scholten, 2018 ; Wilhelm et al. , 2016 ).

3.5 Directionality of principal-agent relations in supply chain

One major difference between the four reviewed disciplines is the directionality of principal-agent relationships in the supply chain. By directionality, we mean upstream vs downstream positioning of the principal and the agent. In OSCM, the fundamental assumption is that the upstream supplier acts as the agent to the downstream buyer or the principal ( Fayezi et al. , 2012 ; Slack and Brandon-Jones, 2021 ). In turn, the firm then takes an agent role when serving the next downstream firm in the chain.

However, given the different research foci, this assumption is reversed in other disciplines. For example, in MARK, analyses of channel relationships place the upstream manufacturer as a principal and the downstream distributor as an agent. A similar assumption holds for franchising relations. The rationale is that this time the downstream agent has an informational advantage in areas like market value ( Chen et al. , 2014 ), how active it is in promoting and selling products ( Celly and Frazier, 1996 ), how well it meets service standards in franchising ( Massimo and Lawrence, 2019 ). This analogy could easily be applied to buyer-supplier relationships meaning that especially in situations of complex technologies, the buyer may act as an agent to the supplier, when (mis)using the supplier's components in its own manufacturing process and the supplier does not have sufficient information on the process. Naturally, an agency problem will occur only if the goals of the two parties are incongruent [3] .

As stated above, the papers building on an economic principal-agent framework appear to be more flexible in these terms because they simply assign the P-A roles based on informational advantage which every self-interested economic actor is willing to use. Naturally, this assumption is debated, particularly in empirical work (see, e.g. Broekhuis and Scholten, 2018 ; Lassar and Kerr, 1996 ; Meuleman et al. , 2010 ). However, focusing only on information asymmetry allows using the same P-A framework for BSRs where either the supplier or buyer acts as an agent.

Taken together, these aspects support our theoretical premises and choice to focus on the focal firm as a principal. This choice further motivates our subsequent analysis in the next section where we discuss different governance mechanisms the focal firm can put in place to coordinate its supply chain agency relationships. Naturally, such theoretical parsimony comes with its limitations such as the aforementioned overly principal-oriented focus. We return to these limitations at the end of our paper as they open interesting avenues for future research.

4. Governance mechanisms

We identified 14 different types of governance mechanisms, which we have further aggregated into four distinct governance strategies: (1) information transfer strategies , dedicated to decrease the level of private information (creating information asymmetry) between parties (2) goal alignment strategies , dedicated to curb self-interested behaviour through decreasing goal incongruence, (3) integration strategies , aiming to decrease both information asymmetry and goal incongruence, and (4) psychological influence strategies , involving social mechanisms mitigating self-interested behaviour. As a result of our systematic review, we are able to present a much richer set of governance mechanisms that goes beyond the commonly mentioned dichotomy of “incentives” and “monitoring”. The result of this coding is shown in Figure 1 .

In the following, we will explain each mechanism in detail which then leads to our formulation of a typology of supply chain agency relationships together with the set of propositions on conditions under which each relationship form is assumed to thrive. We assume that each supply chain relationship comprises of some kind of a formal agreement/contract between the parties defining their roles and responsibilities and therefore the identified governance mechanisms are seen as complements to such a baseline contract. For example, two organizations may enter into a baseline exchange agreement for a specific service which defines the basic characteristics and price paid. However, to mitigate agency problems, the principal may also put in place additional governance mechanisms, i.e. some of those introduced in the following.

4.1 Information transfer strategies

Most of the mechanisms grouped under this strategy rely on the principal's actions to acquire more information on either agent's skills or actions to decrease the opportunity for agency problems to occur. However, signalling mechanism also highlights the agent driven action to willingly (or selectively) share private information. Thus, the label information transfer , which aims to capture the ideal that reducing information asymmetry is essentially about transferring the information between two independent parties.

4.1.1 Screening

Many articles, especially in ECON, focus on screening contracts as a mechanism to mitigate adverse selection. Note that screening has a specific meaning in this context which differs from its more colloquial interpretation. Screening is based on the idea that the principal offers agents (who possess private information ex ante on their “type” such as production costs), a menu of contracts from which to choose ( Laffont and Martimort, 2002 ; Iyer and Palsule-Desai, 2019 ). The principal can then screen the agents' type based on the contract they select ( Gibbons, 2005 ). This approach relies on the so-called information revelation principle : when the menu of contracts is effectively designed, the agent's best strategy is to select the contract revealing their true type. In the simplest form, this would mean that the principal offers to pay so low price that only the most efficient supplier can meet it, but given the information asymmetry it is difficult for the principal to deduce such price level. Therefore, extant literature suggests mathematically sophisticated screening contracts like dynamic programming to account for past information and decisions ( Zhang and Zenios, 2008 ) or to account for the needs for product specification by the principal ( Iyer et al. , 2005 ); while a more conservative stream ( Rogerson, 2003 ) states that contract menus for screening should be as simple as possible.

4.1.2 Signalling

Signalling refers to voluntarily revealing private information, e.g. about capabilities, and this signalling can be done by either agents or principals. Signalling by agents is often practiced by “high type” or cost-efficient agents ( Bergen et al. , 1992 ; Heide, 2003 ). Two articles stress the importance of the principal's signalling actions as a way of revealing, for example, demand forecasts ( Gümüş, 2014 ) or their own commitment to the relationship ( Ross et al. , 1997 ). Given that signalling and screening (above) are both related to revealing private information and to some extent, self-selection, these two mechanisms could potentially be combined – indeed, Heide (2003) takes this approach. However, once one considers the role of principal signalling as well as agent signalling, such a combination appears inappropriate.

4.1.3 Selection

Empirical papers often use the term selection to describe a more interactive approach – very different from screening above – in which the principal may negotiate with agents and for example audit their operations. A typical selection process includes the use of certain transparent criteria, which are either self-reported by the agent or verified by the principal, for example by assessing an agent's past performance in other relationships ( Antia et al. , 2013 ; Wilhelm et al. , 2016 ). In high uncertainty and high-risk settings, selection processes may be resource-intensive for both principal and agent, as in the example of a buyer organizing design workshops with suppliers ( Zsidisin and Smith, 2005 ). However, Rivera-Santos et al. (2017) argue that ex ante selection of altruistic parties to an alliance may decrease the need for ex post monitoring. As such, a resource-intensive selection process should be undertaken only when the selection cost can offset the cost of shirking ( Stump and Heide, 1996 ). However, as we will discuss later, such a cost-benefit analysis is often difficult, if not impossible, to obtain.

4.1.4 Monitoring

Unsurprisingly, monitoring is the most frequently mentioned governance mechanism in our sample. It is cited as a strategy to decrease information asymmetry and to mitigate post-contractual moral hazard. Monitoring is often deemed necessary especially when the agent's compensation cannot be outcome-based ( Zu and Kaynak, 2012 ). Forms of monitoring vary, ranging from intensive behaviour monitoring, such as facility audits ( Handley and Gray, 2013 ), to more arm's-length output monitoring through, e.g. quality checks and financial analysis ( Heide et al. , 2007 ). Agents may perceive behaviour monitoring as intrusive ( Rivera-Santos et al. , 2017 ), which may increase the likelihood of moral hazard ( Heide et al. , 2007 ; Sharma, 1997 ). One important finding is that behaviour or output monitoring on their own seem relatively ineffective but combining both with effective enforcement appears to yield the best governance solution ( Kashyap et al. , 2012 ). Interestingly, even with franchising, where the residual claimancy of the franchisee is often assumed to govern moral hazard, monitoring is seen as a necessary evil to eradicate potential horizontal brand freeriding ( Combs et al. , 2004 ; Zhang et al. , 2015 ).

Monitoring is typically presented as an activity undertaken by the principal, leading to agency costs for the principal. In reality, however, one may expect that monitoring relies to some extent on the agent preparing reports, as in supplier-completed questionnaires ( Hajmohammad and Vachon, 2016 ). For example, Green and Taylor (2016) explicitly mention reporting as a mechanism in the form of an agent self-reporting progress on a complex development project. While most studies refer to the principal monitoring the agent, there are also examples of mutual monitoring (e.g. Broekhuis and Scholten, 2018 ) and third-party monitoring (e.g. Shevchenko et al. , 2020 ).

4.2 Goal alignment strategies

Goal alignment strategy aims to utilize wide set of mechanisms targeted to mitigate agency problems by reducing goal incongruence between the principal and the agent. In other words, the agency problems become less likely, when the agent's self-interest better matches with the common interest of the both parties.

4.2.1 Residual claimancy

The key governance mechanism in franchising relationships is residual claimancy: the franchisee (the agent) is made a (residual) claimant of the outlet revenues after the deduction of a certain royalty rate for the franchisor (the principal). This offers an incentive not to shirk. Indeed, the fundamental argument is that franchising is preferred especially when monitoring of the agent is costly, for example due to the large geographical distance between parties ( Combs and Ketchen, 2003 ; Dahlstrom and Nygaard, 1994 ). Despite the effectiveness of residual claimancy to mitigate a vertical agency problem (between the franchisor and the franchisee), the mitigation of a horizontal agency problem (i.e. freeriding at the expense of the franchise brand and other franchisees) requires complementary mechanisms such as monitoring ( Combs et al. , 2004 ; Zhang et al. , 2015 ). Residual claimancy is also simpler to implement in downstream relations, in which the agent is in direct contact with end customers and the financial risks of distributing the final product or service can be transferred. Conversely, in upstream relations, reward sharing programs can easily increase contract complexity and the need for collaboration, further increasing total costs ( Tse et al. , 2018 ).

4.2.2 Outcome-based pay

Outcome-based contracts and performance-based contracts (PBCs) are terms used to denote agreements where rewards are largely or wholly dependent on output or outcome performance. Examples are piece rates or no-cure-no-pay arrangements. PBCs are seen as effective not only in governing moral hazard but also in fostering radical innovation ( Sumo et al. , 2016 ). Outcome uncertainty is typically referred to as the key barrier in utilizing outcome-based contracts ( Steinbach et al. , 2018 ; Zu and Kaynak, 2012 ). Therefore, some papers explicitly focus on developing indicators for agent compensation such as inventory level in make-to-stock production systems ( Plambeck and Zenios, 2003 ) or risk adjusted healthcare payment systems ( Fuloria and Zenios, 2001 ). However, outcome-based contracts may influence not only the agent's behaviour but also other stakeholders' behaviour (e.g. the end customer who the service provider agent is serving) leading to unexpected and undesired outcomes ( Steinbach et al. , 2018 ). Hence, outcome-based pay may appear as a key remedy in aligning goals but is often challenging to implement.

4.2.3 Extracontractual incentives

If monitoring is seen as a core means to reduce information asymmetry, incentives appear to be the key mechanism to align goals between the principal and the agent. The term incentive is a complex one since all mechanisms to encourage effort can be seen as incentives. Therefore, we emphasize extracontractual incentives referring to all monetary forms of compensations and sanctions (bonuses and penalties) beyond the so-called base-line agreement ( Kashyap et al. , 2012 ). Roughly 20% of the articles in our review discuss such incentives. These can be, for example, rewards and bonus schemes to induce suppliers to improve their performance ( Hajmohammad and Vachon, 2016 ), positive price discrimination ( Wilhelm et al. , 2016 ), but also disincentives or sanctions such as late penalties ( Lewis and Bajari, 2014 ) or reduced payments when hospital readmission rates are high ( Arifoğlu et al. , 2021 ). However, such incentive systems do not always lead to positive outcomes since they are also subject to gaming ( Obloj and Zemsky, 2015 ) and hence need to be combined with other governance mechanisms such as monitoring to verify the agent's performance ( Kashyap et al. , 2012 ).

4.3 Integration strategies

4.3.1 complex payment schemes.

As discussed earlier, economists see contracts as the key governance mechanism in agency relations. In most articles, such contracts are in essence payment schemes. Many (mathematical modelling) ECON papers explore so called complex contracts ( Kalkancı and Erhun, 2012 ), through which the principal's welfare could be optimized by getting as near as possible to the “first best situation” of symmetric information. The payment schemes are complex, because they typically involve multiple parts, such as upfront payments, milestone payments, and royalties in licensing ( Crama et al. , 2008 ) or fixed fees, linear variable fees, and non-linear variable fees in franchising ( Desai and Srinivasan, 1995 ). Different approaches are utilized including linear multi-parameter schemes ( Chick et al. , 2017 ), multi-item non-linear schemes ( Desai and Srinivasan, 1995 ; Kim et al. , 2007 ), dynamic schemes ( Arve and Martimort, 2016 ; Plambeck and Zenios, 2003 ), and tiered schemes ( Jain et al. , 2013 ). Some complex payment schemes are operationalizations of commitment, captured as a payment now and the promise of future payments, which can be contingent on, e.g. agent performance improvements ( Li et al. , 2013 ) or varying stock levels ( Gao, 2015 ). Such future promises are seen to mitigate not only moral hazard but also holdup problems ( Board, 2011 ).

A common denominator between these complex payment schemes is that they aim to overcome both problems of information asymmetry and goal incongruence. Despite the intellectual attractiveness of such models, their empirical applicability remains contested which is why simple contracts are argued to capture the major portion of the total welfare against much lower cost ( Rogerson, 2003 ).

4.3.2 Scope and structure

Some articles suggest manipulation of scope and structure as an approach to overcome agency issues. Mahoney (1992) claims that vertical integration allows for better goal alignment and becomes more attractive when the principal bases the compensation on observing efforts rather than outputs. Mookherjee and Tsumagari (2004) show how centralization of supply networks yields higher profits to the principal when compared to decentralization and using intermediaries. Heide (2003) argues that the principal should combine outsourcing and in-house manufacturing (plural governance) as the in-house operation helps the principal to learn about the agent's operations. In a similar vein, Makadok and Coff (2009) argue that hybrid governance forms (e.g. franchising and quasi-integration), mixing elements of market and hierarchy, may prove effective especially when compensation of the agent cannot be based on a single and simple metric such as exchange price.

4.3.3 Coordination

Coordination can be understood as efforts to specify task allocation between a principal and an agent. Thus, it can be seen as a mechanism integrating operations between the principal and the agent. Celly and Frazier (1996) distinguish between outcome-based and behaviour-based coordination efforts, the former focuses on coordinating bottom-line results (e.g. sales and profitability) while the latter aims to coordinate the actual tasks the agent should execute. Coordination can be brought about through contract completeness ( Vivian Zheng et al. , 2020 ) but also through continuous efforts to harmonize operations between principal and agent ( Zsidisin and Ellram, 2003 ). Coordination indirectly mitigates an agent's self-interested behaviour by decreasing information asymmetry and aligning goals. Coordination may also relate to the systematic optimization of capacity allocations ( Chen et al. , 2014 ) and inventory levels ( Corbett, 2001 ; Zsidisin and Ellram, 2003 ) among multiple parties of the supply chain and other tasks undertaken by parties to form cross-task synergies ( Makadok and Coff, 2009 ). Finally, Argyres (1999) posits that use of information systems may enhance coordination by making information processing more cost efficient which also improves governance when parties have a transparent view on the actions of other parties.

4.3.4 Support

Closely related to coordination as a governance mechanism is support provided by the principal to the agent. Such support can take the form of franchisor services ( Vivian Zheng et al. , 2020 ), joint training programs ( Wilhelm et al. , 2016 ; Zsidisin and Ellram, 2003 ), and supplier development ( Hajmohammad and Vachon, 2016 ; Zu and Kaynak, 2012 ). These types of support create a mutual understanding of goals and disseminate knowledge between principals and agents ( Vivian Zheng et al. , 2020 ). Support is considered a governance mechanism in its own right, separate from coordination, because it represents a conscious investment of the principal in the agent – to improve the agent's capabilities and competences, and hence improve relationship outcomes.

4.3.5 Social interaction

Social interaction refers to personal communication and information exchange among the representatives of principal and agent organizations. Increased interaction and communication ultimately lead to information sharing which increases the total welfare generated in the exchange relationship ( Inderfurth et al. , 2013 ) as well as better information transparency ( Wilhelm et al. , 2016 ). In the context of franchising relationships, social interaction between parties also has an educational purpose for the franchisee, resulting in mutual gains ( Antia et al. , 2017 ). Social interaction can also act as a less-intrusive monitoring mechanism ( Rivera-Santos et al. , 2017 ), avoiding the negative repercussions of using intrusive monitoring approaches as discussed above.

Intensive social interaction between supply chain partners can lead to “thick” relationships through which principal and agent continuously improve their joint products and processes, control opportunism, and share risk, i.e. align goals ( Camuffo et al. , 2007 ). Such intensive interaction may pave way to informal social contracts, which refers to a micro-level informal agreement between the principal and the agent about the roles and responsibilities of the parties going beyond or complementing formal written agreements ( Heide et al. , 2007 ). Indeed, the social contract may prove effective especially when the formal contract remains incomplete for example due to uncertainties ( Ring and Van de Ven, 1994 ). Social contracts are ultimately about mutuality in party attitudes, perceptions of the other party's commitment, and fairness of the trade. A mutually perceived and accepted social contract can be established during contract negotiations and can become a prerequisite for effective contract management ( Broekhuis and Scholten, 2018 ).

4.4 Psychological influence strategies

Some articles in our review mention governance mechanisms that help to reduce the risk of moral hazard while not specifically relating to information transferring or goal alignment but more on psychological and behavioural aspects. From more positive side, trust and sense of reciprocity can be seen to curb self-interest while credible threats can be used to create negative pressure to curb undesired behaviour.

4.4.1 Trust

Some of the reviewed articles argue that in some relationships, investment in governance mechanisms is in fact unnecessary, or barely necessary. This may be because either professional norms limit the risk of moral hazard ( Sharma, 1997 ) or there is sufficient trust in the behaviours of the agent, based on a shared history ( Shevchenko et al. , 2020 ). For instance, repetitive syndication, in the private equity industry, creates common experiences of success between investors, hence creating mutual trust in the other party's capabilities ( Meuleman et al. , 2010 ). Norm-based trust and experience-based trust alleviate concerns that there may be a risk of agency problems in the relationship, and hence reduce the need to invest in other governance mechanisms in the relationship.

4.4.2 Credible threats

Various articles emphasize that the mix of governance mechanisms should also include “enforcement” (e.g. Kashyap et al. , 2012 ; Wilhelm et al. , 2016 ), meaning punitive actions by the principal towards wayward agents. Visible punitive actions towards one agent signal punitive capacity ( Morgan et al. , 2007 ), creating a credible threat of similar punitive actions towards other agents. Punitive actions include termination of the relationship (e.g. Grünhagen et al. , 2017 ), reducing share of business (e.g. Li et al. , 2013 ), and litigation (e.g. Antia et al. , 2013 ). While such credible threats are hypothesized to decrease moral hazard, Hasan et al. (2020) describe adverse effects of credible threats, documenting how the fear of losing business can drive agents to cut corners and hence increase moral hazard.

Principals can device structures to create competition between agents, or, in the case of plural governance ( Heide, 2003 ; Perryman and Combs, 2012 ), between “make” and “buy”, i.e. between in-house production and delegation to an agent. Competition also creates a threat; being aware of competitors introduces a credible threat of losing (a share of) business ( Liang and Atkins, 2021 ). Competition can be used as a governance mechanism both upstream (e.g. Zsidisin and Ellram, 2003 ) and downstream (e.g. Lassar and Kerr, 1996 ). As Heide (2003) points out, high type agents may actually benefit from competition and plural governance as it enables principals to recognize high performance and rewards them accordingly.

Principals can also use “hostages” to create a credible threat. Powerful principals can force agents to make relationship-specific investments, such as buyers requiring suppliers to invest in specific tooling, effectively taking a hostage from the supplier ( Stump and Heide, 1996 ). In the franchising context, franchisors can require franchisees to put up significant upfront capital to open a franchise ( Fan et al. , 2017 ).

5. A typology of supply chain agency relationships

Our review reinforces the view that agency problems in supply chain relationships are predominantly caused by two factors: information asymmetry and goal incongruence between the principal and the agent. Therefore, to integrate past research under these two dimensions, we formed a two-by-two matrix ( Figure 2 ) to illustrate four different conditions. We use “positive” terminology of information transfer (IT) and goal alignment (GA) allowing two axes logically to increase towards up and right forming the following four cells: cell 1 of low-low (IT and GA), cell 2 of high-low, cell 3 low-high, and cell 4 of high-high. For analytical simplicity, the matrix represents the two dimensions as binary variables (high vs low), although in real life the dimensions resemble continuous variables and drawing exact lines between conditions is difficult (cf. Watermann and Meier, 1998 ).

The cell conditions depend on the context in which the focal firm operates but are also directly or indirectly affected through different governance strategies deployed. However, the low-low cell can be seen as a baseline condition, i.e. if the focal firm does nothing, relationship dynamics tend to find equilibrium in this cell. As such, key questions are how, when, and why the focal firm should manoeuvre to other cells and under which conditions these cell conditions can be sustained. We have already touched on the how question in the previous section on governance mechanisms, which aggregate into three different strategies illustrated as the arrows in the figure (we discuss the special cases of psychological influence strategies separately). Whilst for ease of interpretation the strategy arrows point vertically, horizontally and diagonally from the origin, we note that they may to some extent be used in any position of the framework (e.g. goal alignment and integration strategies may be used to move from cell 3 to cell 4).

The core focus of the typology is to illustrate ideal relationship archetypes under each of four conditions as well as their empirical examples. In addition, we formulate propositions explaining when and why these relationship archetypes are most likely to be found and under which conditions they will be sustained. This theorization is based on the fundamental idea of agency costs , which can be further decomposed as the principal's monitoring costs [4] , the agent's bonding costs, and the residual loss, i.e. the cost of agent shirking ( Jensen and Meckling, 1976 ). Simply put, the focal firm's strategic choices in terms of governance, and thus choice of relationship type, are the outcome of a crude optimization between these three factors. Yet, as we show below, such optimization problems are further moderated by the likelihood and impact of agency risk (i.e. agent shirking) as well as external uncertainty against which the principal insures itself when investing in governance.

5.1 Cell 1: low-low conditions and arm's length relations

To many, the low-low cell appears the worst possible position for the focal firm since the conditions are fruitful for agency problems to flourish. Several exogenous factors may contribute to such situation: First, the principal may be a new entrant to the market and thus has not developed enough information and capability to assess its trading partners and local conditions ( Bergen et al. , 1992 ). Second, the market, where the focal firm operates, has high technological uncertainty, where volatility and constant changes force firms into a high degree of specialization ( Sharma, 1997 ). Third, the geographical and/or cultural distance between the focal firm and its agents is high, making it difficult for the focal firm to attain information on an agent's activities ( Fladmoe-Lindquist and Jacque, 1995 ). The focal firm may have only limited means to control these exogenous factors directly and therefore, the equilibrium tends to tilt naturally towards this cell. In turn, this encourages the focal firm to carefully evaluate the need and strategies to move out from this cell.

On the other hand, given that information sharing, incentives, and other governance mechanisms are costly, the low-low condition may be used as a deliberate strategy by the focal firm. We describe such a choice as deploying arm's length relationships representing the baseline of supply chain agency relationships: e.g. the focal firm delegates a task to a supplier or signs a contract with a distributor. The focal firm has little to no prior information of the agent firm's capabilities and preferences, has little means (or interest) to align goals, and is thus highly subject to both adverse selection and moral hazard. Theoretically, given such conditions create a high likelihood of agency risk, such relationships can exist only when the impact of the risk [5] , such as the harmful consequences of agent shirking, are relatively small.

Low information symmetry and low goal congruence conditions are the baseline of supply chain agency relations and occur when the focal firm does not invest in governance mechanisms but settles for arm's length relationships.

The focal firm can sustain arm's length relationships when risk of agency problems is low to moderate due to high likelihood but low impact (e.g. transferring simple products and services).

It is thus crucial to understand when the so-called baseline condition is sustainable but also when and how to change the condition. As theorized above, agency risk, as the function of probability and impact, will at least partly determine the decision to move between the cells. When the strategic importance of the item under exchange increases, the impact of agency risk will also rise. Therefore, the focal firm needs to try to alter the information and goal environment in which the exchange takes place. In the following, by matching the governance strategies with the framework, we will explain factors influencing alternative positions in the matrix.

5.2 Cell 2: low-high conditions and incentivized relations

The focal firm may invest in goal alignment strategy to increase goal congruence, when monitoring the agent is difficult due to significant geographic or cultural distance between the focal firm and its upstream ( Broekhuis and Scholten, 2018 ; Shafiq et al. , 2017 ) or downstream ( Celly and Frazier, 1996 ; Kosová and Sertsios, 2018 ) agents. Traditionally, AT suggests that this occurs if the outcome is contractable, i.e. performance ambiguity is low, and if the agent is willing to carry the risk ( Eisenhardt, 1989 ). The principal can thus use goal alignment as an insurance against agency risk by making the agent a residual claimant (carrying full risk and reward). Residual claimancy can be achieved effectively through franchising in downstream relations ( Combs and Ketchen, 2003 ; Combs et al. , 2004 ) but can also be mimicked through outcome-based pay in both upstream buyer-supplier relations ( Sumo et al. , 2016 ) and downstream channel relations ( Celly and Frazier, 1996 ).

One key issue in outcome-based pay is that if the focal firm fully pushes the external risk to the agent, the focal firm may eventually suffer from the realization of the risk if the agent lacks capability. For instance, Antia et al. (2017) show in a franchising context that the franchisors should not solely rely on residual claimancy but should also deploy franchisee motivation and capability increasing mechanisms to safeguard them against bankruptcy. A similar situation applies in the buyer-supplier context if the costs (affected by random shocks) are systematically higher than contract payments ( Jain et al. , 2013 ). Therefore, before allocating work to agents, the focal firm must ensure they have sufficient financial and operational capabilities to absorb the external risks ( Camuffo et al. , 2007 ).

Under long distances and low to moderate performance ambiguity, the focal firm can seek low information symmetry – high goal congruence conditions by establishing incentivized relations through goal alignment strategy.

Incentivized relations decrease both the likelihood and impact of agency risks via risk transfer but can be sustained only when the agent is willing AND capable of carrying the external risks.

5.3 Cell 3: high-low conditions and observed relations

The focal firm can increase information symmetry inducing different information sharing strategies. When doing so, the focal firm seeks to establish observed supply chain agency relationships. Past AT research ( Eisenhardt, 1989 ; Stump and Heide, 1996 ; Zu and Kaynak, 2012 ) suggests information sharing and monitoring is suitable under high task programmability (i.e. tasks can be agreed upon ex ante monitored more easily ex post ) and under high outcome ambiguity (i.e. the outcome is too uncertain and risk cannot be passed to the agent). An example of such a situation could be buying consulting services, where the agent's performance and impact of the service is difficult to evaluate objectively and performance is also dependent on factors laying outside of their influence, but the focal firm can relatively easily monitor consultants work, e.g. via reporting or close monitoring ( Roels et al. , 2010 ). In a similar vein, mystery shoppers are standard modi operandi to assess if a retailer complies with a manufacturer's brand-related standards ( Lassar and Kerr, 1996 ).

Under high task programmability and high performance ambiguity, the focal firm can seek high information symmetry – low goal congruence conditions by establishing observed relations through information sharing strategies.

Observed relations decrease the likelihood of agency risks and can be sustained when monitoring is not perceived as intrusive AND the impact of information spillover abuse is low

5.4 Cell 4: high-high conditions and integrated relations

The final cell describes the situation of high information symmetry and goal congruence, and we describe relationships under these conditions as integrated relations . It goes without saying that such conditions are expensive to sustain due to high investments in information sharing and goal alignment. Furthermore, these relations are not just costly to the focal firm but require investments from the agent side as well, i.e. the agent's bonding costs ( Jensen and Meckling, 1976 ) are high . Empirically, these relationships represent partnerships and alliances in which organizations engage in close collaboration with one another, sharing risks and rewards. Both organizations make specific investments into such relationships to align goals ( Stump and Heide, 1996 ) and share information ( Inderfurth et al. , 2013 ). Different types of risk and reward sharing schemes can be put in place to align goals and motivate information sharing ( Tse et al. , 2018 ). Most likely, various social control mechanisms come into play with the increased integration and collaboration between personnel from both organizations ( Meuleman et al. , 2010 ).

Given the high cost of establishing and sustaining such relationships, the classical agency cost formulation would suggest that the residual loss due to agency risk in such situations should be high. However, like observed relations, information sharing may in fact increase the impact of agency risk, when the agent receives proprietary information from the focal firm. Naturally, goal alignment through risk and reward sharing should decrease the likelihood of agent self-interested behaviour. However, integrated relations cannot be justified simply by the trade-off between costs of monitoring and residual loss. Instead, the risk, reward, and information sharing may help mitigate adverse effects of external uncertainty when both parties can jointly absorb the risks of external shocks ( Camuffo et al. , 2007 ).

The focal firm can seek high information symmetry – high goal congruence conditions by establishing integrated relations through goal alignment, information transfer and integration strategies.

Integrative relations decrease both the likelihood and impact of agency risks, and can be sustained when the costs of external shocks cannot be solely absorbed by one party AND parties create strategic complementarities that increase value creation in the relationship.

5.5 Trust and credible threats as complementary mechanisms

Trust can complement governance mechanisms under each cell condition types but can substitute governance mechanism only when mitigating govern moral hazard but not adverse selection.

Credible threats should be used as a supplementary governance mechanism only in arm's length relationships.

6. Discussion

In this section, we discuss the implications of our review and particularly the developed typology. Exceptionally, we begin with an extensive future research agenda, which is followed by summarizing the theoretical contributions and discussing of the managerial implications in the form of a process flowchart.

6.1 Future research agenda

Agency theory continues to hold significant promise in explaining various phenomena within OSCM. It is therefore somewhat surprising that it remains to some extent underutilised within the discipline. In the following, we present a future research agenda based on what we found, and perhaps more importantly, did not find in extant research across the four disciplines. This includes calls to measure agency costs more accurately; to examine residual gains alongside residual losses; to adopt a dual-sided perspective of agency relations; and to adopt agency theory to examine more complex supply networks in contemporary OSCM contexts.

6.1.1 Measuring agency costs

Our review points to a broad consensus that partnering and extra governance, such as monitoring and detailed contracting, are costly and a strategic choice of the principal ( Lassar and Kerr, 1996 ). Whilst the idea of a simple cost-benefit analysis of agency versus governance costs appears conceptually sound, the lack of measurement of these costs is a significant limitation in extant research. In fact, we did not observe any rigorous efforts to operationalize agency costs in supply chain relations, though such attempts do exist in the corporate governance domain (cf. Westermann, 2018 ).

Across the disciplines, literature provides little, besides anecdotal evidence, on the costs incurred by the principal when deploying different sets of governance mechanisms. For example, whilst mathematical modelling papers may note that monitoring is expensive – hence the rationale for franchising or granting the agent residual claimancy under geographically dispersed systems – the actual costs of monitoring or setting up a franchising system receive scant attention. Similarly, papers considering other relationship types typically lack analysis of monitoring costs. A notable exception is Lee and Zenios (2012) who acknowledge that their conceptual outcome-based compensation model for treatment of renal disease might be unfeasible in practice given the potential costs of data collection.

The reviewed studies also offer no evidence on what such governance mechanisms cost the agent nor what the agent's reservation utility would be. Instead, much of the literature focuses on the agent's behaviour under different governance structures ( Heide et al. , 2007 ) or on contextual contingencies predicting when a certain governance form would be preferred ( Combs et al. , 2004 ). Therefore, we call for future research that seeks to evaluate agency risks and mitigation more precisely. Such work would further explain the viability of different relationship forms within our developed typology and the costs incurred of moves between different cells. In doing so, we stress the importance of assessing not only the costs incurred by the principal but also those of the agent.

6.1.2 Examining residual gain alongside residual loss

Residual loss describes the financial loss accrued to the principal due to the agent's tendency to act less efficiently than the principal when left unmonitored. Again, the issue of measurement described above is applicable here. Furthermore, the idea of residual loss is problematic because it contradicts the empirical reality that agents are often hired because of their unique skills, such as innovativeness ( Wagner and Bode, 2014 ). In theoretical terms, the principal may be less capable of making decisions or taking proper actions than the agent and therefore should outsource the task ( Schneider, 1987 ). The basic assumption that the agent is likely to do a worse job than the principal only holds true in the very simplest of contexts where the principal hires an agent to undertake a well-defined job and the principal lacks interest or time themselves but does have the capability. However, supply chain relationships are typically considered as value creating activities, meaning the principal can be significantly better off when delegating activity to agents especially when the principal and agents have complementary skills (cf. Dyer et al. , 2018 ).

Based on this, we suggest that future OSCM research should consider the possibility of “residual gain” alongside residual loss that may accrue from contracting-out. This would be crucial to further understand the benefits of integrated relations such as alliances and partnering, and connects strongly with recent work exploring the value of collective experimentation between inter-organisational parties in new product/service development ( Browder et al. , 2022 ).

6.1.3 Adopting a dual-sided perspective of agency relations

The current principal-dominant tenet of agency theory represents a significant challenge to its use as a lens in OSCM research. As discussed, the reviewed research typically adopts a one-sided view when examining any relationship and posits arrangements that maximise the principal's utility. In doing so, we see agent firms painted as wilful yet self-interested contributors who only act in the principal's best interest if compensated well or monitored frequently. Information asymmetry is predominantly viewed as one-sided and something that the principal suffers from.

However, we argue that agency issues are not merely, as originally suggested by Ross (1973) , “the principal's problem”, but a concern for both parties. In practice, the agent organisation may also suffer from the principal's private information on principal's preferences. In addition, they may be antagonistic towards certain governance mechanisms due to their increased operation costs or negative trust signalling (see, e.g. Gilliland and Kim, 2014 ; Heide et al. , 2007 ; Steinbach et al. , 2018 ). By adding the agent's preferences, one can better predict when a chosen set of governance mechanisms is likely to succeed.

To date, only a handful of studies across the four reviewed disciplines have approached inter-organisational agency issues from an agent perspective (for notable exceptions, see Heide et al. , 2007 ; Steinbach et al. , 2018 ) or sought data from both parties (for notable exceptions, see Handley and Gray, 2013 ; Homburg et al. , 2020 ; Lawrence et al. , 2021 ; Ross et al. , 1997 ; Sumo et al. , 2016 ; Wilhelm et al. , 2016 ). This leads us to call for a dual-sided perspective of agency relations within OSCM, expanding the rather cemented view that the principal is the one whose preferences matter (cf. Selviaridis and Norrman, 2014 ). Future research should consider both sides of the relationship by surveying agents specifically and better yet, by gathering dyadic or matched data.

6.1.4 Adopting agency theory to examine more complex supply networks in contemporary OSCM contexts

Our review demonstrates that agency relationships in supply chains are mostly considered in dyadic settings. Arguably, this is as an appropriate starting point given that the dyad is typically where the contract is made and where information sharing and goal-setting occurs. However, we also need to deepen our understanding of the complex supply networks in which such dyadic principal-agent relationships exist. While the governance mechanisms that the focal firm deploys are typically designed for the dyadic relationship, their impact can depend on, for example, collaboration and competition between multiple agents such as suppliers ( Obloj and Zemsky, 2015 ; Wu et al. , 2010 ), franchisees ( Vivian Zheng et al. , 2020 ), or sales partners ( Homburg et al. , 2020 ), or competition between the buyers ( Hu et al. , 2013 ; Tang and Kouvelis, 2011 ; Gupta et al. , 2015 ).

Few studies in our sample investigated these more complex settings such as triads, the agency chain, common agency, multiple agency, or the use of third-party organizations to monitor suppliers (for notable exceptions, see Broekhuis and Scholten, 2018 ; Hasan et al. , 2020 ; Homburg et al. , 2020 ; Lawrence et al. , 2021 ; Peltokorpi et al. , 2020 ; Wilhelm et al. , 2016 ; Zhang et al. , 2015 ). In addition, principal and agent roles can also be dynamic across different activities ( Fayezi et al. , 2012 ). For example, a food retailer would typically be viewed as the principal in a relationship with a food producer but may switch to an agent role when delegated responsibility for maintaining food quality post-delivery [6] . This is particularly likely when the supplier is the more powerful player and can thus heavily stipulate behaviours to avoid product problems or potential brand risk.

In our view, the paucity of studies adopting agency theory for more complex supply network contexts does not signal a lack of suitability. Rather, it reinforces the need to expand agency theory's typical use beyond simple dyadic settings to become truly supply chain and network oriented ( Choi and Wu, 2009 ; Pathak et al. , 2014 ). Informational and goal alignment problems will only grow when more players enter the game.

Many topics within OSCM lend themselves to the application of agency theory. For example, OSCM continues to engage actively with various aspects of sustainability (leading OSCM journals have launched multiple special issue calls, e.g. closed-loop supply chains with product re-manufacturing; OM under the goal of carbon neutrality; and environmental dynamism and supply chain complexity). In many respects, the issue of delegation is acute here with buyers typically attempting to ensure certain supplier behaviour, but with all the accompanying agency challenges this poses. In line with a small group of OSCM researchers (c.f. Kim et al. , 2022 ; Wilhelm et al. , 2016 ), future research could clearly benefit from the application of agency theory to explore such challenges, for example examining the efficacy of the various governance mechanisms aimed at increasing information transfer, goal alignment, or both. Furthermore, the suitability of third-party certification in sustainability monitoring, and hence issues of third-party governance, warrant further research [7] .

The digitalisation of OSCM continues to garner significant attention within our community ( Brandon-Jones and Kauppi, 2018 ; Holmström et al. , 2019 ) and connects strongly with the sustainability agenda above. In adopting an agency perspective to this topic area, we see a potential double-edged sword for researchers to investigate. On the one hand, emerging technologies (for example, distributed ledger technology) have significant potential to increase information transfer through improved monitoring and signalling ( Massimino and Lawrence, 2019 ). Similarly, data scraping technologies may enable more effective screening of potential suppliers, the use of more complex payment schemes, and enhanced collection of risk indicators across highly complex supply networks. In other words, existing and emerging technologies offer significant promise in increasing information transfer and goal alignment, enabling (potentially) more effective agency relationships.

On the other hand, emerging technologies are often technically complex and as such generate significant challenges for their sourcing and implementation, potentially increasing information asymmetry. Blockchain, artificial intelligence (AI), and other OSCM technologies can quickly become new “black boxes” for providers to leverage in terms of agent advantage. Furthermore, the inability of many principals to effectively codify their needs creates a high probability of dual information asymmetry, whereby the (potentially non-opportunistic) agent suffers from not knowing the principal's preferences (cf. Kauppi and Van Raaij, 2015 ). The adoption of emerging technologies in OSCM also runs the risk of “over-automation” whereby some governance mechanisms aimed at addressing the agency problems, such as social contracts, social interaction, and repetitive relationship, are given less credence than those that “fit” within big data/AI perspectives more readily, such as screening, (remote) monitoring, and reporting.

6.2 Theoretical contributions

Our study offers several important contributions to the OSCM community. First, by adopting a focal firm perspective, we have been able to analytically “stabilize” the dynamic application domain. Importantly, we do not underestimate the complexity and dynamic nature of supply networks (e.g. changing principal-agent roles or double agency as per Wilhelm et al., 2016 ) but for the sake of theoretical parsimony, this focal-firm perspective has enabled more coherent theorizing on agency in supply chains.

Second, drawing on work from the four disciplines has supported the categorization of governance mechanisms that improve information transfer, goal alignment, or both. Critically, this provides a more nuanced managerial toolkit of mechanisms than those dominating traditional discourse, namely monitoring and incentives. In addition, it provides a potential bridge between relatively disconnected discussion of governance mechanisms in different disciplines.

Third, the categorization of governance mechanisms led us to create a typology of supply chain agency relationships. To further understand the viability of relationships with varying degrees of information transfer and goal alignment, we have emphasized the many times neglected, yet fundamental, concepts of agency costs and risks. In doing so, we stress the importance of principal-incurred costs, which have been the key foci in the past, but also agent-incurred costs, hence the dual-sidedness of agency issues. Critically, agency costs make both supply chain parties worse-off.

6.3 Managerial implications

Our review and subsequent synthesis are predominantly theoretical in its nature. However, the identified and categorized governance mechanisms do provide a clear “menu” from which managers can choose when planning their supply chain structures. We have further captured the key aspects of our typology and propositions into a stylized process flowchart in Figure 3 . This distills our propositions into a simple decision-making sequence to guide towards suitable relationship formation when the focal firm needs to delegate work in its supply network. Naturally, the flowchart is a simplification of complex decision-making routine but it can work as a higher-level cognitive support for managers engaging into the daunting task of establishing new relationships or developing existing ones.

7. Conclusions

This study has taken a step towards a theory of supply chain agency by conducting a detailed review of extant research on AT utilized in a supply chain context in four neighbouring disciplines – the first of its kind. We focus our analysis and subsequent theory development on the two core elements shared among all four disciplines: information asymmetry and goal incongruence further complemented with considerations around agency costs and risk. We see that these form the viable basis for examining agency problems in supply chains for deriving theoretical foundations for existence of different types of supply chain relationships. Our work by no means represents a complete theory of agency in supply chain relationships and comes with limitations. Some of these are methodological (e.g. the reviewed journals represent only a sample of the total bulk of AT oriented agency research) and others are conceptual (e.g. how to effectively capture voices of the diverse fields and authors). Despite these limitations, we hope that our efforts will inspire and assist future researchers to continue the examination of agency issues in supply chains. Specifically, we advocate finding more robust ways to measure and operationalize agency costs, considering potential residual gains not simply losses, adopting a dual-sided perspective to agency issues, and leveraging AT to examine more complex supply networks in contemporary OSCM contexts.

agency theory and supply chain management a structured literature review

Governance mechanisms in supply chain agency relationships

Typology of supply chain agency relationships

Decision flow-chart for supply chain relationship formation

Relationship types and methods per discipline and sample in total

	OSCM	MGMT	MARK	ECON	Total
Papers in total	51	17	17	10	95

Buyer-supplier	36 (71%)	6 (35%)	3 (18%)	8 (80%)	53 (56%)
Franchisor-franchisee	5 (10%)	6 (35%)	7 (41%)	1 (10%)	19 (20%)
Manufacturer-distributor	3 (6%)	1 (6%)	5 (29%)	1 (10%)	10 (11%)
Payor-provider	5 (10%)	N/A	N/A	N/A	5 (5%)
Alliance/network	N/A	2 (12%)	1 (6%)	N/A	3 (3%)
Various/generic	1 (2%)	2 (12%)	N/A	N/A	3 (3%)
Licensor-licensee	1 (2%)	N/A	1 (6%)	N/A	2 (2%)

Secondary data	6 (12%)	6 (35%)	6 (35%)	3 (30%)	20 (21%)
Survey	7 (14%)	1 (6%)	8 (47%)	N/A	16 (17%)
Mixed-methods	3 (6%)	1 (6%)	N/A	N/A	4 (4%)
Case study	6 (12%)	1 (6%)	1 (6%)	N/A	8 (8%)
Experiment	1 (2%)	N/A	N/A	N/A	1 (1%)
Modelling	25 (49%)	2 (12%)	1 (6%)	7 (70%)	35 (37%)
Review	3 (6%)	6 (35%)	1 (6%)	N/A	10 (11%)

*Percentages refer to the “papers in total” in each field or in total sample (the leftmost column)

Governance mechanism	Relationship type	Agency problem	References
1. Screening	Buyer-supplier	Moral hazard (MH) Adverse selection (AS)	(2005)
	Buyer-supplier	Moral hazard (MH) and AS	(2017) (2013)
	Manufacturer-distributor	MH
	Various	AS	(1992)
2. Signalling	Buyer-supplier	AS
	Manufacturer-distributor	AS and MH	(1997)
	Various	AS	(1992)
3. Selection	Buyer-supplier	MH	(2016)
	Buyer-supplier	AS and MH
	Franchisor-franchisee	AS and MH	(2017)
	Alliance	MH	(2010) (2017)
4. Monitoring	Buyer-supplier	MH	(2007) (2007) (2007) (2017) (2020) (2016) (2016)
	Buyer-supplier	AS and MH	(2020)
	Franchisor-franchisee	MH	(2004) (2012) (2015)
		AS and MH	(2017)
		AS, MH and hold-up
	Manufacturer-distributor	MH	(2016) (2021)
	Various	MH	(1992)
	Alliance	MH	(2010) (2017)
	Licensor-licensee	MH	(2013)
5. Residual claimancy	Franchisor-franchisee	MH	(2004) (2015)
		AS and MH	(2017) (2017)
		AS, MH and hold-up
	Various	MH
6. Outcome-based pay	Buyer-supplier	MH	(1994) (2018) (2016) (2016)
	Buyer-supplier	AS and MH	(2001) (2020) (2012)
	Manufacturer-distributor	MH
	Payor-provider	MH
	Various	MH	(1992)
	Alliance	MH
7. Extracontractual incentives	Buyer-supplier	MH	(2013) (2016)
	Buyer-supplier	AS and MH	(2012)
	Manufacturer-distributor	MH
	Payor-provider	MH	(2021) (2019) (2020)
	Various	MH
	Various	AS and MH	(1992)
	Alliance	MH	(2017)
	Licensor-licensee	MH	(2013)
8. Complex payment schemes	Buyer-supplier	MH	(2007) (2013)
		AS	(2015) (2013)
		AS and MH	(2017)
		Double MH	(2013) (2010)
		Holdup
	Franchisor-franchisee	MH	(2017)
	Payor-provider	MH
	Licensor-licensee	AS and MH	(2008)
9. Scope and structure	Buyer-supplier	MH
	Buyer-supplier	AS and MH
	Payor-provider	MH	(2020)
	Various	MH
10. Coordination	Buyer-supplier	MH	(2016) (2018)
	Franchisor-franchisee	MH	(2012) , 2020
	Manufacturer-distributor	MH	(2020)
	Manufacturer-distributor	AS	(2014)
	Various	MH
11. Support	Buyer-supplier	MH	(2016)
	Franchisor-franchisee	MH	, 2020
	Manufacturer-distributor	AS
	Payor-provider	MH	(2019)
12. Social interaction	Buyer-supplier	MH	(2007) (2007) (2013) (2018) (2016)
	Buyer-supplier	AS and MH
	Franchisor-franchisee	AS and MH	(2017)
	Manufacturer-distributor	MH	(2020)
	Manufacturer-distributor	AS	(1997)
	Various	AS and MH
13. Trust	Buyer-supplier	MH	(2020) (2018)
13. Trust	Alliance	MH	(2010)
14. Credible threats	Buyer-supplier	MH	(2013) (2007)
		AS
		AS and MH	(2020)
	Franchisor-franchisee	MH	(2017)
	Franchisor-franchisee	AS and MH	(2013) (2017)
	Manufacturer-distributor	MH
	Alliance	MH

Journals per discipline with their AJG ranking and UTD ranking status:

OSCM: Int J Oper Prod Man (AJG 4) ; J Oper Manag (UTD/AJG 4*) ; J Supply Chain Manag (AJG 4) ; Manage Sci (UTD/AJG 4*) ; M&SOM-Manuf Serv Op (UTD) ; Oper Res (UTD/AJG 4*) ; Prod Oper Manag (UTD/AJG 4)

MGMT: Acad Manage J (UTD/AJG 4*) ; Acad Manage Rev (UTD/AJG 4*) ; J Manage (AJG 4*) ; J Manage Stud (AJG 4) ; Org Sci (UTD/AJG 4*) ; Strateg Manage J (UTD/AJG 4*).

MARK: J Marketing (UTD/AJG 4*) ; J Marketing Res (UTD/AJG 4*) ; J Retailing (AJG 4) ; J Acad Market Sci (UTD/AJG 4*) ; Market Sci (UTD/AJG 4*)

ECON: Am Econ Rev (AJG 4*) ; Econometrica (AJG 4*) ; J Polit Econ (AJG 4*) ; Rev Econ Stud (AJG 4*)

Table 1 reports the relative weights of each studied element as percentages either from the disciplinary sub-sample (the columns two to four) or from the complete sample (the leftmost column). We do so only for illustrative purposes and to highlight the relative importance not to seek any statistical inference.

An example might be a relationship between a high-end component (e.g. a microchip) manufacturer and a low-end product (e.g. budget computers) manufacturer. In such situations, the component manufacturers may actually cease from selling their premium components to low-end manufacturers or at least heavily instruct their usage to avoid problems with the product or potential brand risk.

In this equation by Jensen and Meckling (1976) , the term monitoring is used more widely than observing agent behaviour, i.e. it includes all governance mechanisms directed towards the agent.

When defining risk as the product of likelihood and impact (see, e.g. Mitchell, 1995 )

We thank our reviewers for this very useful example of potential dynamic agency roles.

Again, we thank our reviewers for this interesting avenue for future research utilising agency theory.

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Acknowledgements

The research was funded by the Academy of Finland (No: 316020) as part of the research projectnamed “Alternative Causes to Agency Problems in Inter-organizational Relationships” (ACAP) as well as by the Finnish Foundation for Economic Education (No: 16-8806). The previous versions of this paper were presented in EurOMA 2019 conference in Helsinki as well as in virtual Academy of Management Annual Meeting 2020, and the authors thank all anonymous reviewers and sessions participants for their comments. Finally, the authors would like especially thank the IJOPM editor Professor Tobias Schoenherr and two anonymous reviewers for the constructive comments during the publication process helping develop the paper.

Conflict of interest : The authors declare no conflict of interests and any errors are own.

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Agency theory and supply chain management: A structured literature review
Abstract. Purpose - The paper aims to explain how agency theory can be used to inform our. understanding of the dynamics surrounding supply chain behaviours and relationships. Design/methodology ...
Agency theory and supply chain management: a structured literature review
Design/methodology/approach. A structured review of the literature using a three‐stage refinement process is used. The articles were sourced through online databases and keyword classifications, such as "agency theory", "principal‐agent relationships" and "supply chain management". The search initially identified over 86 articles.
Agency theory and supply chain management: a structured literature review
DOI: 10.1108/13598541211258618 Corpus ID: 54907802; Agency theory and supply chain management: a structured literature review @article{Fayezi2012AgencyTA, title={Agency theory and supply chain management: a structured literature review}, author={Sajad Fayezi and Andrew O'Loughlin and Ambika Zutshi}, journal={Supply Chain Management}, year={2012}, volume={17}, pages={556-570}, url={https ...
PDF Agency theory and supply chain management: a structured literature review
Agency theory and supply chain management: a structured literature review The Authors Sajad Fayezi, School of Management and Marketing, Deakin University, Melbourne, Australia Andrew O'Loughlin ...
Agency theory and supply chain management: A structured literature review
Purpose: The paper aims to explain how agency theory can be used to inform our understanding of the dynamics surrounding supply chain behaviours and relationships. Design/methodology/approach: A structured review of the literature using a three-stage refinement process is used. The articles were sourced through online databases and keyword ...
Agency Theory and Supply Chain Management: A Literature Review
The chapter is dedicated to the literature review on agency theory in supply chain management contexts. After an overview on the original formulation of agency theory and a brief description of the most recent development, the review presents the state of the art of theoretical and empirical research on the topic and discusses the areas in which agency theory has been more usefully adopted.
Agency theory and supply chain management: a
Agency theory and supply chain management: a structured literature review. Fayezi, Sajad; O'Loughlin, Andrew; Zutshi, Ambika. ... been undertaken with regard to how agency theory might be used to explain relations between organisations within the supply chain (SC). Agency theory is relevant for the situations wherein one party (the principal ...
Agency Theory and Supply Chain Management: A Literature Review
The chapter is dedicated to the literature review on agency theory in supply chain management contexts. After an overview on the original formulation of agency theory and a brief description of the most recent development, the review presents the state of the art of theoretical and empirical research on the topic and discusses the areas in which agency theory has been more usefully adopted.
Making agency theory work for supply chain relationships: a systematic
First, we provide a systematic literature review (Durach et al., 2017) of the use of agency theory in studies of supply chain relationships. Critically, we spanned our search across four key disciplines OSCM, general management (MGMT), marketing (MARK), and economics. (ECON) to identify potential similarities and divergent perspectives.
Agency Theory and Supply Chain Management: A Literature Review
Agency Theory and Supply Chain Management: A Literature Review. April 2018. DOI: 10.1007/978-3-319-72793-6_1. In book: Agency Theory and Sustainability in the Global Supply Chain (pp.1-15) Authors ...
Supply chain management: an integrative review from the agency theory
An upward trend of publications in supply chain management from the agency theory perspective only happened from the year 2019, losing strength in 2020, which may indicate that this is an atypical year. However, more than 50% of the articles were published in the last five years between 2016 and 2021 (June).
Agency theory and supply chain management: a structured literature review
Design/methodology/approach ‐ A structured review of the literature using a three-stage refinement process is used. The articles were sourced through online databases and keyword classifications, such as "agency theory", "principal-agent relationships" and "supply chain management". The search initially identified over 86 articles.
PDF Agency Theory and Supply Chain Management: A Literature Review
Abstract The chapter is dedicated to the literature review on agency theory in supply chain management contexts. After an overview on the original formulation of agency theory and a brief description of the most recent development, the review presents the state of the art of theoretical and empirical research on the topic and discusses the ...
Agency theory and supply chain management : a structured literature review
Agency theory and supply chain management : a structured literature review. Authors. ... Publisher Emerald Group Publishing Ltd. Doi. Cite. Abstract Abstract is not available. Journal Article; Agency theory; uncertainty management; literature review; collaboration; relationship management; behaviour uncertainty; supply chain management; Similar ...
Supply chain management: an integrative review from the agency theory
Design/methodology/approach. We performed an integrative literature review, based on the process detailed by Botelho et al. (2011), with search filters. The articles were obtained from the Scopus and Web of Science databases using the keywords "supply chain" and "agency theory", with a subsequent analytical filter for "management".
Agency theory and supply chain management: a structured literature review
DOI: 10.1108/13598541211258618 Corpus ID: 54907802; Agency theory and supply chain management: a structured literature review @article{Fayezi2012AgencyTA, title={Agency theory and supply chain management: a structured literature review}, author={Sajad Fayezi and Andrew O'Loughlin and Ambika Zutshi}, journal={Supply Chain Management}, year={2012}, volume={17}, pages={556-570} }
Agency theory and supply chain management: a structured literature review
Purpose - The paper aims to explain how agency theory can be used to inform our understanding of the dynamics surrounding supply chain behaviours and relationships. Design/methodology/approach - A structured review of the literature using a three‐stage refinement process is used. The articles were sourced through online databases and keyword classifications, such as "agency theory ...
Agency theory and supply chain management: a structured literature
Agency theory and supply chain management: a structured literature review - Author: Sajad Fayezi, Andrew O'Loughlin, Ambika Zutshi - The paper aims to explain how agency theory can be used to inform our understanding of the dynamics surrounding supply chain behaviours and relationships., - A structured review of the literature using a three ...
Blockchain and agency theory in supply chain management: : A question
A. Batwa, A. Norrman, Blockchain technology and trust in supply chain management: A literature review and research agenda, Operations and Supply Chain Management 14 (2) ... Agency theory and supply chain management: A structured literature review, Supply Chain Management: An International Journal 17 (5) (2012) 556-570,.
Supply Chain Management: Vol. 17 Iss. 5
Sustainable purchasing and supply management: a structured literature review of definitions and measures at the dyad, chain and network levels. Joe Miemczyk, Thomas E. Johnsen, Monica Macquet. This paper provides a structured literature review of sustainability in purchasing and supply management, moving beyond the traditional environmental and ...
Supply chain management: an integrative review from the agency theory
An upward trend of publications in supply chain management from the agency theory. perspective only happened from the year 2019, losing strength in 2020, which may indicate. that this is an ...
Agency theory and supply chain management: a structured literature review
Purpose - The paper aims to explain how agency theory can be used to inform our understanding of the dynamics surrounding supply chain behaviours and relationships. Design/methodology/approach - A structured review of the literature using a three-stage reﬁnement process is used.
Agency theory and supply chain management: a structured literature review
Agency theory and supply chain management: a structured literature review Sajad Fayezi, Andrew OâLoughlin and Ambika Zutshi School of Management and Marketing, Deakin University,…
Making agency theory work for supply chain relationships: a systematic
This review of agency theory (AT), across four distinct fields, explains the connection between governance mechanisms and supply chain relationship types.,The study uses a systematic literature review (SLR) of articles using AT in a supply chain context from the operations and supply chain management, general management, marketing, and ...

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Agency theory and supply chain management: a structured literature review

Making agency theory work for supply chain relationships: a systematic review across four disciplines

Design/methodology/approach

Research limitations/implications

Practical implications

Originality/value

1. Introduction

2. Methods and materials

2.1 Theoretical premises

2.2 Systematic literature review process

2.2.1 Article retrieval

2.2.2 Analysis and coding

3. Summary of synthesis sample – similarities and differences between disciplines

3.1 Positivist agency theory versus principal-agent research

3.2 Relationship types

3.3 Methods employed

3.4 Units of analysis

3.5 Directionality of principal-agent relations in supply chain

4. Governance mechanisms

4.1 Information transfer strategies

4.1.1 Screening

4.1.2 Signalling

4.1.3 Selection

4.1.4 Monitoring

4.2 Goal alignment strategies

4.2.1 Residual claimancy

4.2.2 Outcome-based pay

4.2.3 Extracontractual incentives

4.3 Integration strategies

4.3.2 Scope and structure

4.3.3 Coordination

4.3.4 Support

4.3.5 Social interaction

4.4 Psychological influence strategies

4.4.1 Trust

4.4.2 Credible threats

5. A typology of supply chain agency relationships

5.1 Cell 1: low-low conditions and arm's length relations

5.2 Cell 2: low-high conditions and incentivized relations

5.3 Cell 3: high-low conditions and observed relations

5.4 Cell 4: high-high conditions and integrated relations

5.5 Trust and credible threats as complementary mechanisms

6. Discussion

6.1 Future research agenda

6.1.1 Measuring agency costs

6.1.2 Examining residual gain alongside residual loss

6.1.3 Adopting a dual-sided perspective of agency relations

6.1.4 Adopting agency theory to examine more complex supply networks in contemporary OSCM contexts

6.2 Theoretical contributions

6.3 Managerial implications