Nicolai J. Foss

Agency theory studies the impact of and remedies to asymmetrically distributed information in principal-agent relations. Yet, it does so in a surprisingly binary manner: It assumes the principal to be perfectly knowledgeable of some pieces of information (such as the agent’s risk aversion), while others (such as the agent’s true effort exerted) are considered to be perfectly private information of the agent. Agency theory thus makes highly asymmetrical assumptions about the knowledge of… Vis mere

Agency theory studies the impact of and remedies to asymmetrically distributed information in principal-agent relations. Yet, it does so in a surprisingly binary manner: It assumes the principal to be perfectly knowledgeable of some pieces of information (such as the agent’s risk aversion), while others (such as the agent’s true effort exerted) are considered to be perfectly private information of the agent. Agency theory thus makes highly asymmetrical assumptions about the knowledge of principals and agents, largely neglecting the role of individual differences in the human capacity to read other people’s desires, intentions, knowledge, and beliefs—that is, to have an imperfect theory of someone else’s mind. This study explores the implications of instilling agency theory with a more realistic account of this (bounded) human capacity. Vis mindre

We study a model of adverse selection, hard and soft information, and mentalizing ability—the human capacity to represent others’ intentions, knowledge, and beliefs. By allowing for a continuous range of different information types, as well as for different means of acquiring information, we develop a model that captures how principals differentially obtain information on agents. We show that principals that combine conventional data collection techniques with mentalizing benefit from a… Vis mere

We study a model of adverse selection, hard and soft information, and mentalizing ability—the human capacity to represent others’ intentions, knowledge, and beliefs. By allowing for a continuous range of different information types, as well as for different means of acquiring information, we develop a model that captures how principals differentially obtain information on agents. We show that principals that combine conventional data collection techniques with mentalizing benefit from a synergistic effect that impacts both the amount of information that is accessed and the overall cost of that information. This strategy affects the properties of the optimal contract, which grows closer to the first best. This research provides insights into the implications of mentalizing for agency theory. Vis mindre

The attention-based view (ABV) of the firm highlights the role of decision makers’ attention in firm behavior. The ABV vastly improves our understanding of decision makers’ focus of attention; how that focus is situated in an organization’s procedural and communication channels; and how the distribution of the focus of attention among decision makers participating in those procedural and communication channels affects their understanding of a situation, their motivation to act, and, ultimately,… Vis mere

The attention-based view (ABV) of the firm highlights the role of decision makers’ attention in firm behavior. The ABV vastly improves our understanding of decision makers’ focus of attention; how that focus is situated in an organization’s procedural and communication channels; and how the distribution of the focus of attention among decision makers participating in those procedural and communication channels affects their understanding of a situation, their motivation to act, and, ultimately, their behavior. Significant progress has been made in recent years in refining and extending the ABV. However, the role of individual differences in the capacity to read other people’s desires, intentions, knowledge, and beliefs – that is, the theory of mind (ToM) – has remained on the sidelines. The ToM is a natural complement to the ABV. In this study, we explore how the ToM allows for an understanding of the advantage that organizations have over markets within the ABV. Vis mindre

Agency theory is one of the most important foundational theories in management research, but it rests on contestable cognitive assumptions. Specifically, the principal is assumed to hold a perfect (correct) theory regarding some of the content of the agent's mind, while he is entirely ignorant concerning other such content. More realistically, individuals have some limited access to the minds of others. We explore the implications for classical agency theory of realistic assumptions regarding… Vis mere

Agency theory is one of the most important foundational theories in management research, but it rests on contestable cognitive assumptions. Specifically, the principal is assumed to hold a perfect (correct) theory regarding some of the content of the agent's mind, while he is entirely ignorant concerning other such content. More realistically, individuals have some limited access to the minds of others. We explore the implications for classical agency theory of realistic assumptions regarding the human potential for interpersonal sensemaking. We discuss implications for the design and management of rewards, and trace implications for value creation in principal-agent relations. Vis mindre

Physical separation is pervasive in organizations, and has powerful effects on employee motivation and organizational behaviors. However, research shows that workplace separation is characterized by a variety of tradeoffs, tensions, and challenges that lead to both positive and negative outcomes. We develop new theory on the nature, antecedents, and motivational implications of separation awareness—a psychological state in which people are aware of their physical separation from others—and… Vis mere

Physical separation is pervasive in organizations, and has powerful effects on employee motivation and organizational behaviors. However, research shows that workplace separation is characterized by a variety of tradeoffs, tensions, and challenges that lead to both positive and negative outcomes. We develop new theory on the nature, antecedents, and motivational implications of separation awareness—a psychological state in which people are aware of their physical separation from others—and proffer a model of the mechanisms that link separation and motivation. We distinguish between control and autonomy affirmation as psychological states that are triggered by physical separation in the workplace, and discuss individual and context specific moderators, as well as motivational implications of separation awareness. In doing so, we reconcile the seemingly contradicting findings that have been produced in past research on the motivational and affective consequences of physical separation in organizations. Vis mindre

Building on the problem-solving perspective, we study behaviors related to projects and the communication-based antecedents of such behaviors in the free open source software (FOSS) community. We examine two kinds of problem/project-behaviors: Individuals can set up projects around the formulation of new problems or join existing projects and define and/or work on sub-problems within an existing problem. The choice between these two behaviors is influenced by the mode of communication. A… Vis mere

Building on the problem-solving perspective, we study behaviors related to projects and the communication-based antecedents of such behaviors in the free open source software (FOSS) community. We examine two kinds of problem/project-behaviors: Individuals can set up projects around the formulation of new problems or join existing projects and define and/or work on sub-problems within an existing problem. The choice between these two behaviors is influenced by the mode of communication. A communication mode with little a priori structure is the best mode for communicating about new problems (i.e. formulating a problem); empirically, it is associated with project launching behaviors. In contrast, more structured communication fits sub-problems better and is related to project joining behaviors. Our hypotheses derive support from data from the FOSS community. Vis mindre