The Principal's Theory of Mind

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The Principal's Theory of Mind

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Title: The Principal's Theory of Mind
The Role of Mentalizing for Reward Design and Managenemt in Principal-Agent Relations
Author: Foss, Nicolai J.; Stea, Diego
Abstract: Agency theory is one of the most important foundational theories in management research, but it rests on tenuous cognitive assumptions. We combine classical agency theory with a realistic theory of the intrinsically imperfect human potential for interpersonal sensemaking. This allows us to systematically show how the principal’s ability to mentalize with the agent influences value creation in principal-agent relations, and to link this to organizational sensemaking instruments.
URI: http://hdl.handle.net/10398/8624
Date: 2013-01-15

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