Turning Agents into Psychological Principals: Aligning Interests of Non‐Owners through Psychological Ownership

Abstract

Principals who delegate tasks to agents face the perennial challenge of overcoming agency problems. We investigate whether feelings of ownership among senior managers in the absence of formal ownership can align agents' interests with those of principals, thus turning agents into psychological principals. Using a moderated mediation model, we find that psychological ownership is positively related to company performance through the mediating effect of individual-level entrepreneurial behaviour. We also find that the effect of psychological ownership on individual-level entrepreneurial behaviour and, ultimately, company performance is weaker for high levels of monitoring compared to low levels. These findings offer important contributions to agency, psychological ownership, and entrepreneurship literatures.

Tweaking the entrepreneurial orientation–performance relationship in family firms: the effect of control mechanisms and family-related goals

“…Control mechanisms were found to reduce agency behavior by aligning individual and firm preferences, consequently resulting in higher financial performance (Chrisman et al 2007;Sieger et al 2013;Helsen et al 2016). We hypothesize in accordance with prior literature that the use of control mechanisms will avoid agency behavior by aligning individual and family (firm) preferences through specific monitoring and evaluation procedures (Sieger et al 2013;Eisenhardt 1989).…”

“…The final return rate of 17.1% is well above the average of 10 to 12% response rates of prior studies (e.g. Sieger et al 2013). Table 1 describes the sample of our research.…”

“…Control mechanisms were found to reduce agency behavior by aligning individual and firm preferences, consequently resulting in higher financial performance (Chrisman et al 2007;Sieger et al 2013;Helsen et al 2016). We hypothesize in accordance with prior literature that the use of control mechanisms will avoid agency behavior by aligning individual and family (firm) preferences through specific monitoring and evaluation procedures (Sieger et al 2013;Eisenhardt 1989). When agency behavior is prevented, individual attitudes towards Innovativeness, Proactiveness, Risk-Taking, Autonomy and Competitive Aggressiveness will align with the family firm attitudes towards these entrepreneurial behaviors.…”

“…We follow the idea to address agency problems by the use of control mechanisms (Calabrò and Mussolino 2013;Gnan et al 2015). Therefore, control mechanisms are developed on the assumption that agency behavior can be controlled through monitoring and peer evaluation (Chrisman et al 2007;Sieger et al 2013;Malmi and Brown 2008).…”

“…Control mechanisms were measured with a scale that aims at measuring the presence of agency costs in family business (Sieger et al 2013;Chrisman et al 2007). The scale is a result of the assumption that ''monitoring, while costly, reduces agency behavior'' (Sieger et al 2013, p. 3) and was measured with four items on a five-point Likert Scale from ''never'' (=1) to ''very often'' (=5) (Chrisman et al 2007).…”