CINEMA 7 Lecture Notes - Lecture 20: Agency Cost, Organizational Memory, Performance Measurement
Document Summary
The impact of information systems on organisations & markets : how information systems affect key measures of organisation structure, agency theory firm as agency relationship built on set of contracts among self-interested agents. Cannot be guaranteed that decisions align with principal"s interest. Transaction cost economics operation of market is not costless; Assess transaction costs in analysis of economic activities. Firm size & allocation of decision-making authority determined by acquisition, storage, process & information dissemination costs. Decisions rights should be located where sum of costs is minimised. Agency theory: principal (entrepreneur) employs agents (employees) to perform. Firm = nexus of contracts among self-interested individuals service on his behalf: agent hast objective to maximise his/her utility, agency costs: Costs incurred as result of discrepancies between principal"s & agent"s objectives. Payment only when output > pre-specified level (na ve because many factors affect output) Agent pays fixed amount to owner & keeps remainder (if any) Hire another person to monitor salesperson (agent)
