Browsing by Subject "agency theory"

Sort by: Order: Results:

Now showing items 1-4 of 4
  • Lahti, Tom (Svenska handelshögskolan, 2009)
    Economics and Society
    Wealthy individuals - business angels who invest a share of their net worth in entrepreneurial ventures - form an essential part of an informal venture capital market that can secure funding for entrepreneurial ventures. In Finland, business angels represent an untapped pool of capital that can contribute to fostering entrepreneurial development. In addition, business angels can bridge knowledge gaps in new business ventures by means of making their human capital available. This study has two objectives. The first is to gain an understanding of the characteristics and investment behaviour of Finnish business angels. The strongest focus here is on the due diligence procedures and their involvement post investment. The second objective is to assess whether agency theory and the incomplete contacting theory are useful theoretical lenses in the arena of business angels. To achieve the second objective, this study investigates i) how risk is mitigated in the investment process, ii) how uncertainty influences the comprehensiveness of due diligence as well as iii) how control is allocated post investment. Research hypotheses are derived from assumptions underlying agency theory and the incomplete contacting theory. The data for this study comprise interviews with 53 business angels. In terms of sample size this is the largest on Finnish business angels. The research hypotheses in this study are tested using regression analysis. This study suggests that the Finnish informal venture capital market appears to be comprised of a limited number of business angels whose style of investing much resembles their formal counterparts’. Much focus is placed on managing risks prior to making the investment by strong selectiveness and by a relatively comprehensive due diligence. The involvement is rarely on a day-to-day basis and many business angels seem to see board membership as a more suitable alternative than involvement in the operations of an entrepreneurial venture. The uncertainty involved does not seem to drive an increase in due diligence. On the contrary, it would appear that due diligence is more rigorous in safer later stage investments and when the business angels have considerable previous experience as investors. Finnish business angels’ involvement post investment is best explained by their degree of ownership in the entrepreneurial venture. It seems that when investors feel they are sufficiently rewarded, in terms of an adequate equity stake, they are willing to involve themselves actively in their investments. The lack of support for a relationship between increased uncertainty and the comprehensiveness of due diligence may partly be explained by an increasing trend towards portfolio diversification. This is triggered by a taxation system that favours investments through investment companies rather than direct investments. Many business angels appear to have substituted a specialization strategy that builds on reducing uncertainty for a diversification strategy that builds on reducing firm specific (idiosyncratic) risk by holding shares in ventures whose returns are not expected to exhibit a strong positive correlation.
  • Masalin, Walter (2007)
    Franchising is not particularly well researched topic in organizational economics. However, its economic importance is significant. For example, the total revenue of franchising in the US is now approximately 50% of all retail trade. A typical franchising chain consists of units that are operated by the franchisees but there are also centrally managed units? Which ones are managed centrally and why? Some of the prior research on the matter is incomplete. The research question of this thesis is: “What factors tend to determine which units of a typical franchising chain are centrally managed?” The main issue of focus in this study is the free riding problems that arise in environments where the franchisee is not compelled to work in the best interests of the franchisor. The objectives of this study are threefold. The goal is to (1) write a thorough literature review on the theory of the firm in order to understand franchising as an organizational form, (2) develop a model describing the franchisor-franchisee relationship and (3) perform a case type empirical analysis on one typical franchising chain to test two hypotheses derived from the theoretical model. The target of the empirical research in this study is McDonald’s, a well established franchising chain with a valuable brand. The data used in the research is collected from three main sources: Interviewing the franchising director of McDonald’s Finland, searching public web pages and using an internet based service solution for maps (Eniro). Also, a particular qualitative index for metropolitan context was created. It was used to estimate the influence of the franchisees operating environment to the business. A logistic regression model was used to test the proposed hypotheses. The sample size comprises 84 restaurants. The underlying assumption in the empirical research is that an established franchisor has learned an efficient ownership allocation for its units. The key results from the theoretical model are interesting and together with the analyzed theory motivate two hypotheses. According to these hypotheses, this ownership allocation is as a function of operating environment and monitoring costs. The empirical results supported the proposed hypotheses: the likelihood for a given McDonald’s restaurant to be owned and operated by the franchisor decreases the closer the unit is to the headquarter (monitoring costs) and the higher the metropolitan index is for that given location (environment). Even though the sample size was not large, the results are statistically significant. The study is concluded with three propositions, suggestions for future research and recommendations for franchising firms.
  • Janzon, Max Albert (2008)
    This study adopts a case study research strategy to a public bureaucracy with a military organization structure. This study investigates the logics of action of strategy process from a governance perspective. Strategy process refers to the process dimension of strategic issues management (sensing, deciding, executing). The governance models used in the study are agency theory and stewardship theory. The primary objective of the study is to explore the relationship between the forms of governance and the logics of action of strategic issues management. In this study the literature review was complemented with a pilot study. The material obtained in the pilot study (N 114, n 72) was then analyzed by means of discourse analysis. The objective of the pilot study was to complement the literature review and thus immediately from the beginning incorporate qualitative organization-based empiria. However, in order to explore the study's main concern, a quantitative approach was deployed. The statistical technique used was correlation analysis. The material for the statistical analysis was gathered by means of survey (N 136, n 72). The questionnaire was sent to the key executives and managers, and experts of the public agency in question (the Border Guard of Finland). For measurement purposes, the Spearman rank correlation coefficient was computed. The study focused on a statistically significant (p<0,01) and very significant (p<0,001) correlation. The study shows that stewardship theory is a more efficient governance form than agency theory from a strategic issues management perspective. The stewardship theory based governance behaves clearly more advantageous in the analysis and constituted a significantly positive correlation to the logic of action, which actively identifies strategic issues in the organization's external environment. Agency theory did not show a corresponding correlation. Stewardship theory showed a statistically very significant correlation to each of the decision-making logics of action, and the correlation was the strongest to the decision-making logic of action, which suits most appropriately the demands of strategic issues management. Agency theory did not show a correlation with equivalent strength. With respect to implementation, stewardship theory constituted a statistically very significant correlation to the executing logics of action required by holistically natured strategic issues, whereas agency theory based governance constituted a statistically very significant correlation merely to the formal modes of implementation.
  • Björkman, Anette (Svenska handelshögskolan, 2007)
    Economics and Society
    Control is central to management and there is already a considerable body of research on control. However, the emergence and growth of multinational corporations (MNCs) has renewed the interest in control, as MNCs are complex (often large) organizations that face circumstances beyond those of national business organizations. The geographical dispersion of MNC activities means that the headquarters controls subsidiaries that differ with regard to power and that are embedded in different cultural, political, legal and educational systems. Foreign subsidiary control also takes place across language boundaries and physical (i.e. geographical) distances. In face of these challenges, how are foreign subsidiaries controlled? The thesis explores different types of control mechanisms and attempts to explain the degree to which they are used to control foreign subsidiaries. It contributes to existing knowledge on control by exploring how five different control mechanisms are related to each other. Previous research has tended to focus only on one or two control mechanisms and seldom has their effect on each other been explored. The thesis also contributes by including two central aspects of the MNC that have been neglected in much of the research on foreign subsidiary control: language competence of subsidiary staff and physical distance between the headquarters and its subsidiaries. The findings indicate that specific control mechanisms should not be studied in isolation as there are intricate relationships among the different control mechanisms. Language competence of the subsidiary staff can furthermore affect the type and degree of control that the headquarters can exercise over a subsidiary. The findings also indicate that changes in the physical distance between subsidiaries and its headquarters (i.e. a relocation of the headquarters as part of a restructuring process) can have great consequences for the headquarters-subsidiary relationship.