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Theoretical basis of supply management: theoretical and practical contributions of agency theory

Mitzkus, S. (2013) Theoretical basis of supply management: theoretical and practical contributions of agency theory.

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Abstract:This research evaluates the possible contributions of agency theory to supply management. Based on the purchasing year cycle, which outlines the most important tasks of supply management, the purchaser faces 4 critical decision points: make-or-buy, sourcing strategies, supplier relationship strategies as well as contract awarding. The outcomes confirm that agency theory can be a valuable supportive tool to the decision-making process of the purchasing professional concerning sourcing strategies and contract awarding. Agency theory helps create sourcing strategies by taking into account the degree of market uncertainty and offers behavioral- as well as outcome-based contractual mechanisms in order to assure supply. It helps further at the stage of contract awarding by mitigating information asymmetry and opportunistic behavior through agency costs and the right contractual choice in order to align the interests of the principal and agent. Further, agency theory alone seems not to be helpful concerning make-or-buy decisions. However, by extending agency theory with the variable of ‘asset specificity’ from transaction cost economics, a supporting framework to make-or-buy decisions can be established. Agency theory seems not to be useful in establishing supplier-relationship strategies, due to its aim to reduce information asymmetries. Information asymmetries, however, are often a prerequisite in order to engage in relationships, which aim at boosting innovation.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration BSc (56834)
Link to this item:http://purl.utwente.nl/essays/63738
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