An Endogenous Agency Model of Sociocognitive Processes

Abstract

While much of the agency literature focus on the utility-maximization differences between principals and agents, less is understood about how individual-level factors interact with these situational differences in perspective. We develop a sociocognitive theory of agency that explains the interaction between the individual’s cognitive processing style and agency role. Integrating construal level theory with agency theory, we describe how agency roles provide differently ordered aspect hierarchies, through which individuals conceptualize decisions. As the aspect hierarchies of both principal and agent perspectives contain risk and return, the interplay with construal level determines which aspect is used to conceptualize the decision. We illustrate how traditionally labelled principals and agents both may exhibit varying degrees of risk taking based on how abstractly they think about decisions. Consequently, it is necessary to account for individual-level cognitive processing styles when explaining how interpersonal agency differences affect decision-making. By emphasizing the dynamic nature of decision conceptualization, we provide a framework for addressing agency conflicts based on influencing which aspects are used to evaluate decisions.