Model-Theoretic Knowledge Accumulation: The Case of Agency Theory and Incentive Alignment

Abstract

The philosophy of science offers two different perspectives on how empirical findings contribute to knowledge accumulation. The “law-statement” perspective interprets contributions to the extent that empirical research confirms or refutes general axioms of theory. Alternatively, the “model-theoretic” perspective recognizes contributions from models that improve scholars' ability to represent the world of managers. Management scholars often have limited awareness of the philosophical tradition underlying the model-theoretic perspective, and, consequently, useful contributions from improved models of important phenomena may be overlooked. Drawing on model-theoretic philosophy, we identify three ways in which empirical research contributes to theoretical knowledge without necessarily verifying or falsifying theoretical axioms, through the grafting, contextualizing, and repurposing of representational models. We provide examples of each by focusing on studies investigating incentive alignment. Finally, we discuss how the model-theoretic perspective contributes to an ongoing discussion about improving theoretical precision in management research.