Role of Goodwill and Competence Trusts in Principal's Monitoring of Agents: An Experimental Study

Natarajan, R C (2007) Role of Goodwill and Competence Trusts in Principal's Monitoring of Agents: An Experimental Study. TAPMI, Manipal.


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Principal agent relationship has been the focus of research over twenty years. A relationship characterised by absence of legitimate power necessitates monitoring and control by the principal to align the activities of the agent to the goals of the collective chain. However, complete monitoring of the agent is impossible, and expensive. Certain amount of trust is inevitable. This research looked at the relationship between the principal’s trust in his agent and the monitoring he engages on that agent’s activities. Trust was dichotomised into goodwill trust and competence trust as is mentioned in the extant literature. Monitoring was dichotomised into control-based monitoring and need-based monitoring. The research postulated negative relationship between goodwill trust and control-based monitoring on the one hand and between competence trust and need-based monitoring on the other. The study used laboratory experiment using students of management and executives. The data for the research were captured both through questionnaire and through the participants’ allocation of (limited) time among various activities in a simulated distribution channel context generated by a simulation game. The study found support to the postulated negative relationships between trust and intended monitoring. However, actual monitoring manifested through allocation of time found rare support for the postulates. This inconsistency raises the question “Why do managers act differently from what they intended to in response to trust?” This is an important contribution of this research, which can be probed through further research.

Item Type: TAPMI Working Papers
Uncontrolled Keywords: Principal-Agent Relationship, Trust, Goodwill Trust, Competence Trust, Monitoring, Control-based Monitoring, Need-based Monitoring
Subjects: Marketing
Marketing > Marketing Research
Divisions: Marketing Management
Depositing User: Ms. Vanitha K
Date Deposited: 15 Nov 2018 07:16
Last Modified: 20 Nov 2018 06:23

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