Agency theory and supply chain management: a structured literature review

TLDR

The study aims to demonstrate how agency theory can illuminate supply‑chain dynamics and to assess its current application, proposing future research directions. The authors conducted a structured literature review using a three‑stage refinement process, screening 86 articles from keyword searches down to 19 for final analysis. They found that agency theory is rarely applied in supply‑chain management, yet it offers valuable insights for engineering relationships and mitigating abnormal behaviours through contractual and non‑contractual remedies.

Abstract

Purpose The paper aims to explain how agency theory can be used to inform our understanding of the dynamics surrounding supply chain behaviours and relationships. Design/methodology/approach A structured review of the literature using a three‐stage refinement process is used. The articles were sourced through online databases and keyword classifications, such as “agency theory”, “principal‐agent relationships” and “supply chain management”. The search initially identified over 86 articles. After further screening these were reduced to 19 for final assessment and comparison. Findings Despite agency theory's prevailing descriptive and predictive qualities there is scarcity in its application to the SCM discipline. The authors posit that agency theory provides valuable insights for relationship engineering within supply chains where social, political, legal and behavioural dynamics dominate. Practical implications It is a critical task for managers to understand and mitigate abnormal behaviours across the supply chain. Agency theory serves this need by providing them with a useful tool to respond to transaction cost dilemmas through contractual and non‐contractual remedies. Originality/value This is one of the first studies that examines the current state of agency theory application in the SCM literature and suggests potential avenues for future research.