Professional as agent: Knowledge asymmetry in agency exchange

In this article I examine those business exchanges in which firms hire professional service organizations and give them limited decision-making authority to perform knowledge-intensive tasks. I frame such exchanges within agency theory perspective and invoke the extant literature on professions to delineate several attributes that make principal-professional exchanges intrinsically distinct from others, such as owner-manager agency. in doing so. I question and complement some key assumptions in agency theory and also discuss explicitly how the study of principal-professional exchanges helps highlight important considerations not addressed in the mainstream theory. I then present an expanded framework that integrates agency theory and the literature on the professions and present several propositions to outline four types of restraints on potential opportunistic behavior of professional agents: (1) self-control. (2) community control. (3) bureaucratic control. and (4) client control. The article ends with theoretical and empirical implications.