Unicorns and agency theory: Agreeable moral hazard?

Authors

  • Birton J. Cowden Kennesaw State University, 1000 Chastain Road. Kennesaw, GA 30144, USA
  • Joshua S. Bendickson University of Louisiana at Lafayette, 214 Hebrard Boulevard, Lafayette, LA 70503, USA
  • Jerrica Bungcayao Kennesaw State University, 1000 Chastain Road, Kennesaw, GA 30144, USA,
  • Simona Womack Kennesaw State University, 1000 Chastain Road, Kennesaw, GA 30144, USA

Abstract

The number of unicorns, startups valued over $1 billion, has steadily risen over the past decade. The abnormally high valuation of a unicorn from investors is based on their potential to disrupt a market and create a new paradigm. With this as the backdrop, this piece asks the question, what theoretical tools do we have to understand unicorns? Specifically, we explore agency theory. We argue that if principals and agents agree on the goal of disruption, then perhaps the agency problem that does occur in unicorns is beneficial, not a cost. Further, we argue that the principals of unicorns do want agents to take higher than normal risks with their investment to disrupt a given market. From this phenomenon, we introduce the concept of agreeable moral hazard and its use in the unicorn setting. Not only does the concept of agreeable moral hazard provide theoretical implications for future research, but it also highlights the need for more research to test existing theory on the unicorn population.

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Author Biographies

Birton J. Cowden, Kennesaw State University, 1000 Chastain Road. Kennesaw, GA 30144, USA

Birton Cowden, Ph.D., is Assistant Professor of the Michael A. Leven School of Management, Entrepreneurship and Hospitality, and Research Director for the Robin and Doug Shore Entrepreneurship Center. Dr. Cowden joins KSU from the University of Massachusetts, where he was the Director of New Ventures and faculty at the Isenberg School of Management. Dr. Cowden earned his Ph.D. from Saint Louis University and has research interests in entrepreneurship and institutions.

Joshua S. Bendickson, University of Louisiana at Lafayette, 214 Hebrard Boulevard, Lafayette, LA 70503, USA

Josh Bendickson earned his Ph.D. in Strategic Management from Louisiana State University. Josh’s research interests include strategic human capital, small business/ entrepreneurship, and international strategy and he is a member of multiple professional organizations including the Academy of Management, Southern Management Association, and the United States Association for Small Business and Entrepreneurship, among others. Josh is an associate professor of management at the University of Louisiana at Lafayette.

Jerrica Bungcayao, Kennesaw State University, 1000 Chastain Road, Kennesaw, GA 30144, USA,

Jerrica Bungcayao is a Ph.D. student studying and researching management and entrepreneurship topics at Kennesaw State University.

Simona Womack, Kennesaw State University, 1000 Chastain Road, Kennesaw, GA 30144, USA

Simona Womack is a Ph.D. student at Kennesaw State University. She is studying and researching topics related to management, research methods, and entrepreneurship.

Published

2020-05-27

How to Cite

Cowden, B. J., Bendickson, J. S., Bungcayao, J., & Womack, S. (2020). Unicorns and agency theory: Agreeable moral hazard?. Journal of Small Business Strategy, 30(2), 17-25. Retrieved from https://libjournals.mtsu.edu/index.php/jsbs/article/view/1550

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