Expanding the explanatory power of agency theory for the knowledge economy

Researchers have questioned whether the new knowledge economy is fundamentally different from the social and economic contexts of the 19th and 20th centuries (Webster, 2002). Some argue that classic economic theories still apply with equal relevance; while others claim that we are in the midst of profound changes and thus, new perspectives are needed (Whittaker, 1995; Wigand et al., 1997). This paper examines how one such classic theory; agency theory (developed by Jensen and Meckling, 1973) can be expanded to explain emerging practices in today's knowledge economy and, in so doing, explicates some apparent paradoxes with respect to ERP systems and KM (knowledge management). Copyright © 2006 Inderscience Enterprises Ltd.