Inside the firm: Socioeconomic versus agency perspectives on firm competitiveness Peter Wright a, *, Ananda Mukherji b a Department of Management, Fogelman College of Business and Economics, The University of Memphis, 475 River Ridge Cove, Memphis, TN 38152 USA b Department of Management, College of Business Administration, Texas A&M International University, Laredo, TX 78041-1900 USA Abstract In this paper, we examine agency theory’s presumptions of self-interest, opportunistic behavior, and the notion of the “economic man” (or woman). We contend that the application of agency theory’s presumptions to the firm may imply high costs, competitive disadvantage, and high firm risk. We suggest that agency theory’s presumptions may not contribute to the interests of the principal, agent, or other stakeholders. Alternatively, we discuss socioeconomic theories’ presumptions of enlightened self-interest, trustworthy behavior, and the possibility of the noneconomic person. We argue that the extension of socioeconomic theories to the firm may imply low costs, competitive advantage, and low firm risk. We contend that the socioeconomic presumptions may contribute to the interests of various stakeholders. © 1999 Elsevier Science Inc. All rights reserved. 1. Introduction In this paper we attempt to juxtapose two different literature streams and relate them to firm competitiveness. One stream of literature, agency theory (e.g., Jensen and Meckling, 1976), is a component of organizational economics—the other related component of orga- nizational economics is transaction cost theory (e.g., Williamson, 1985). The development of agency theory has been based on a number of assumptions and has received its impetus from the premise that the interests of owners and managers of publicly held corporations may diverge. The concern has been that the wishes of the owners of capital may be distorted by * Corresponding author. Tel.: +1-901-682-4982; fax: +1-901-678-4990. Journal of Socio-Economics 28 (1999) 295–307 1053-5357/99/$ – see front matter © 1999 Elsevier Science Inc. All rights reserved. PII: S01053-5357(99)00019-0