Opportunism and Honest Incompetence - Seeking Explanations for Noncompliance in Public Procurement

Abstract

This article utilizes agency theory to explain maverick buying in governmental agencies, that is, noncompliance to centrally negotiated frame agreements. Traditional agency theory assumes the agent to be an opportunistic self-interest seeker. A complementary view of agency problems portrays man as an honest, yet not fully competent, actor; both agents and principals may be burdened by "honest incompetence." We apply both perspectives on principal-agent relationships to study maverick buying in government procurement and link agency problems to three governance mechanisms: monitoring, training, and guidance. We find that guidance and training help to reduce governmental employees' noncompliance, but output monitoring does not. Our findings further indicate that maverick buying is related to goal incongruence and two different types of information asymmetry: Agency problems may arise not only because the agent has information the principal is not aware of but also because the principal may have information the agent is not aware of. Future research in public management using agency theory to study instances of hidden action could benefit from applying a similar dual lens to behaviors previously examined as purely opportunistic.