Social Norms and the Theory of the Firm

For decades, the economic theory of the firm referred to as agency theory has dominated business research and education in the United States. Although agency theory has been influential in accounting, finance, and managerial economics, it lacks informal and nonfinancial controls. Douglas E. Stevens resolves to enhance this theory through the incorporation of social norms. Drawing on historical context related to the firm, the theory of the firm, and social norm theory related to the firm, he demonstrates the importance of social norms in the formation and development of free-market capitalism and the firm. He also describes the latest theoretical, experimental, and archival evidence to exhibit the growing body of research that incorporates social norms into the theory of the firm. These foundations enable Stevens to create a comprehensive roadmap of agency theory that will have strong implications for practice and public policy.

'… Stevens makes a persuasive case that social norms are an important determinant of how firms are organized, and how individuals working within them behave.' Paul E. Fischer, University of Pennsylvania  , 'Scarcity of attention to social norms became increasingly difficult to sustain after the recent decades' events, raising uncomfortable questions about the prevailing theories of business, economics, organizations, and finance. Beyond sociology and organization behavior, awareness of the importance of social norms in accounting and law has grown rapidly. Stevens' book will help meet the hunger for new ideas in theory of the firm.' Shyam Sunder, Yale University, Connecticut

Douglas E. Stevens studied experimental economics at Indiana University while completing his Ph.D. in accounting. His experimental and theoretical research demonstrates how incorporating social norms enhances the theory of the firm. His research has been published in leading academic journals including The Accounting Review; Contemporary Accounting Research; Accounting, Organizations and Society; Experimental Economics; the Journal of Business Ethics; the Journal of Management Accounting Research; and Behavioral Research in Accounting.