Agency Problems in Industries Undergoing Fundamental Change: Applications to Telecommunications

Once stable industries that become dynamic industries raise numerous management and economic issues. Population ecology and contingency theories indicate that an incumbent economic organization must reform its organizational structure, production resource and processes, products, and markets if it is to survive (Harman and Freeman, 1977; Tosi, 1984). Survival can take many forms, including reorganization, merger, and divestiture. Agency theory indicates that conflicting interests and information asymmetries affect investors' and firm managers' abilities to make changes, should they want to (Eisenhardt, 1989).