Rediefining the Government-University Relationship using the Principal-Agent Theory

Government–university relationship has always been challenging. Many theories have emerged to explain this relationship. Among them, the principal-agent theory (PAT) has mainly developed in recent decades. This research aims to utilize PAT as a theoretical framework to redefine the government-university relationship to discover the insights agency theory can offer in this context. From the viewpoint of this theory, information asymmetries and goal conflict are the main problems in government–university relationship that coexistence of these problems leads to the agency problem. This study is descriptive research using a systematic literature review (Fink, 2014 & 2018). The most relevant documents in the context of agency theory have been selected and reviewed in general and government- university in particular (81 documents). Results show that the theory systematically by examining adverse selection and moral hazard in the context and utilizing agency costs and agency variables allows the government to evaluate costs and optimal contracts in the pre- and post-contractual relationship with universities. Finally, this theory provides a unique explanation for the government choice and use of certain governance procedures and it can be used for redefining government-university relationship. ​