Agency in the algorithmic age: The mechanisms and structures of blockchain-based organizing

Abstract

Firms are increasingly adopting blockchains as a form of knowledge engineering to align their internal processes, share information, and improve oversight. We study intraorganizational blockchains from an agency perspective to understand how the distributed, sequenced, and consensus-based nature of blockchains mitigates information asymmetries and affects organizational structures. First, we explain how blockchains differ from conventional relational, contractual, and system-based mechanisms to address three pertinent information challenges—concentration, continuity, and conflict. Subsequently, we address the consequences of introducing such blockchains, arguing that they create both direct and sequenced information channels among principals and agents, which elicit an organizational reconfiguration via vertical disintermediation and lateral reintermediation. Finally, we theorize the implications of blockchain-based organizing for agency theory regarding the chain of command, the unity of direction, and the span of control. Overall, we show how blockchains for intraorganizational governance can mitigate principal-agent problems and impact organizational design in profound ways.