The principal–agent problem amid digital transformation

Abstract

Despite the widespread use of digital technologies, the economic nature and essence of digital transformation remain understudied. The article examines the aspects of the principal–agent problem amid digital transformation, which implies replacing a person or analogue machines with digital technologies. Transformation is needed to gain additional economic advantages or improve the flexibility of the organization’s activities within the concept of Industry 4.0. The research demonstrates that the underlying economic reason for digital transformation is to solve the problem of information asymmetry and overcome the principal–agent conflict through the use of digital technologies. The concept of digital transformation and the principles of the principal–agent theory constitute the methodological basis of the study. Among the research methods were generalization, the inductive method of knowledge formation, and the assessment of the conclusions’ completeness with the involvement of theorists and practitioners in the field under consideration. The study allowed broadening the understanding of the principal–agent theory: establishing the roles of a human agent and a machine agent, as well as highlighting the essential economic aspects of digital transformation. The results obtained can be used to create digital transformation methodologies and research on the organization of labour in this field.

Keywords

• digital transformation
• principal–agent problem
• machine agent
• human agent
• digital agent
• physical agent
• information asymmetry
• principal–agent conflict
• digital twin