Deregulatory Forms, Variations in the Speed of Governance Adaptation, and Firm Performance

Abstract

Government regulation in an industry is an intermediary in the principal-agent relationship that acts as a substitute for internal governance mechanisms. We propose a model for studying how different forms of deregulation (frame-breaking, metamorphic, piecemeal, and plodding) impact variations in the speed of adaptation of internal governance mechanisms to the theoretical predictions of agency theory and resulting performance implications. We develop illustrative propositions for a set of contingencies that moderate the above relationship. How government and firms manage the deregulatory process has important economic and social consequences.