Aligning principal and agent’s incentives: A principal–agent perspective of social networking sites

The viability of networked communities depends on the creation and disclosure of user-generated content and the frequency of user visitation (Facebook 10-K Annual Report, 2012). However, little is known about how to align the interests of user and social networking sites. In this study, we draw upon the principal-agent perspective to extend Pavlou et al.’s uncertainty mitigation model of online exchange relationships (2007) and propose an empirically tested model for aligning the incentives of the principal (user) and the agent (service provider). As suggested by Pavlou et al., we incorporated a multi-dimensional measure of trust: trust of provider and trust of members. The proposed model is empirically tested with survey data from 305 adults aged 20-55. The results support our model, delineating how real individuals with bounded rationality actually make decision about information disclosure under uncertainty in the social networking site context. There is show little to no relationship between online privacy concerns and information disclosure on online social network sites. Perceived benefits provide the linkage between the incentives of principal (user) and agent (provider) while usage intensity demonstrated the most significant impact on information disclosure. We argue that the phenomenon may be explained through Communication Privacy Management Theory. The present study enhances our understanding of agency theory and human judgment theory in the context of social media. Practical implications for understanding and facilitating online social exchange relationships are also discussed.