DAOs and the future of governance
A decentralized autonomous organization (DAO) is a type of autonomously functioning corporation that lacks a central governance structure. A prevailing belief (or hype) is that DAOs could revolutionize (corporate) governance thanks to built-in characteristics which makes them less susceptible to the pitfalls of principal-agent problems. This, allegedly, translates to an edge over traditional organizations. This thesis evaluates the validity of this belief through an integrative literature review, guided by agency theory perspective. Subsequently, a GICS-based industry-by-industry SWOT analysis is conducted on the suitability of DAOs. The findings reveal that DAOs’ inherent characteristics are theoretically capable of overcoming agency problems such as opportunism, distrust, and misalignment of interests in a novel manner. Moreover, DAOs can preventively code (parts of) their complications away, enhancing their adaptability to several industries. DAOs are suitable for innovative, technological and consumer-oriented sectors, and for sectors that benefit from automation and blockchain features. Conversely, suitability diminishes for concentrated sectors and sectors exposed to regulatory risks. These results hold under the premise that complications concerning legal personality and qualification of tokens are solved by legislation. A crucial contribution of this thesis is a sectoral suitability matrix, which can serve as a baseline for governance theory-building in the future.
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