A Stewardship cost perspective on the governance of delegation relationships: the case of social franchising

We explore how nonprofits can effectively govern delegation relationships. We extend stewardship theory by conceptualizing stewardship costs—costs in delegation relationships based on stewardship behavior. As stewards are theorized as other-regarding, self-actualizing, and intrinsically motivated, so far, literature almost exclusively points to the positive performance potential of stewardship behavior. Addressing this shortcoming, we develop propositions showing how stewardship selection costs rooted in the psychological characteristics of stewardship behavior and stewardship management costs rooted in situational factors of stewardship behavior occur during relationship formation and maintenance, and how they counteract the potential to increase performance. We identify and systematize opportunity costs of delayed growth, limited growth potential, and lost standardization gains, as well as increased selection and management costs. To demonstrate the theoretical potential and empirical relevance of our framework, we illustrate our arguments by referring to social franchising, a scaling strategy considered relevant for nonprofits as well as social enterprises.