Delegating Terror: Principal–Agent Based Decision Making in State Sponsorship of Terrorism

State sponsorship of terrorism, where a government deliberately provides resources and material support to a terrorist organization, is common in the international system. Sponsorship can provide significant strategic and political benefits for a state, but there are inherent international and domestic risks associated with delegating foreign policy to these actors. Using principal–agent analysis, I develop a model that evaluates the impact of potential costs and benefits on a state’s decision to sponsor terrorism. I test my model by using a novel dataset on sponsorship behaviors that ranges from 1970 to 2008. The results of my analysis support the validity of the principal–agent model in explaining sponsorship, as states will be more likely to engage in sponsorship when the strategic benefits of weakening the targeted state are high and the risks of international reputation loss and domestic dissatisfaction are low.