The Donaldson Theory, developed by James Donaldson, is a concept in the field of economics that focuses on the relationship between corporate governance and firm performance. It emphasizes the importance of aligning the interests of shareholders and management to enhance overall company value. The theory suggests that effective governance structures can lead to better decision-making and improved financial outcomes. Additionally, the Donaldson Theory highlights the role of external factors, such as market conditions and regulatory environments, in shaping corporate behavior. By understanding these influences, companies can adapt their strategies to optimize performance and ensure long-term sustainability in a competitive landscape.