Consistency in Organization

Internal organization relies heavily on psychological consistency requirements. This perspective has been emphasized in modern compensation theory, but has not been extended to organization theory. The idea is developed by starting from Williamson's discussion of idiosyncratic exchange. The perspective sheds new light on several topics in the theory of the firm, like the boundaries of the firm (“Williamson's puzzle”), the importance of fairness concerns within firms, the attenuation of incentives, or the role of routines. It implies a “perceptional” theory of the firm that is “realistic” in the sense advocated by Coase (1937).