A Positive Theory of the Firm: Identification, Prosocial Intrinsic Motivation, and Highly Interdependent Tasks

Abstract

Building on a rich heritage of works in psychology, sociology, and organizational behavior we develop a positive theory of the firm: the firm is the most suitable organizational form for coordinating highly interdependent tasks because prosocial intrinsic motivation fostered by organizational identification is a unique “positive” motivator to firms. We assert that an individuals’ identification with the firm that employs them creates a powerful, collective bond with others that share the same identification. Market and hybrid forms of organization cannot replicate in strength this shared, common identification among workers. We further assert that because of this collective-other bond, identification better fosters prosocial intrinsic motivation, a positive, other-oriented motivation, than other organizational levers, such as high-powered incentives, authority, and social ties. Prosocial intrinsic motivation is uniquely able to cultivate collaborative effort and engagement, and in doing so, overcomes the team coordination challenge that often undermines the level of collaborative effort required for highly interdependent tasks.