February 2003

IZA DP No. 718: Consistency in Organization

final version published in: Journal of Theoretical and Institutional Economics, 2008, 164(4), 612–623

Recent thinking has emphasized the importance of consistency in a firm’s compensation policy. By starting from Williamson’s ideas about idiosyncratic exchange, this view can be supplied with some theoretical foundation. At the same time, the consistency view can be applied to a number of organizational issues. It sheds new light on some Williamsonian themes, like the boundaries of the firm or the attenuation of incentives within firms.