THE RATIONAL CHOICE APPROACH TO AN ANALYSIS OF INTRA- AND INTERORGANIZATIONAL GOVERNANCE

Rational choice theory has numerous implications for the analysis of organizational governance structures. This chapter reviews some of these applications. The main emphasis is on relational contracting. It will be argued that repeated games theory, that is, a variant of rational choice that deals with rational agents who repeatedly interact, can explain the outcomes of relational contracting. There is some controversy about the merits of rational choice explanations. Can they deal with inefficient structures and their (alleged) stability, with path dependence and mimetic processes? Many of these issues have been addressed by new sociological institutionalists. It is argued that rational choice analysis is in fact consistent with many of these observations. There is, in other words, some convergence between rational choice and institutionalist approaches.