Abstract

Identity, reputation, and culture represent ways to understand why organizations with similar structures and memberships nevertheless behave differently. While a large body of work has advanced our understanding of the effects of formal institutional details such as delegation, hierarchy, transparency, and oversight on organizational behavior, less attention has been paid to informal institutional details such as shared mission, professionalism, and other bases of organizational identity. We present a theory of organizational decision-making that incorporates organizational identity in the form of "mission." The degree to which individuals will be motivated to adopt their organization's mission will be influenced by both the preferences of others within, and the structure of, the organization. Thus, we provide a theory of endogenous preferences within organizations that incorporates features of both formal and informal institutions.