Managing Motivation, Organization and Governance

To a high degree Simon’s work is identified with the introduction of “Bounded rationality” into economics and with the behavioral theory of the firm. Today, bounded rationality has become a conventional footnote in almost every economic treatment. However, it often does not do justice to Simon’s far-reaching ideas. Much has been neglected, in particular Simon’s emphasis on motivation, including workers’ identification with their firm. In our paper, we focus on these aspects neglected in organizational economics. We seek to complement them with an approach, which makes motivation an endogenous variable to management. At the same time, we introduce a dynamic relationship between extrinsic and intrinsic motivation into the theory of the firm. The management of these two kinds of motivation becomes a crucial task, particularly when production is knowledge intensive.