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Types of Norms and Rules:
- - Pre-defined models of acceptable/inacceptable behavior (bypass your boss)
- - Patterns of behavior and action deemed appropriate (wearing ties at the office)
- -The laws and customs continuing the external legal system in internal organization (equal pay)
- - Humanly devised constraints that shape human interaction (Traffic rules)
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Basic Functions of R&N
- - Reduce Negotiation costs by substituting case by case problem solving
- - Reduce conflict by depersonalization
- - Reduce uncertainty b predetermining behavior
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Reason for Formalization
- - Transparency: Justice and accountability, governance by rights rather than power, are sustained by formalization
- - Enforceability: Protection in case of conflict of interest is enhanced by formalization
- - Complexity: If many matters and agents are to be coordinated formalization sustains memory and information processing capacity
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Optimal Degree of Formalization
- - Large systems (Large firms or large networks of firms) are and should be more formal than smaller ones
- -High conflict relatons (employment contracts, personnel evaluations, one chance buyer-seller relations)
- - Size/complexity and conflict lead to more formalization
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