The Theory Of The Social Exchange Theory

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The first theory I will touch on is the Social Exchange Theory (SET) presented by George Homans. The concept of the social exchange theory involves “actions contingent on the rewarding reactions of others, which over time provide for mutually and rewarding transactions and relationships” (Cropanzano &Mitchell, 2005, p.890). Homan introduced this theory with the understanding that exchanges are not limited to materials but also include symbolic values (p. 890). In the social exchange theory multiple entities, either companies, social groups, or individuals develop a relationship in which they can fulfill their needs. Some relationships are unilateral (only one entity feel is affected) or bilateral (both entities are affected). The SET involves rationality which encompasses the idea that voluntary actions are determined by the return they are expected to bring (Emerson, 1972, p. 340). An organization is motivated by the expectations of something beneficial in return for providing a good or service. Define TCT The second theory, the Transactional Cost Theory was derived by economist, Ronald Coase. Williamson (1981) define this theory as, “An interdisciplinary approach to the study of organizations that joins economics, organization theory, and aspects of contract law” (p. 573). His theory involves avoiding extra time and expense by having transactions inside or in the market and focuses on efficiency. The decision is to be made on whether an agency decide to integrate or
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