Abstract

The theory of the firm initially developed by Ronald Coase has made explicit the political nature of firms by putting hierarchy at the heart of the economic process. Theories of workplace democracy articulate this intuition in the normative terms of the conditions under which this political power can be legitimate. This paper presents an organizational theory of workplace democracy, and contends that the democratization of firms requires that we take their organizational dimension explicitly into account. It thus construes democracy as an organizational principle and juxtaposes it to market, hierarchy, and norm-compliance as rival principles for the organization of economic activities. Attempts to construe democracy as an organizational principle with unique features in the tradition of transaction-cost economics are discussed before proposing an innovative solution based on an updated version of grid/group cultural theory of politics, adjusted to accommodate the basic requirements of democratic theory.