Rationalization: This occurs when the violator develops a justification for their fraudulent activities. Adam Smith explains why supply and demand are matched efficiently together within a market. Coase explains why companies still occur. When the costs of using the price mechanism exceed the coordination costs for performing activities yourself, activities will take place within the company. Williamson identifies three critical dimensions that influence the emergence of firms: uncertainty, frequency and specifity. In the view of Coase an entity can be seen as a system, as defined by Bertalanffy in his general system theory, because it is a set of elements standing in interrelation among themselves and with the environment. The transaction cost theory of Williamson fits in the hierarchy of systems as developed by Boulding, in response to the work of Bertalanffy. As uncertainty, frequency and specifity will increase the complexity of the system increases. The work of Smith, Coase and Williamson shows that companies exist to achieve an objective. Implicitly it can be seen from their theories that this objective is profit maximization because it serves self-interest the most. A company can thus be characterized as a system that pursues an objective. Alchian and Demsetz see an organization as a form of team production. This leads to the danger of shirking so that the overall production of the team will be reduced. Employees must be monitored in order to prevent this. Jensen and Meckling identify a conflicting between the owners and management of a company. To do act the agent in the interest of the principal agency costs will be made. Cressey stated that trusted persons become violators when three dimensions occur: pressure, opportunity and rationalization. The work of Alchian and Demsetz and Jensen and Meckling show that conflicts of interest between the residual claimant (principal) and the employees of an organization (agent) could cause that the objective is not fully achieved by the company.
Rationalization: This occurs when the violator develops a justification for their fraudulent activities. Adam Smith explains why supply and demand are matched efficiently together within a market. Coase explains why companies still occur. When the costs of using the price mechanism exceed the coordination costs for performing activities yourself, activities will take place within the company. Williamson identifies three critical dimensions that influence the emergence of firms: uncertainty, frequency and specifity. In the view of Coase an entity can be seen as a system, as defined by Bertalanffy in his general system theory, because it is a set of elements standing in interrelation among themselves and with the environment. The transaction cost theory of Williamson fits in the hierarchy of systems as developed by Boulding, in response to the work of Bertalanffy. As uncertainty, frequency and specifity will increase the complexity of the system increases. The work of Smith, Coase and Williamson shows that companies exist to achieve an objective. Implicitly it can be seen from their theories that this objective is profit maximization because it serves self-interest the most. A company can thus be characterized as a system that pursues an objective. Alchian and Demsetz see an organization as a form of team production. This leads to the danger of shirking so that the overall production of the team will be reduced. Employees must be monitored in order to prevent this. Jensen and Meckling identify a conflicting between the owners and management of a company. To do act the agent in the interest of the principal agency costs will be made. Cressey stated that trusted persons become violators when three dimensions occur: pressure, opportunity and rationalization. The work of Alchian and Demsetz and Jensen and Meckling show that conflicts of interest between the residual claimant (principal) and the employees of an organization (agent) could cause that the objective is not fully achieved by the company.