The degree to which organizational members integrate an organization's identity into themselves influences their loyalty, performance, and effectiveness within that organization. With the eyes of a dynamic external environment increasingly interested in and vocal about the internal operations and outputs of organizations, managers have to recognize the dynamic link between the organizational identity held by its members and the effectiveness of the organization and to develop strategies that allow the organization to adapt its internal image to the environment better.

This section investigates the connection between organizational identity and organizational effectiveness by defining organizational identity, exploring concepts of group dynamics to establish measurements for organizational effectiveness, assessing Social Identity Theory and frameworks for shaping organizational identity, and considering how organizational identity can hinder an organization's effectiveness.

For as long as there have been humans, humans have organized to survive, accomplish goals, build societies, and win battles. Even though organizations played an increasingly definitive role in human activity as history advanced, organizational theory did not emerge as a field of inquiry until the mid-twentieth century. While Jones (2004) defines organizational theory as “the study of how organizations function and how they affect and are affected by the environment in which they operate” (pp. 28-29), disparate perspectives compete for attention in the fractious field. While some of these competing views seem to prove partially valid in some situations, most have failed to meet the demands of empirical analysis and increasingly dynamic environments (David & Marquis, 2005).

Today, organizational theorists attempt to provide people with ways to understand, predict, and influence behavior in organizations (McShane & Von Glinow, 2005) by adapting flexible frameworks that can explain dynamic organizations in dynamic environments. This paper explores the historical foundations of organizational theory, highlighting the various perspectives and central debates that have guided the field, summarizing integrative approaches to these perspectives, and reviewing emerging trends that may influence the field.