Theories of Group Formation

Cite this article as:"Theories of Group Formation," in The Business Professor, updated April 13, 2020, last accessed October 29, 2020,

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Theories for Group Formation

Various theories exist concerning the reason that informal groups arise:

Propinquity Theory – This theory says that individuals form informal social groups based upon their physical proximity or closeness to other group members.

Homan’s Interaction Theory – This theory says that informal groups arise as a result of individual interaction, common activities, and personal sentiments that attach as a result of pursuant to a common group goal.

Balance Theory – This theory says that individuals associated based upon similarities or commonalities in how they address similar objectives or goals. If these common characteristics disappear, the group is generally dissolved.

Exchange Theory: This theory says that individuals associated based upon perceived cost-benefit (reward). That is individuals receive some benefits from association (such as personal satisfaction or gratification). The drive to be in this group is measured against the cost associated with affiliation (such as effort, anxiety, embarrassment, discomfort, etc.).

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