Social identity is the portion of an individual's self-concept derived from perceived membership in a relevant social group. As originally formulated by social psychologists Henri Tajfel and John Turner in the 1970s and the 1980s, social identity theory introduced the concept of a social identity as a way in which to explain intergroup behaviour. "Social identity theory explores the phenomenon of the 'ingroup' and 'outgroup', and is based on the view that identities are constituted through a process of difference defined in a relative or flexible way depends on the activities in which one engages."

This theory is described as a theory that predicts certain intergroup behaviours on the basis of perceived group status differences, the perceived legitimacy and stability of those status differences, and the perceived ability to move from one group to another. This contrasts with occasions where the term "social identity theory" is used to refer to general theorizing about human social selves. Moreover, and although some researchers have treated it as such, social identity theory was never intended to be a general theory of social categorization. It was awareness of the limited scope of social identity theory that led John Turner and colleagues to develop a cousin theory in the form of self-categorization theory, which built on the insights of social identity theory to produce a more general account of self and group processes.

The term social identity approach, or social identity perspective, is suggested for describing the joint contributions of both social identity theory and self-categorization theory. Social identity theory suggests that an organization can change individual behaviours if it can modify their self-identity or part of their self-concept that derives from the knowledge of, and emotional attachment to the group.

The term social identity theory achieved academic purchase only in the late 1970s, but the basic underlying concepts associated with it had emerged by the early twentieth century. William G. Sumner, writing in 1906, captures the primary dynamics in this excerpt from his influential work Folkways: A Study of the Sociological Importance of Usages, Manners, Customs, Mores, and Morals:

By the late 1920s the collectivist perspective had all but disappeared from mainstream social psychology. Over fifty years later, around the time of the first formal use of the term 'social identity theory', Tajfel wrote this on the state of social psychology:

Thus, social identity theory in part reflects a desire to reestablish a more collectivist approach to social psychology of the self and social groups.

Social identity theory states that social behaviour will want a person to change their behaviour while in a group. It varies along a continuum between interpersonal behaviour and intergroup behaviour. Completely interpersonal behaviour would be behaviour determined solely by the individual characteristics and interpersonal relationships that exists between only two people. Completely intergroup behaviour would be behaviour determined solely by the social category memberships that apply to more than two people. The authors of social identity theory state that purely interpersonal or purely intergroup behaviour is unlikely to be found in realistic social situations. Rather, behaviour is expected to be driven by a compromise between the two extremes. The cognitive nature of personal vs. social identities, and the relationship between them, is more fully developed in self-categorization theory. Social identity theory instead focuses on the social structural factors that will predict which end of the spectrum will most influence an individual's behaviour, along with the forms that the behaviour may take.

A key assumption in social identity theory is that individuals are intrinsically motivated to achieve positive distinctiveness. That is, individuals "strive for a positive self-concept". As individuals to varying degrees may be defined and informed by their respective social identities (as per the interpersonal-intergroup continuum) it is further derived in social identity theory that "individuals strive to achieve or to maintain positive social identity". The precise nature of this striving for positive self-concept is a matter of debate (see the self-esteem hypothesis). Both the interpersonal-intergroup continuum and the assumption of positive distinctiveness motivation arose as outcomes of the findings of minimal group studies. In particular, it was found that under certain conditions individuals would endorse resource distributions that would maximize the positive distinctiveness of an in-group in contrast to an out-group at the expense of personal self-interest. Social identity matters because it shapes people's self-perceptions and interpersonal relationships. Favorable self-perception increases the likelihood that an individual would relate well to other members of the group and experience favorable feelings about themselves. People's perceptions of themselves are shaped by the group they identify with more strongly. Getting status within the group can make people feel more confident, content, and respected since belonging to that group becomes significant for how they view themselves and their talents.^{[citation needed]}