In Freudian psychology, externalization (or externalisation) is an unconscious defense mechanism by which an individual "projects" their own internal characteristics onto the outside world, particularly onto other people. For example, a patient who is overly argumentative might instead perceive others as argumentative and themselves as blameless.
Like other defense mechanisms, externalization is a protection against anxiety and is, therefore, part of a healthy, normally functioning mind. However, if taken to excess, it can lead to the development of a neurosis.
Externalization can also be used in the context of a corporation. A corporation that externalizes its costs onto society and the environment is not taking full responsibility and ownership of these costs. An example might be the discharge of untreated toxic waste into a river where people wash and fish.
The corporation is an externalizing machine (moving its operating costs and risks to external organizations and people), in the same way that a shark is a killing machine. — Robert Monks (2003) Republican candidate for Senate from Maine and corporate governance adviser in the film The Corporation.
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