Organizational Theory

Abstract

Abstract This chapter traces the lineage of organizational theory to methodological individualism as a mode of explanation in social sciences. In this framework, an organization is viewed as a multiagent system, where an observed phenomenon at the aggregate organizational level is explained as the result of the behaviour of and interactions among the constituent individuals within the organization. In this context, a formal theory as an explanation through deductive logic can be expressed in two distinct ways: (1) mathematical model and analysis and (2) computational model and simulation. This chapter offers a comparative review of these two approaches to theory development in organizational science. It first provides a brief review of the mathematical modelling literature, often referred to as organizational economics. This is followed by a review of the progress made in agent-based models of organizations. This sequence of reviews allows us to highlight the complementary roles that the agent-based modelling and formal mathematical modelling approaches play with one another. The lacunae in the organizational theory literature that could be filled with the agent-based modelling approach are identified, thus charting a path forward.