Behavioral Theory Of The Firm Research Articles

Behavioral theory of the firm: hopes for the past; lessons from the future

This paper is a discussion of “behavioral theory of the firm”. It focuses on understanding aspects of the pre-history, the context, the reception and the evolution of some of the main ideas found in “behavioral theory of the firm” and in the key works associated with it (in particular the books “Organizations” and “A Behavioral Theory of the Firm”). I discuss the reception of these works, using both reviews and bibliometric illustrations. Unlike many modern contributors to organizational literature, Cyert and March (and Simon) made a point of doing interdisciplinary work engaging directly with “the disciplines” (engaging the audiences and disciplines of economics, sociology, political science and psychology), not just focusing on making contributions between them. That legacy – communicating and contributing to the disciplines not just between them – is often overlooked in other celebrations of behavioral theory ideas that often discuss specific developments within the field of organization studies itself.

The Behavioral Theory of the Firm: The First 50 Years and the Next 50 Years

A Behavioral Theory of the Firm (Cyert & March, 1963) laid a conceptual foundation for the application of the “Carnegie School” approach to studying and understanding organization- level behavior and outcomes. The book has exerted enormous influence across fields such as organization theory, business strategy, economics, and organizational sociology in the now 50 years since its initial publication. As 2013 represents the 50th anniversary of the publication of Cyert and March (1963), this is an opportune time to reflect on BTF and its influence. This reflection should both (i) celebrate the foundational contributions of the BTF to organizational theory and strategic management and (ii) look forward toward how BTF may continue to guide future inquiry into the behavior of organizations (Gavetti et al., 2012). Therefore, we propose a panel symposium at the 2013 Academy of Management meeting to discuss the first 50 years of “A Behavioral Theory of the Firm” and project what the next 50 years may hold for work...

Hiring and Firing During Recession: Are Issues Looking for Answers or Answers Looking for Issues?

This study examines how SMEs adapt their personnel count as a result of sales changes in recession. While the Behavioral Theory of the Firm (BTF) suggests that adaptation takes place based on short-run feedback, the process may be influenced by social embeddedness. Drawing on the Attention-Based View, I hypothesize that board interlocks may form an interorganizational attention structure, which influences problemistic search as its scope expands. An examination of 244 Finnish software firms with board interlocks with 295 firms outside of the software industry during the onset of the Financial Crisis in 2008 supports this hypothesis. In addition, I find the strongest support for adaptation based on proximate search, and evidence of mimicry without motivated search.

How Organizational Goals are Influenced by Economic Institutions

This paper examines the influence of economic institutions on organizational goals. Building on the model of organizational goals from the Behavioral Theory of the Firm (BTOF) it advances three new...

Knowing Your Place: Performance feedback and organizational change in the best and worst of times

Performance comparison, or performance relative to aspirations, is central to the Behavioral Theory of the Firm. The firm makes two such comparisons that inform its decision to engage in organizational change: performance relative to its own prior performance, and performance relative to that of other firms. The latter performance comparison relies upon the “social aspiration point” construct, which has received relatively little theoretical development. This paper seeks to fill that gap by extending the theoretical conceptualization and empirical specification of the socially derived performance targets against which organizations compare their performance. We argue that firms make social performance comparisons with a group of firms that is smaller than the whole industry and within that comparison group organizations monitor both an upwardly focused performance target and a downwardly anchored failure threshold. In addition to these performance thresholds which all organizations monitor, we propose tha...

The Behavioral Theory of the Firm: Assessment and Prospects

The Behavioral Theory of the Firm has had an enormous influence on organizational theory, strategic management, and neighboring fields of socio-scientific inquiry. Its central concepts have become foundational to any theoretical and empirical work focussed on organizational phenomena. Unlike past reviews of this work, we start by focusing less on reviewing these concepts than we do on discussing the new agenda they created for students of organizations and related subjects. We then explain the theoretical commitments implied by its agenda before we trace and evaluate progress on a set of research issues inspired by its agenda: cognition, performance feedback, politics, attention, learning, and adaptation. Finally, we offer a broader assessment of the theory by looking both at original ideas that have seen less developments and at modern developments in the field that deserve to be incorporated into the Behavioral Theory of the Firm. In the open-system spirit of the Behavioral Theory of the Firm, we conclude that its agenda will continue to benefit from work both by its closest adherents and by work in related research traditions.

The Behavioral Theory of the Firm: Assessment and Prospects

The Behavioral Theory of the Firm: Assessment and Prospects

Adaptive aspirations: performance consequences of risk preferences at extremes and alternative reference groups

AbstractGoals or aspirations and their relationships to risk taking and performance are important issues in both psychology and strategic management. The concept of adaptive aspirations, as discussed in Cyert and March's Behavioral Theory of the Firm, has long been a topic of interest in both fields. Moreover, many studies in strategy have focused on risk and/or extreme performance. In the current paper, we build on earlier models of adaptive aspirations. We introduce into the models a new risk preference function that incorporates changes in risk preference at extremes of performance. Based on empirical studies and the managerial literature, we also introduce alternative strategies for setting reference groups. Simulations of the resulting models suggest important differences in outcomes from earlier studies and this invites further empirical investigation. These simulations also have significant implications for managerial goal setting. Copyright © 2011 John Wiley & Sons, Ltd.

What Level of Analysis is Most Salient for a Global Theory of Corporate Governance?

What Level of Analysis is Most Salient for a Global Theory of Corporate Governance?

HETEROGENEITY IN ADAPTIVE ASPIRATIONS AND REFERENCE GROUPS

The setting of goals or aspirations as first conceptualized in A Behavioral Theory of the Firm is an important issue in behavioral approaches to strategic management and organization theory. Empiri...

Forward and backward transitions in pharmacy-based immunization services

Background Community pharmacies can engage in immunization services by contracting with an external workforce (outsourced mechanism) or staff pharmacists (in-house mechanism) to deliver the services. Because an outsourced mechanism generally requires lower organizational commitment, pharmacies often start with an outsourced mechanism. Later, these pharmacies can have 1 of the following transitions: sit on a fence by continuing with an outsourced mechanism, move backward by abandoning any immunization services, or move forward by implementing an in-house mechanism. Objectives Using Rogers' Diffusion of Innovations model and Behavioral Theory of the Firm as guidance, this study identified the associations between perceived characteristics of immunization services and backward/forward transitions. Methods A cross-sectional mail survey was conducted to collect data from key informants of Washington State community pharmacies during May-July 2004 (response rate = 46.9%). A total of 106 pharmacies were included in the analysis. Based on pharmacy's immunization service transitions, these pharmacies were identified as Fence sitters, Backward movers, or Forward movers. Relationships between these transitions, pharmacy characteristics, and perceived characteristics of immunization services were analyzed using bivariate and multinomial logistic regression techniques. Results Backward and Forward movers had less positive assessments of outsourced services when compared with Fence sitters. Backward and Forward movers differed in their perceptions of in-house services; Backward movers generally perceived no differences between these 2 services, whereas Forward movers generally perceived in-house services to be superior to outsourced services. Furthermore, the odds of being a Forward mover increased as perceived technical and social benefits of outsourced services decreased, perceived compatibility of in-house services increased, and perceived complexity of in-house services decreased. Conclusions Perceived characteristics of outsourced and in-house innovations were associated with backward and forward transitions. Findings can be used to guide the development of strategies for facilitating organizational change and preventing the abandonment of immunization services.

A retrospective look at A Behavioral Theory of the Firm

The papers in this special issue focus on ideas associated with a book published 45 years ago, A Behavioral Theory of the Firm (Cyert, R.M., March, J.G., 1963. A Behavioral Theory of the Firm. Endlewood Cliffs. Prentice Hall, NJ). The book proposed the introduction of a few more realistic behavioral assumptions into the economic theory of the firm. The papers presented here examine some aspects of the history of the ideas found in the book, extend and elaborate the ideas in the context of current research, and indicate possible directions for future research in the behavioral tradition. We will not attempt to summarize the papers, but will try to locate them gently in their historical and intellectual context.

Applying organizational routines in analyzing the behavior of organizations

The concept of organizational routine can foster our understanding of the behavior of organizations and of organizational change [Nelson, R.R., Winter, S.G., 1982. An Evolutionary Theory of Economic Change. Belknap Press/Harvard University Press, Cambridge; March, J.G., Simon, H.A., 1958. Organizations. Blackwell, Oxford (1993); Cyert, R.M., March, J.G., 1963. A Behavioral Theory of the Firm. Blackwell, Oxford (1992)], but since empirical studies employing organizational routines as analytical perspective are still relatively rare, how to conduct such an analysis and what are its benefits is not yet fully evident. We wish to shed light on how employing routines contributes to understanding the behavior of organizations and to demonstrate the potential of such analysis. The empirical analysis of the product development process at an engineering centre shows that using organizational routines presents advantages over alternative analytical approaches. The paper also contributes to shed light on how to fruitfully employ an organizational routines perspective in analyzing the behavior of organizations, providing the foundation for further empirical work.

Outlines of a behavioral theory of the entrepreneurial firm

In A Behavioral Theory of the Firm (BTF), Cyert and March [Cyert, R.M., March, J.G., 1963. A Behavioral Theory of the Firm. Prentice-Hall, Englewood Cliffs, NJ] present a clutch of ideas for explaining the behavior of established firms within an environment of well-defined markets, stakeholder relationships, technologies, and so on. In this paper, we outline a behavioral theory of the entrepreneurial firm that emphasizes transforming environments rather than acting within extant ones. In particular, we explicate three ideas that parallel key concepts in BTF: (1) accumulating stakeholder commitments under goal ambiguity (in line with a political conception of goals), (2) achieving control (as opposed to managing expectations) through non-predictive strategies, and (3) predominately exaptive (rather than adaptive) orientation.

A Behavioral Theory of the Firm—40 Years and Counting: Introduction and Impact

In this introductory piece, we take stock of the impact of Cyert and March’s A Behavioral Theory of the Firm, describe current research trends in the behavioral tradition, and introduce the special issue’s papers. A Behavioral Theory of the Firm is one of the most influential management books of all time. In the book, Cyert and March developed theoretical building blocks that became the foundations for current research in organizational studies in management, economics, political science, and sociology. Cyert and March also made theoretical propositions that are investigated and extended in current work on organizational learning theory and evolutionary economics.

Perspective—On the Evolutionary and Behavioral Theories of Organizations: A Tentative Roadmap

Cyert and March’s A Behavioral Theory of the Firm has been acknowledged as one of the most fundamental pillars on which evolutionary theorizing in economics is built. Nelson and Winter’s 1982 book is pervaded by the philosophy and concepts previously developed by Cyert, March, and Simon. Behavioral notions, such as bounded rationality are also at the heart of economic theories of institutions such as transaction costs economics. In this paper, after briefly reviewing the basic concepts of evolutionary economics, we discuss its implications for the theory of organizations (and business firms in particular), and we suggest that evolutionary theory should coherently embrace an “embeddedness” view of organizations, whereby the latter are not simply efficient solutions to informational problems arising from contract incompleteness and uncertainty, but also shape the “visions of the world,” interaction networks, behavioral patterns, and the identity of the agents. After outlining the basic features of this perspective, we analyze its consequences and empirical relevance.

Perspective—Neo-Carnegie: The Carnegie School’s Past, Present, and Reconstructing for the Future

Cyert and March’s (1963) A Behavioral Theory of the Firm and the broader Carnegie School form critical theoretical underpinnings for modern organization studies. Despite its impact, however, we suggest that researchers who rely on the Carnegie School have progressively lost touch with its defining commitment to a decision-centered view of organizations. Decision making has given way to learning, routines, and an increased focus on change and adaptation; the organizational level of analysis, although frequently invoked, has been largely supplanted by either a more micro or a more macro focus. In this paper, we argue for restoring the School’s original mission and perspective. Our proposal for how this overarching goal can be achieved encompasses three central points. First, we believe the School needs to resurrect a few select ideas that, despite their fundamental importance, have been neglected over time. Second, we believe there is a need for greater paradigmatic closure amongst the School’s central theoretical pillars. Loose coupling among such pillars might keep key insights on organizational decision making from emerging. Finally, there is the need to incorporate major developments that have been generated post-Carnegie School, both within organization theory and in the behavioral and social sciences more broadly. In particular, we point to the shift to more open systems perspectives on organizations, the conceptions of organizations being embedded in larger social contexts, and recent developments in the study of individual cognition.

Perspective—Historical Roots of the A Behavioral Theory of the Firm Model at GSIA

Richard Cyert and James March’s (1963) A Behavioral Theory of the Firm (ABTOF) is one of the most influential works in organization science. An important element of that work was a computational model of a duopoly, which was arguably the first computational model that instantiated organizational constructs within a substantial theoretical framework. We suggest that the academic environment within which this theory and model grew was instrumental in its emergence. Furthermore, an examination of the model itself (by triangulating on the verbal descriptions, the flow charts, and the code) reveals innovative embodiments of organizational attention, organizational learning, organizational memory, routines, metaroutines, aspiration level adjustments and computational experiments. In this paper we examine the historical roots of the model—the concepts, culture, and characters at Carnegie Tech and the Graduate School of Industrial Administration (GSIA). Although causality is difficult to assess historically, we suggest the significance of a strong research-based, interdisciplinary culture at a time when innovative (and often computational) concepts and theories were emerging within the contexts of computer science, economics, and psychology.

Perspective—Administrative Behavior: Laying the Foundations for Cyert and March

A Behavioral Theory of the Firm by Cyert and March (1963) can be interpreted as a culmination of new intellectual directions in the study of organization that began with Herbert Simon’s Administrative Behavior (1947). This essay shows how Simon broke with major pre–World War II intellectual traditions and thereby laid the groundwork on which A Behavioral Theory depends. It also suggests the contemporary potential of returning to themes that were set aside by Simon, but were key for prewar pragmatists, such as emphasizing the roles of habit and emotion in organizational action.

Antecedents and Consequences of Organizational Change: ‘Institutionalizing’ the Behavioral Theory of the Firm

In this paper, we highlight the conditions under which organizations initiate changes in two distinct institutional contexts. While the focus within behavioral research has been on aspiration-driven organizational change, the effect of institutional dynamics on the probability of change has been given limited attention. Pooled cross-sectional data covering the period 1920-2001 in the baseball industry are regressed to examine a set of hypotheses that predict the drivers of organizational change in periods of institutional stability and instability, as well as the impact of these changes on performance. Our findings show that the role of aspiration-driven organizational change diminishes in environments characterized by institutional instability. Rather, mimetic and cognitive pressures pave the ground for responses to institutional dynamics. We also shed light on how the relative stability/instability of the institutional environment heterogeneously influences the implications of behavioral changes for organizational performance.