A Behavioral Theory of the Firm

Richard Cyert & James March

(http://faculty.washington.edu/krumme/450/CyertMarch.html)

Reviews:

• A Behavioral Theory of the Firm , by: Richard M. Cyert, James G. March; Review author[s]: Sidney G. Winter, Jr., The American Economic Review, Vol. 54, No. 2, Part 1. (Mar., 1964), pp. 144-148.

Outline of Major Argument:

• EXHAUSTIVE VARIABLE CATEGORIES for analysis of decision-making
  1. Variables that affect ORGANIZATIONAL GOALS
     • variables that influence DIMENSIONS of goals
     • variables that influence ASPIRATION LEVELS on any dimension

  2. Variables that affect ORGANIZATIONAL EXPECTATIONS
     • variables that affect the process of DRAWING INFERENCES from given information
     • variables that affect the process by which INFORMATION is made available to the organization; e.g. variables that affect search activity within the firm
       1. affecting the intensity and success of search:
          • extent to which goals are fulfilled
          • amount of organizational slack
       2. affecting the direction of search:
          • nature of the problem stimulating search
          • location in the organization at which search is focused

  3. Variables that affect ORGANIZATIONAL CHOICE
     • variables that affect the definition of the problem
     • variables that influence the standard decision rules
     • variables that affect the order of consideration

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• SET OF RELATIONAL CONCEPTS (FOUR MAJOR CONCEPTS)
  1. Quasi-Resolution of Conflict
     Goals as independent constraints
     • Local Rationality

  2. Uncertainty Avoidance
     • avoid the requirement of correctly anticipating events by using SHORT-RUN-REACTION DECISION RULES
     • avoid the requirement of anticipating the environment by NEGOTIATING THE ENVIRONMENT

  3. Problemistic Search
     • Search is motivated
     • Search is simple-minded
     • Search is biased

  4. Organizational Learning
     • Adaptation to goals
     • Adaptation in attention rules
     • Adaptation in search rules