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The Behavioral Foundations of Strategic Management. Theories of Strategic Management Series

  • ID: 2213273
  • Book
  • November 2004
  • 160 Pages
  • John Wiley and Sons Ltd
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This book argues that assumptions of rationality and market equilibrium are inconsistent with rigorous strategic management research and that strategic management should adopt behavioral assumptions.

The author suggests that most scholars in strategic management implicitly adopt a behavioral view by assuming firms can make better or worse decisions, and then trying to understand the characteristics of these decisions. He outlines the basics of a behavioral approach to strategic management; he examines assumptions of rationality and equilibrium and the problems they create; and he considers how a behavioral approach relates to several major strains of strategic management scholarship. Relevant methodological issues are also explored.

The book as a whole argues persuasively that a behavioral perspective offers the best foundation for strategic management scholarship.

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1. Introduction.

Objectives of Strategic Management Research:.

What is an Explanation?.

Rigor in Strategy Research.

Rationality and Bounded Rationality.

Summary of the Argument.

Outline of the book.

2. Basics of A Behavioral Approach.

Basic Views of Decisions.

Bounded Rationality.


Aspirations and Search.

Aspiration Levels.


Alternative Variations.


The Ecological or Selection Argument.

Two Criticisms of the Bounded Rationality View.


3. A Behavioral Critique of Rationality and Equilibrium.

The Behavioral Critique of Rationality.

Rationality Assumptions are Untestable.

Only Optimizers Survive Selection.

Correctness of Assumptions Doesn t Matter because Optimization Predicts Well.

Does Optimization Predict Well?.

Prediction is the Appropriate Test of a Theory.

The Assumptions are Close Enough.

Very Weak Form Rationality?.

Optimization is Best!.

Logical Problems of Rationality and Equilibrium.

Bounded rationality in economics.

Game theory.

A Lack of Rigor.

Uses of Formal Models.


4. A Behaviorist s Perspective on Current Strategy Approaches.

Behavioral Traditions in Strategy.

No Rules for Riches?.

Resource Based View.

The RBV versus Porter s Industry Analysis.

Transactions Costs.

Agency Theory.


5. Behavioral Methodology.

Importance of Process.

Process and Testing.

Time Series and Endogeneity.

6. Where do we go from here?.

Management Strategy and External Strategy.




Behavioral Theory of the Firm.

Concluding Remarks.

7. References

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Philip Bromiley
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