A summary of Basic Concepts in the Behavioral Theory of the Firm By: Richard M. Cyert and James G. March

Goals, Expectations and Choice Organizational goals: Goals change as people leave or join Goals are influenced by the goals of the subunit making the decision Past goals, past performance and past coals of comparable firms

Goals, Expectations and Choice …(continuo) Organizational expectations: Inferences from Information Linear Hopes Search Intensity

Goals, Expectations and Choice …(continuo) Organizational Choice: Variables that affect choice are those that influence: The definition of the problem + Decision rules + order of consideration of alternations

4 major relational concepts Quasi resolution of conflicts Goals as constraints Procedure to resolve conflict we should study the following Local Rationality Problems are divided into sub-problems and assigned for subunits Sales department for sales problems and strategy… Production… (Delighter and specialization) Conflict will be solved through inner consistency and consistency with the environment

4 major relational concepts …(continuo) Acceptable level of decision rules: The invisible hand would create consistency in local rationality and local optimization will lead to total maximization but organization relation work with less consistency. Sequential attention to goals: Organizations are likely to attend to one goal at a time

4 major relational concepts …(continuo) Uncertainty avoidance: Environmental forces come always with the unexpected (i.e. risk and uncertainty) Solution = Value for uncertainty Rules with uncertainty But in reality organizations avoid uncertainty by resolving short term problems rather than long term strategy.

4 major relational concepts …(continuo) They avoid planning and predictions through some control devices like contracts and standard plans and procedures. Feedback decision procedure: Decision are based on day-to-day feedback instead of plans Negotiated Environment Control environmental players through negotiations. Indirect negotiations are made through conventional practice (e.g. Pricing) therefore uncertain behaviors are predictable. Maximizing will be achieved through practices and by violation of conventional procedures occasionally. Internally similar practice is made e.g budget negotiation and contacts among sub-units will work as stabilizers.

4 major relational concepts …(continuo) Problematic search Search is motivated by a problem Search is simple-minded until complicated Search is biased Motivated search: By failure to achieve a goal solution is discovered by alterative to achieve the goal or revise the goal.

4 major relational concepts …(continuo) Simple minded search: A cause will be found near its effect and a solution will be found near an old one. (Neighborhood of symptom rule) Solution consists in either absorbing slack or renegotiating the basic coalition agreement to the disadvantage of the weaker member. Bias Search: Bias from experience and training. Bias from adjusting expectation to hope Bias from communication

4 major relational concepts …(continuo) Organizational learning Organizations do learn and adapt their goals, attention rules, and search rules. Adaptation of Goals: Goals are a function of: Past period goals Experience related to these past goals Experience of comparable organizations to goals dimension during this previous period

4 major relational concepts …(continuo) Adaptation in attention Rules: Organizations develop indices to measure goal achievement, but they change their indices over time. Organizations pay attention to some parts of comparative environment and ignore other parts, but this changes over time. Adaptation in search Rules: In search for solutions past positive and negative solutions will change the search remodel rules.