Abstract
Why has A Behavioral Theory of the Firm (Cyert & March, 1963) been so influential? Three reasons stand out for me.
Compelling non-obvious insights
First, many of its core “little ideas” not only were novel but also ring true to close observers of organizations. It was (still is) a major shift to propose that firms’ aspirations are not driven only by core goals or outside events but get adjusted based on past performance. This implies that firms can learn new goals. It contrasts with typical assumptions that firms have stable goals or values. It was also somewhat radical to suggest that standard operating procedures (and routines) drive a large proportion of action. This contrasts with the (still) pervasive assumption that most activity arises through mindful future-oriented choices. Finally, the notion that firms operate through quasi-resolution of conflict and sequential attention to objectives made sense. But it contrasts with the vision of a unitary actor operating with one set of values. All these “little ideas” offered mini theories that differ from the dominant vision of firm behavior as a unitary actor that maximizes a firm-level utility function.
These “little ideas” were linked together but not too tightly so. Many of the “little ideas” carried the potential to inspire—and did inspire—distinct threads of work. Organizational learning as a form of adaptation, models of variation-selection-retention of standard operating procedures or routines, and political models of organizational action all developed as distinct lines of work. Much but not all of the further development was done by March himself, where we can see deepening of threads of BTF in some later work. This includes garbage can theory (Cohen, March, & Olsen, 1972), technology of foolishness (March & Olsen, 1976), contrasts of exploration/exploitation (March, 1991), and the logic of appropriateness (March, 2006). At the same time, March personally did not attempt to directly control how things unfolded. The BTF offered a big tent. As Jerker Denrell pointed out, though, March did and does influence its impact through his own work and willingness to talk and socialize with others, encouraging a spirit of inquiry. But he constrains other work more by pushing for quality rather than for any one model.
Fertile incompleteness
Second, I suspect the original presentation of these “little ideas” offered an especially fertile type of incompleteness. Nowadays the concept of “design thinking” is becoming more popular. Designs – and theories – vary not only in their substance but also in terms of how complete they are. The incompleteness of the BTF theory left open multiple but feasible doorways to deeper development. It is like a set of sketches that are each partially developed. A picture with one part totally filled in and all other parts blank leaves less for actors to build on. In the same way, BTF does not stand as a complete theory that binds all future work. For example, BTF proposed that an organization can learn (as distinct from only individuals learning). But its description of organizational adaptation/learning focused heavily on a firm’s learning only from its own experience. Organizational learning research later added a whole body of work on learning from others’ experience and also articulated a variety of learning processes (e.g., inferential/behavioral, trial-and-error, superstitious, myopia, etc.).
Methdological variety
Third, and less obviously, BTF modelled methodological diversity within the one small book, as pointed out by Christine. It included mini case studies, simulations, experiments, creative verbal theorizing, and illustrative reasoning. This implicitly invited research that stressed field observation, empirical testing of ideas, and simulation analysis. Many of its “little ideas”—for example, seeing a firm as a political system—were not novel if you look at the broader world of organizational studies. Sociological research frequently detailed internal political struggles in organizations. But BTF offered a pallette of middle-path methodological tactics along with its distinct combination of processes. If seemed to respect quantitative and precise models, but also use several different styles of inquiry. Of course, the BTF had many parts that did not match what would now be seen as rigorous theory testing research designs. It did not always include formal construct definitions, offer falsifiable hypotheses, use large data sets, or offer nuanced presentations of qualitative research. It did honor close observation, efforts to formalize understanding in numerical data, and formal models while respecting careful observation. But the key is that later scholars did not have to abandon their previous core methodological commitments to explore its frontiers.
Is BTF at a Turning Point? Should It Be?
One latent unresolved issue is whether BTF will survive as an identifiable theory in the long run.
Already succeeded, already failed and still at risk
BTF has inspired and contributed to many distinct lines of work. In that sense, BTF has already succeeded, and its future is not at issue. “Little ideas” related to organizations as intended adaptive systems, organizational learning, standard operating procedures (routines), the firm as a political coalition, slack and problem driven search, aspiration adjustment and sequential attention will continue to drive impactful research.
Judged in terms of the goal to influence economic theory at the roots, on the other hand, the BTF did not succeed. Even when economists became interested in processes within the firm, they did not generally call on this work to inform their theorizing. The fact that the authors of the BTF did not reach this specific goal does not mean that scholars now have to keep pursuing the goal of reforming economic theory. The BTF authors may have underestimated the potential of their ideas to support a fundamental framework. Their framework has value on its own and deserves its own ongoing development rather than the job of reforming economics.
At the same time, though, there is a danger that BTF could fade out of explicit influence because of its diversity of “little ideas.” Perhaps the very multiplicity of ideas and respect for methodological variety that made it fertile also dooms it to a kind of diffusion without coherence. It is also not inevitable that BTF framework will necessarily persist as a community of scholars who regularly exchange ideas and make careful links to the original work. It may take active efforts to make sure BTF stays alive as an identifiable theoretical framework.
Its fate matters
Does it matter whether and how scholars reaffirm BTF and try to expand its impact? I think it does. These these “little ideas” offer powerful and compelling insight into how organizations work, worthy of the blooming array of organization theory that draws on the original insights. The BTF tradition also offers important ideas to incorporate into professional schools and normative theory, although Jim March has often cautioned against the dangers of doing this. Important strategy research does embrace coalitions and the idea of organizational learning. But large swathes of the field of strategy and management still take neoclassical economics as the master theoretical model for normative theory and teaching. BTF processes end up as interesting complications rather than foundational assumptions. Students do not learn how to deal with the processes described in BTF but inhale instead the expectation that these processes repesent some kind of aberration to be suppressed. This fails to help students learn how to deal with and deploy some of the most vital organizational processes that make things happen.
Frontiers for Further Work
One way to take any theory to a new level of impact or meaning involves offering more nuanced treatment of issues it already develops. This often includes finding moderators and scope conditions. Another way is to fill in gaps in the fundamental elements of the theory, in ways that extend its reach and its validity. I find two issues of the second type especially promising.
Creation of new-to-the-world knowledge
First, I think that we will get materially better theory if we make more headway regarding collective (organizational) creation of new to the world things and new knowledge. This contrasts to the discovery of things already there. The BTF emphasizes search, whether problemistic or opportunistic. This search focus made an important improvement of models that assumed the firm had perfect information. But the word “search” typically connotes looking for something already there. The assumption that novelty arises from the recombination of existing elements assumption pervades many literatures. It matches important processes in the world, makes formal simulation much more tractable, and helps us avoid imputing god-like powers of intuition and mysterious flashes of insight to organizations.
But I think the convenience of the “all is recombination” approach to novelty seriously limits the BTF’s ability to meet its full potential. What are the processes that enable the deliberate organizational creation—versus discovery—of new to the world entities, elements, and new combinations of elements? The humanities and the arts focus on individual-level creation. Psychologists and neuroscientists will make headway on individual-level imagination. But individual-level processes may or may not translate well to organizational processes. And social science research on the origins of things is much harder than research on things that already exist. The parallel BTF question is, “What are the relevant organizational processes for the creation of new things?” The problem is not that people do not see the potential of creation, as I see it, but that the task is hard.
The role of emotion
The other topic that I believe could eventually take BTF to a new level of impact and validity concerns emotion and affect. The BTF includes semi-resolution of conflict, but the book’s processes and language offer a very cool and in some ways a computational vision of the world. Conflict consists of incompatible utility functions or values or aspirations. There is little passion, delight, anger, or shame in the theory for the most part. Contemporary theories in psychology and other fields do tackle emotion. However, moving to the organizational level with emotion remains a tough task. Can it be done? Learning used to be seen as only at the individual level, but the BTF helped solidify a vision where organizations themselves can learn in a way that is distinct from the addition of all the individuals within them. Is there a parallel regarding firm-level behavioral theories that incorporate emotion? I conclude that there is, and that it will be worth developing, although it is a very tough theoretical frontier. The addition of uncertainty to decision-making models took that field to new frontiers in the last century. Affect and emotion, I think, stand ready to make a deepen theories of organizatonal action in the next century.
In any event, it’s a privilege to be able to read and participate in the conversations stimulated by the BTOF, and will be worth watching its offspring in the coming decades.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.