Behavioral Theory of the Firm


Also found in: Acronyms.

Behavioral Theory of the Firm

A theory of how a firm or company makes decisions. The behavioral theory states that a company's decision makers may not make the best decisions all the time because of lack of information, how a question is framed or their own prejudices and fears. Because more than one person is usually involved in a company's decision-making process, firms often implement policies to reduce the incentive for the personal perceptions of multiple persons to result in inefficient decisions. See also: Theory of the Firm.
References in periodicals archive ?
Furthermore, the value in starting this discussion at a theoretical level can be seen in both transaction cost economics (Coase 1937) and the behavioral theory of the firm (Cyert and March 1963).
When bad news is sugarcoated: Information distortion, organizational search and the behavioral theory of the firm.
Reciprocity and R&D search: Applying the behavioral theory of the firm to a communitarian context.
Once again, we believe the behavioral theory of the firm (Cyert & March, 1963) can provide guidance on this challenge.
In other words, such organizations do not focus on performance goals that are conventionally assumed by the behavioral theory of the firm (Cyert and March 1963).
From behavioral theory of the firm, organizations innovate as to conform to industry trend (Chen and Miller 2007).
To summarize, although the behavioral theory of the firm, as reflected in the seminal work of Cyert and March (1963), explicitly acknowledges that all firms develop and pursue non-economic as well as economic goals through a process of stakeholder negotiation, family firms alone should have non-economic goals reflecting the unique interests of the controlling family (Lee & Rogoff, 1996; Zellweger & Nason, 2008).
The behavioral theory of the firm (BTOF), pioneered by Cyert and March (1963), suggests that top managers routinely contrast performance outcomes with referent points comprised of aspirations previously held for such performance.
From the perspective of the behavioral theory of the firm, poor performing organizations are tempted to adopt new, unproven high technologies because of the chance to reap substantial rewards.
First, we found support for the behavioral theory of the firm prediction (Hypothesis BF1), not that of threat-rigidity (Hypothesis TR1), regarding the addition of high technology.
We also found support for the behavioral theory of the firm prediction (Hypothesis BF2), not that of threat-rigidity (Hypothesis TR2), regarding deletions of high technology.
Finally, our data provide modest support for the behavioral theory of the firm (Hypothesis BF4), not threat-rigidity (Hypothesis TR4), regarding the deletion of services.