The Behavioral Foundations of Strategic Management
Theories of Strategic Management Series

This book argues that rationality and market equilibrium assumptions are inconsistent with rigorous strategic management research so that strategic management should adopt behavioral assumptions.

When strategy scholars assume that firms can make better or worse decisions, they implicitly adopt a behavioral view. After examining the problems that rationality and equilibrium assumptions create, the author outlines the basics of a behavioral approach to strategic management. The book addresses how a behavioral approach relates to several major strains of strategic management scholarship and explores relevant methodological issues.

Overall, the book argues persuasively that a behavioral perspective offers the best foundation for strategic management scholarship.

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.

Routines.

Aspirations and Search.

Aspiration Levels.

Search.

Alternative Variations.

Slack.

The Ecological or Selection Argument.

Two Criticisms of the Bounded Rationality View.

Summary.

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.

Summary.

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.

Summary.

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.

Competition.

Prescription.

Statistics.

Behavioral Theory of the Firm.

Concluding Remarks.

7. References

Philip Bromiley holds the Curtis L. Carlson Chair in Strategic Management and chairs the Department of Strategic Management and Organization at the Carlson School of Management, University of Minnesota.