Mahoney-Ch01-Mahoney-Ch01-Behavioral-Theory-of-Behavioral-Theory-of-the-Firmthe-FirmBehavioral Theory of the Firm:wBarnard (1938): The Functions of the ExecutivewSimon (1947): Administrative BehaviorwMarch and Simon (1958): OrganizationswCyert and March (1963): A Behavioral Theory of the FirmwSimon (1982): Models of Bounded Rationality Barnard (1938) The Functions of the ExecutivewBarnards purpose is to provide a comprehensive theory of cooperating behavior in formal organizations.wEssential features are:The willingness to cooperateThe capability to communicateThe existence and acceptance of purpose Barnard (1938) The Functions of the ExecutivewBarnard notes that successful cooperation is the abnormal, not the normal condition. What we observe from day-to-day are the successful survivors among innumerable failures.wFailure to cooperate and failure of organization are characteristic facts of human history. Barnard (1938) The Functions of the ExecutivewBarnard emphasizes the important role of informal organization within formal organizations.wInformal organization is to be regarded as a means of maintaining the personality of the individual against certain effects of formal organizations, which tend to disintegrate the personality.Organizational efficiency vs. humanity Barnard (1938) The Functions of the ExecutivewBarnard argues that there exists a “zone of indifference” in each individual within which orders are acceptable without conscious questioning of their authority.wBarnard submits that he regards nothing as more “real” than “authority.” Barnard (1938) The Functions of the ExecutivewBarnard notes that the fine art of executive decision-making consists in not deciding questions that are not pertinent, in not deciding prematurely, in not making a decision that cannot be made effective, and in not making decisions that others should make. Such good judgment by the executive then preserves morale, develops competence, and preserves authority. Barnard (1938) The Functions of the ExecutivewBarnard observes that the executive process transcends the capacity of mere intellectual methods. The terms pertinent to the executive process are:“feeling”“judgment”“sense”“proportion”“balance”“appropriateness” Barnard (1938) The Functions of the ExecutivewBarnard maintains that coordination is a creative act.wBarnard also argues that organizations endure in proportion to the breadth of the morality by which they are governed.“Old men and old women plant trees.” Barnard (1938) The Functions of the ExecutivewBarnard concludes that: “expansion of cooperation and the development of the individual are mutually dependent realities, and that a due proportion or balance between them is a necessary condition of human welfare.” Barnard (1938) The Functions of the ExecutivewBarnard presents a systems view of the organization that contains:A psychological theory of motivation and behavior;A sociological theory of cooperation and complex interdependencies; andAn ideology based on meritocracy.Simon (1947) Administrative BehaviorwOrganizations influence individuals habits;wOrganizations provide means for exercising authority and influence over others; andwOrganizations influence the flow of communications.Simon (1947) Administrative BehaviorwSimon argues that it is precisely in the realm where behavior is intendedly rational, but only limitedly so, that there is room for a genuine theory of organization.wOrganizational behavior is the theory of intended and bounded rationality.Simon (1947) Administrative BehaviorwOrganizations enable stable and comprehensible expectations among members;wOrganizational members “satisfice” and use simple rules of thumb to inform decisions; andwRules of thumb or organizational routines are the counterpart of individual habits.Routine or habit有助於預測其行為Simon (1947) Administrative BehaviorwSimon suggests the following mechanisms of organizational influence:Divides work among its members;Establishes standard operating procedures;Transmits decisions by authority;Provides formal and informal channels of communication; andTrains and inculcates its members.Simon (1947) Administrative Behaviorw“Zone of Acceptance” Sales contract versus employment contractAn incomplete contracting approachA real options perspective wAuthority Relationship:Enforces Responsibility of Individual;Secures Expertise in Decision Making; ndPermits Coordination of Activities. 勞資簽訂僱傭契約，讓資方有彈性可令員工在接受領域之內，從事不同的工作Simon (1947) Administrative BehaviorwThe Brain as Scarce Resource:The information-processing systems of modern civilization swim in an exceedingly rich soup of information. In a world of this kind, the scarce resource is not information; it is processing capacity to attend to information. Simon (1947) Administrative BehaviorwThe Brain as Scarce Resource:Attention is the chief bottleneck in organizational activity, and the bottleneck becomes narrower and narrower as we move to the tops of the organizations.March and Simon (1958) OrganizationswManagers must continually search for complementarities to inform their task allocations;wAn organizational model that neglects economic incentives will be, for most humans, a poor predictive model; andwOrganization behavior can often be predicted by knowing past behavior and routines. .March and Simon (1958) OrganizationsFeatures of their model of organization structure:Optimizing is replaced by satisficing;Alternatives of action and consequences of action are discovered sequentially through search processes; andEach specific action deals with a restricted range of situations and a restricted range of consequences.March and Simon (1958) OrganizationsSearch is partly random, but in effective problem solving search is not blind.The design of the search process is itself often an object of rational decision.Optimizing modelsSatisficing modelsCyert and March (1963) A Behavioral Theory of the FirmwFour research commitments:Focus on a small number of key economic decisions made by the firm;Develop process-oriented models of the firm;Link models of the firm as closely as possible to empirical observations; andDevelop theory with generality beyond the specific firms studies.Case Studies General PrincipalsCyert and March (1963) A Behavioral Theory of the FirmwOrganizations are viewed as consisting of a number of coalitions and the role of management is to achieve a Quasi- Resolution of Conflict and Uncertainty Avoidance.wProblemistic Search that is stimulated by a problem with (or lack of) an existing routine is assumed to be motivated, simple-minded, and biased (reflecting unresolved conflicts within the organization).Only I have a problem, I change my routine!Simon (1982) Models of Bounded RationalitywTo encompass goal conflict and uncertainty we need to know something about perceptual and cognitive processes in order to predict short-term behavior. wFiltering of information is not a passive process but an active process involving attention, which is influenced by hopes and wishes. Simon (1982) Models of Bounded RationalitywA rabbit-rich world is a lettuce-poor world, and vice versa. Similarly, in an information-rich world, an abundance of information means a dearth(缺乏缺乏) of something else: a scarcity of whatever information consumes. Information consumes the attention of its recipients.wInformation systems need to listen and think more than they speak. Stating the organization problem in this way leads to a very different system design (that deals with information overload).Simon (1982) Models of Bounded RationalitywSubstantive Rationality:Behavior appropriate to the achievement of given goals within the limits imposed by given constraints.In this economics view, given the goals, rational behavior is determined entirely by the characteristics of the environment in which such behavior takes place. Simon (1982) Models of Bounded RationalitywProcedural Rationality:The traveling-salesman problem in operations research is a theory of efficient computational procedures to find good solutions - a theory of procedural rationality.It is a search for better heuristics - which Simon regards as the heart of intelligence.Simon (1982) Models of Bounded RationalitywProcedural Rationality:Organizational economics is a description and explanation of human institutions, whose theory is no more likely to remain invariant over time than the theory of bridge design. Decision processes, like all other aspects of economic institutions, exist inside human heads. Decision processes are subject to change with every change in what humans know, and with every change in their means of calculation.A business firm equipped with the tools of operations research does not make the same decisions, for example, concerning inventory management, as it did before it possessed such tools.The theory of BR leaves the room for learning, because we dont know if we had knes everything!John Rowes? A authorSimon (1982) Models of Bounded RationalitywProcedural Rationality:The shift from theories of substantive rationality to theories of procedural rationality requires a basic shift in scientific style, from an emphasis on deductive reasoning within a tight system of axioms to an emphasis on detailed empirical exploration of complex algorithms of thought.比較接近 Operation managementSimon (1982) Models of Bounded RationalitywProcedural Rationality:Complexity is deep in the nature of things, and discovering tolerable approximation procedures and heuristics that permit huge spaces to be searched selectively is at the heart of intelligence, whether human or artificial.w長崎與股倒之原子彈爆炸，人們（isidwe our brains）擁有技術可以重建。只要人們擁有market的 concept，就可重建資本主義的 institution.例如在集中營ProfitabilityGrowth RateGrowth rate Or Profitability?Penrose : Limit of growth Sustainable growth modelIs easy situation to make decision!结束结束