In This Article Expand or collapse the "in this article" section Behavioral Theory of the Firm

  • Introduction
  • Textbooks and Handbooks
  • Reviews
  • Journals
  • Classic Treatments
  • Goal Conflict and Ambiguity
  • Goal Updating
  • Attention
  • Routines
  • Learning from Own Experience
  • Adaptation

Management Behavioral Theory of the Firm
Henrich R. Greve
  • LAST REVIEWED: 26 October 2015
  • LAST MODIFIED: 26 October 2015
  • DOI: 10.1093/obo/9780199846740-0052


The “behavioral theory of the firm” refers to a research tradition that follows the basic assumptions and interests of Richard M. Cyert and James G. March’s pioneering work, A Behavioral Theory of the Firm (Cyert and March 1963, cited under Classic Treatments). This work examines how organizations function when managers have bounded (not full) rationality, there is disagreement on goals, and the environment is uncertain. This is seen as a more realistic model of organizations than fully rational models or models with full agreement on goals and full knowledge of future states of the environment. Research in this tradition has focused on organizational stability through rules and routines, reduction of conflict through sequential attention to goals operationalized as constraints, and organizational change through the search for solutions that satisfy the goal constraints. Over time it has become broader, and it now includes a significant body of work on how organizations learn from their experience and the experience of other organizations. This bibliography is organized by topic area, and it displays representative work within each topic. For ease of exposition, the space devoted to each topic is not proportional to the work covered; that is, some topics are significantly more developed than others, so that a full coverage of these topics would consume a disproportionate amount of space.

Textbooks and Handbooks

Because the behavioral theory of the firm is one of multiple organizational theories that are taught in organizational theory courses, it does not have its own textbook but is found as a subtopic in standard textbooks. For researchers, a series of books with collected articles by James G. March (March 1988, March 1999, March 2008) provide a good introduction to the evolution of the field. The chapters on learning in Baum 2002 are also useful.

  • Baum, Joel A. C. The Blackwell Companion to Organizations. Oxford: Blackwell, 2002.

    This edited volume is a comprehensive review of organization theory, and includes chapters on intraorganizational, organizational, and interorganizational learning.

  • March, James G. Decisions and Organizations. New York: Blackwell, 1988.

    This edited volume contains an introduction and nineteen of March’s articles on organizational decision making, organized by topic: “Allocation of Attention,” “Conflict in Organizations,” “Adaptive Rules,” and “Decision-Making under Ambiguity.”

  • March, James G. The Pursuit of Organizational Intelligence. Malden, MA: Blackwell, 1999.

    This edited volume has twenty of March’s articles and an introduction, focused on decision making in organizations, organizational learning, organizational risk taking, and the giving and taking of advice.

  • March, James G., ed. Explorations in Organizations. Stanford, CA: Stanford University Press, 2008.

    This edited volume has an introduction and an interview with James G. March, followed by nineteen of his articles plus section introductions by other scholars. The articles cover adaptation, the role of institutions, the evolution of the field of organization studies, and connections between organization studies and literature.

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