Saturday, July 9, 2022

Is there a Strategic Organization in The Behavioral Theory of the Firm?

Questions are great. Sometimes I get asked questions that stimulate ideas that I would not have thought of otherwise, and that lead to research. When the editors of the 20th anniversary special issue of Strategic Organization asked me to write about the relation between the Behavioral Theory of the Firm and Strategy, it made me wonder whether there was something special about the match between this theory and this field of research.

Why this question? The behavioral theory of the firm fuels an active and growing research agenda found mainly in organization theory, but also with much important work in strategy. So, it is possible that we can simply stand by and let things develop on their own, and the synergies between research in these two fields well take care of the rest. Yet somehow, that did not look like the right answer.

The reason is that the basic interests of the fields of strategy and organization theory are different. Obviously not, because that is why they are different fields. To the Behavioral Theory of the Firm, this may not seem to matter because theory is about the mechanisms that drive outcomes in the world, not about the outcomes. It matters for research, though, because different outcomes can be studied depending on the interests of a field. This is a good reason to think of how the Behavioral Theory of the Firm and Strategy relate to each other.

The result of our thinking was a series of questions on how strategy is shaped by the mechanisms in the behavioral theory of the firm. This is the right approach because the Behavioral Theory of the Firm is made for explaining what a firm – or any kind of organization – will do. So, it is the kind of theory that can be used for explaining the origins and changes of firm strategy.

There are already partial answers to all of these questions, but still a lot of room for progress. The very short answer is that we developed a framework organized around how strategy is shaped by the 1) organizational structure, 2) organizational decision-makers, 3) organizational history, and 4) organizational environment. The Behavioral Theory of the Firm has useful ideas in each of these factors. The (slightly) longer answer? Please look for it in the short essay coauthored with Cyndi Man Zhang.

Greve, H.R., C. Zhang Man. 2022. Is there a Strategic Organization in The Behavioral Theory of the Firm? Looking Back and Looking Forward. Strategic Organization, forthcoming.