Simon Says, 'Expand the Definition of Bounded Rationality in Management Research'

28 Pages Posted: 16 Feb 2010

See all articles by Libby Weber

Libby Weber

University of Southern California - Management and Organization Department

Kyle Mayer

University of Southern California - Management and Organization Department

Date Written: February 15, 2010

Abstract

Most mainstream strategy research does not define the concept of bounded rationality as Herbert Simon originally intended. Instead, the major theories in strategy research rely on the simplified operationalization of bounded rationality as the inability to know every possible contingency or outcome. However, Simon’s conceptualization of bounded rationality was much more complex, incorporating all potential cognitive deficits that limit rational behavior, including framing effects, heuristics, influence of prior expectations, and emotions. In this paper, we suggest that the field of strategy could greatly benefit by expanding its definition of bounded rationality to incorporate all of the elements originally specified by Simon. With a more complex definition of bounded rationality, strategy researchers can ask new questions in areas that have already been well explored, thus enhancing our understanding of these topics even further. Additionally, firms that understand how certain elements of bounded rationality predictably impact decisions can build a capability based in decision-making that can positively impact firm performance, as well as intra-firm and inter-firm relationships.

Keywords: bounded rationality, capabilities

Suggested Citation

Weber, Libby and Mayer, Kyle, Simon Says, 'Expand the Definition of Bounded Rationality in Management Research' (February 15, 2010). Atlanta Competitive Advantage Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1553407 or http://dx.doi.org/10.2139/ssrn.1553407

Libby Weber (Contact Author)

University of Southern California - Management and Organization Department ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Kyle Mayer

University of Southern California - Management and Organization Department ( email )

Los Angeles, CA 90089
United States

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