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We return to the problem that motivated the original behavioral theory of the firm, price adjustment, but from the standpoint of post-Carnegie School perspectives on cognition, attention, and routines. Whereas work in the Carnegie School tradition has tended to develop models of firms in opposition to economic theory, we seek to understand how economic ideas are used to shape decision processes. Using a combination of interview, observational, and archival data gathered at a large manufacturing firm that produced parts to maintain machinery, we develop a behaviorally plausible story of how organizations shape price adjustment. We follow three successive waves of managers seeking to improve the pricing routines through shifting attentional perspective, managing attentional engagement, and structuring attentional execution. We demonstrate how managers redesign routines to shape cognition and attention, thereby developing greater coherence in the market representations of the sales force. Our findings show how reshaping cognition and attention in pricing routines can improve organizational intelligence in pricing decisions. Economists treat markets as the ideal – the best that can be imagined – and organizations as second-best options – the best that can be achieved, but our findings invert the story, suggesting that in modern market economies, organizations and routines are essential to making the price system work.

In the academic field of business management, several potential theories were established during the last decades to explain companies' decisions, organizational behavior, consumer patterns, and internationalization, among others. As a result, businesses and scholars were able to analyze and decide based on theoretical approaches to explain the current conditions of the market. Secondary research was conducted to collect more than 36 management theories. This chapter aims to develop the most famous theories related to business applied in the international field. The novelty of this chapter relies on the compilation of recognized previous research studies from the academic literature and evidence in international business.

While the history of modern ideas in business education in general, and organization theory and organizational economics in particular, has several different intellectual roots, two books in particular were influential in initiating the field that is now broadly recognized as behavioral theories of organizations: A Behavioral Theory of the Firm, written by Richard Cyert and James G. March; and Organizations, written by Herbert Simon and James March. These two books set the stage for several subsequent developments in organization and management theory including research in learning, strategic management, and organizational routines. The behavioral view of the firm was also important to modern developments such as evolutionary theory and transaction cost economics. This paper examines part of this history and development, focusing in particular on the contributions of March.

Details a behavioral theory of economic welfare that overlaps and extends the global theoretical framework contained in Pareto Optimality, with significant public policy implications. The essence of this framework is contained in Adam Smith’s the Wealth of Nations where it is argued that the economic welfare of society cannot be augmented if the material level of well‐being of the working population is reduced, even if the economy experiences growth. Moreover, it is argued that there need not be an equity‐efficiency trade‐off in a competitive market economy to the extent that wages positively affect productivity and do not increase production costs. Therefore, shifting from a low to a high wage economy is welfare improving. Smith, in effect, argues that one can have economic ‘justice’ and economic efficiency where the former is necessary to the latter. The behavioral model of economic welfare paints a dynamic picture of economic welfare in contradistinction to the static framework provided by Pareto Optimality wherein the conditions of Pareto Optimality need not be violated.

This paper aims to integrate insights from the behavioral theory of the firm and the dynamic capabilities perspective to explain how the historical and social attainment discrepancies motivate firms to change. Specifically, this paper proposes that a negative historical attainment discrepancy encourages the firm to engage in strategic change to solve its performance problems. In contrast, this paper advanced that a positive social attainment discrepancy motivates strategic change as a mechanism to bolster the firm’s position within the industry. Further, this paper integrated the moderating effects of industry dynamism and industry munificence.

This paper tests hypotheses using panel data on 2,435 US public firms over the years from 1996 to 2018. This paper uses a fixed-effects regression model to empirically test these hypotheses.

This paper finds empirical support for the effects of both the negative historical attainment discrepancy and the positive social attainment discrepancy on the firm’s tendency to engage in strategic change. As for the hypothesized moderating effects, this paper finds that industry munificence accentuated the effects of both attainment discrepancies on the firm’s tendency to engage in strategic change. However, the results do not support the hypothesized moderating effect of industry dynamism on either of these attainment discrepancies.

This paper contributes to the research on the separate effects of historical and social comparisons within the context of strategic change. Further, the paper bolsters our understanding of how performance feedback increases the firm’s tendency to change. Finally, the paper integrates theoretical views from the behavioral theory of the firm and the dynamic capabilities perspective on how socially high-performing firms may build and sustain their competitive advantage through organizational change.

The purpose of this paper is to evaluate the effect of government intervention on a firm's innovation activities.

On the basis of previous literature, this paper proposes a framework to explain behavioral changes in the firm resulting from government interventions. Using propensity score matching technique, this research tries to estimate the effect of R&D subsidies on Iranian firms (small and medium-sized enterprises and large-sized firms).

This paper identified that R&D subsidies have a significant effect on the innovation process. Furthermore, investigations indicate that behavioral variables (innovation capabilities, collaboration agreements and risk-taking) have been partly changed in both SMEs and large firms after subsidizing. The analysis of innovation outputs showed that although R&D subsidies significantly increase the number of new products/services or patents (especially for SMEs), it could not increase the total sale of the firms. These results show that the effect of R&D subsidies has not interestingly covered all variables influencing innovation activities.

The work used dynamic capability theory, transaction cost theory and behavioral theory of the firm to explain behavioral changes in the firm resulting from government interventions.

This paper proposes several policy concerns which can help the policymakers to stimulate the innovation support procedures in Iran.

This paper provides insights for improved policymaking which in turn can aid boosting social welfare.

This paper re-conceptualized behavioral additionality based on firms’ behavioral theories and evaluated the effects of Iranian R&D subsidies on their measures.

Although the extant innovation literature has extensively explored the attributes of different types of innovation capability, little is known yet about the common phenomenon of the rebound and durableness of innovation capability. Therefore, the purpose of this paper is to address these aspects by introducing the concepts of elastic and plastic innovation capability.

Based on the behavioral theory of the firm, the authors propose a theoretical model to study the antecedents and outcomes of elastic and plastic innovation capability. An empirical testing involves two data sets that contained 183 companies in three industries. The empirical evidence supports the existence of the concepts of elastic and plastic innovation capability.

The research findings also demonstrate that a firm’s past performance is positively related to elastic innovation capability. Elastic innovation capability and organizational aspiration are positively related to plastic innovation capability. Both elastic and plastic innovation capability significantly lead to superior performance.

This study makes three main contributions to the existing innovation literature. First, the authors extend existing knowledge on innovation capability by proposing two new types of innovation capability – elastic and plastic innovation capability. Second, the proposed concepts of elastic and plastic innovation capability contribute to the theory of dynamic capability. Finally, this study reveals the micro-mechanism of elastic and plastic innovation capability from the perspective of the behavior theory of the firm and their different effect on firm performance.

This paper seeks to explore the effect of performance duration (rather than intensity) on the subsequent initiation of strategic change by firms. Specifically, the effect of outperformance and underperformance duration on strategic change, as well as the moderating effect of environmental dynamism, is studied.

Using a fixed-effects model, analyzing a sample of 34,907 firm-year observations from 1980 to 2018 across 112 industries mostly supported proposed hypotheses.

Results revealed a U-shaped relationship between outperformance duration and strategic change and an inverted U-shaped relationship between underperformance duration and strategic change. The moderation role of environmental dynamism was only partially supported.

This study examines a new dimension of performance feedback, namely duration, rather than the widely used intensity of performance feedback, to enhance our understanding of the behavioral theory of the firm.

This study aims to examine the relationship between corporate governance (CG) and various measures of earnings quality in listed companies on Tehran Stock Exchange (TSE). The theoretical intuition for prediction of any relationship between earnings quality and CG is based on the behavioral theory and the institutional settings in Iran.

This study used the data of 117 listed companies on the TSE for the period from 2005 to 2019. The authors use panel data regression as the main methodology, along with principal component analysis, t-test and rank-sum test.

This study finds that the CG has a positive association with earnings quality. More precisely, better CG mechanisms cause lower earnings smoothness, more predictable and persistent earnings, and higher levels of timeliness, conservatism and value relevance. The relationship between CG and earnings quality is statistically and economically significant for all models.

The findings further the understanding of the role of CG in improving earnings quality in an Islamic and emerging country. First, this study provides evidence on the relation between CG and earnings quality by focusing on the behavioral theory, which suggests that corporate decision-making is not only influenced by formal CG mechanisms, but also by informal CG arrangements. In this case, this study departs from the restrictive theories (specifically, agency theory) that are widely used in past literature. Second, this study constructs an index that fits to corporate context of Iran rather than applying indexes introduced in Anglo-American environments.

Baumol’s impact on the development of managerial theories of the firm is investigated here through the material found in Galbraith’s archives. In 1957, Galbraith published a paper claiming that the impact of macroeconomic policies varies with market structures (competitive versus oligopolistic). That publication prompted Baumol (1958b) to send Galbraith a manuscript dealing extensively with a crucial question of managerial theories of the firm, namely, the trade-off between sales and profits. I argue that Baumol’s critiques and Galbraith’s answers largely explain the way Baumol (1958a, 1959) framed his alternative model of the behavior of corporations. He reasoned in terms of maximization of sales with a profit constraint as their main objective. In return, Business Behavior, Value and Growth fostered the development of Marris’ (1964) and Galbraith’s (1967) theories of the corporation. While Tullock (1978) provides a narrative in which the sales maximization hypothesis has two main branches – Baumol for the one and Galbraith–Marris for the other – the paper demonstrates that these branches are intimately connected.