The Behavioral Theory of the Firm and Top-Level Corporate Decisions

Top-level planning decisions of an organization are examined in the framework of Cyert and March's A Behavioral Theory of the Firm. Six decisions are studied and analyzed in the Cyert-March framework, and some concepts from the behavioral theory of the firm are revised in the light of the results obtained. Major additional criteria suggested as of major importance in the framework of an extended Cyert and March approach are: the impact of multiple organizational levels on decisions; the bilateral bargaining between project proponents and those managers responsible for review of proposals; the influence of technology and general uncertainty in the environment upon criteria for project evaluation; the nature of an active stimulus for search induced by corporate strategy rather than the more passive, crisis-induced stimulus suggested by Cyert and March; the concept of a threshold-level system by which projects quickly are rated or evaluated on multiple attributes; and the Pollyanna-Neitzsche effect, by which ex post uncertainty absorption can be used by firm members to induce a positive-thinking approach to subsequent performance. Although some writers, for example, Ansoff (1965), have noted the empirical evidence presented by Cyert and March dealt primarily with operating decisions, this single field study offers evidence that a broadened Cyert and March approach is useful for understanding decisions that are partly in the broader field of corporate strategy.