Economic Foundations Of Strategy (Draft Version) by Joseph T. Mahoney

By Joseph T. Mahoney

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Second, organizations avoid the requirement that they anticipate future reactions of other parts of their environment by arranging a negotiated environment. Organizations impose plans, standard operating procedures, industry tradition, and uncertainty-absorbing contracts on that environment. 62 Figure 2. Organizational Decision Process in Abstract Form Source: Cyert and March (1963: 126) 63 Problemistic Search. Cyert and March’s (1963) behavioral models assume that search, like decision-making, is problem-directed.

Cyert and March (1963) are concerned with the business firm and the way the business firm makes economic decisions. Cyert and March (1963) make detailed observations of the processes and procedures by which firms make decisions, and use these observations as a basis for a theory of decision-making in business organizations. Cyert and March (1963) argue that one way to understand modern organizational decision-making is to supplement the microeconomic study of strategic factor markets with an examination of the internal operation of the business firm -- to study the effects of organizational structure and conventional practices on the development of goals, the formation of expectations, and the implementation of choices.

On the other hand, the grapevine is valuable as a barometer of ‘public opinion’ in the organization. It is also important that information does not automatically transmit itself from its point of origin to the rest of the organization; the individuals who first obtain the information must transmit this information. In transmitting the information, organizational members will naturally be aware of the consequences its transmission may have for them. When organizational members believe that the boss is going to be angered by the news, the news is likely to be suppressed.

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