Perspective – on the evolutionary and behavioral theories of organizations: a tentative roadmap

Cyert and March’s ‘A Behavioral Theory of the Firm’ has been acknowledged as one of the most fundamental pillars on which evolutionary theorizing in economics is built. Nelson and Winter’s book is pervaded by the philosophy and concepts previously developed by Cyert, March, and Simon. Behavioral notions, such as bounded rationality, are also at the heart of economic theories of institutions such as transaction costs economics. In this paper, after briefly reviewing the basic concepts of evolutionary economics, we discuss its implications for the theory of organizations (and business firms in particular), and we suggest that evolutionary theory should coherently embrace an ‘embeddedness’ view of organizations, whereby the latter are not simply efficient solutions to informational problems arising from contract incompleteness and uncertainty, but also shape the ‘visions of the world’, interaction networks, behavioral patterns, and the identity of the agents. After outlining the basic features of this perspective, we analyze its consequences and empirical relevance.