Individuals and Organizations Thoughts on a Micro-Foundations Project for Strategic Management and Organizational Analysis

Making links between micro and macro levels has been problematic in the social sciences, and the literature in strategic management and organization theory is no exception. The purpose of this chapter is to raise theoretical issues in developing micro-foundations for strategic management and organizational analysis. We discuss more general problems with collectivism in the social sciences by focusing on specific problems in extant organizational analysis. We introduce micro-foundations to the literature by explicating the underlying theoretical foundations of the origins of individual action and interaction. We highlight opportunities for future research, specifically emphasizing the need for a rational choice program in management research.

Nudge: Manager as Choice Architect

In this paper I discuss the role of manager as choice architect. The notion of nudging and choice architecture has received significant interest in law, economics and public policy. But the behavioral insights from this literature also have important implications for managers, HR professionals and organizations. In essence, employees are consumers of choice and are constantly confronted with a large array and interface of options, and this interface can be designed so as to maximize individual welfare and organizational outcomes. I first discuss the theoretical foundations of the nudge idea and then highlight how managers can design effective choice architectures for the management of human capital. By way of illustration, I specifically focus on four practical areas: 1) nudge hiring, 2) nudge training and development, 3) nudge human capital and organization, and 4) nudge strategy and innovation. Throughout the paper I also point out comparative differences in decision making between contexts (e.g., consumer choice versus decision making in organizations), including implied debates, and also highlight novel opportunities for future research in management and strategy. I particularly focus on the possibilities associated with nudges and choice architectures at the nexus of organizations, crowds and aggregate decision making

Building Micro-Foundations for the Routines, Capabilities, and Performance Links

Micro-foundations have become an important emerging theme in strategic management. This paper addresses micro-foundations in two related ways. First, we argue that the kind of macro (or “collectivist”) explanation that is utilized in the capabilities view in strategic management ? which implies a neglect of micro-foundations ? is incomplete. There are no mechanisms that work solely on the macro-level, directly connecting routines and capabilities to firm-level outcomes. While routines and capabilities are useful shorthand for complicated patterns of individual action and interaction, ultimately they are best understood at the micro-level. Second, we provide a formal model that shows precisely why macro explanation is incomplete and which exemplifies how explicit micro-foundations may be built for notions of routines and capabilities and for how these impact firm performance.Routines, capabilities, micro-foundations, production function

Untangling Infinite Regress and the Origins of Capability

We argue that strategic management in general—and capability theory in particular—suffers from problems of infinite regress that can be traced to an unsatisfactory specification of initial conditions. We argue, first, that this has led to an overemphasis on path-dependence, experience and history, without sufficient attention on initial conditions: more proximate, decision-oriented punctuation points that can be used for better theoretical explanation. Second, we show how the initial conditions of theories are often not distinctively different from what is being explained, which prevents theory from providing credible specifications of causal mechanisms. Third, we highlight how the regress problem has led to a relatively casual borrowing of concepts from neighboring disciplines, which has created a mismatch between the aims of management theory and relevance to practice. We suggest research heuristics for how to deal with infinite regress problems, to develop more rigorous and relevant theories of capability and strategic management

A Critique of Behaviorist and Empiricist Approaches

We discuss the behaviorist and empiricist foundations of the organizational routines and capabilities literature, specifically the extant emphasis placed on experience, repetition and observation as the key inputs and mechanisms of behavior, learning and change in organizations. Based on this discussion we highlight several concerns associated with specifying experience and repetition as antecedents of routines and capabilities, namely, (1) the problem of origins and causation, (2) the problem of extremes, (3) the problem of intentionality, (4) the problem of new knowledge, and (5) the problem of the environment. We highlight the “poverty of stimulus” argument and more generally discuss how internalist or rationalist, choice-based approach might provide a more fruitful (though preliminary) foundation for extant research on organizational routines and capabilities

Designing Organizations for Dynamic Capabilities

How can organizations put dynamic capabilities into practice? We focus on the power of organizational design, showing how managers can harness new organizational forms to build a capacity for sensing, shaping and seizing opportunities. Fast-moving environments favor open organization and self-organizing processes that quickly convert individual capabilities into actionable collective intellect. We argue that self-organizing processes do not organize themselves but require managers to design and execute them. We examine new design principles – such as polyarchy, social proofs, and new forms of open organization – that allow organizations to build dynamic capabilities for sustained innovation in dynamic environments

The Law and Big Data

In this Article we critically examine the use of Big Data in the legal system. Big Data is driving a trend towards behavioral optimization and personalized law, in which legal decisions and rules are optimized for best outcomes and where law is tailored to individual consumers based on analysis of past data. Big Data, however, has serious limitations and dangers when applied in the legal context. Advocates of Big Data make theoretically problematic assumptions about the objectivity of data and scientific observation. Law is always theory-laden. Although Big Data strives to be objective, law and data have multiple possible meanings and uses and thus require theory and interpretation in order to be applied. Further, the meanings and uses of law and data are indefinite and continually evolving in ways that cannot be captured or predicted by Big Data. Due to these limitations, the use of Big Data will likely generate unintended consequences in the legal system. Large-scale use of Big Data will create distortions that adversely influence legal decision-making, causing irrational herding behaviors in the law. The centralized nature of the collection and application of Big Data also poses serious threats to legal evolution and democratic accountability. Furthermore, its focus on behavioral optimization necessarily restricts and even eliminates the local variation and heterogeneity that makes the legal system adaptive. In all, though Big Data has legitimate uses, this Article cautions against using Big Data to replace independent legal judgmen

The Law and Big Data

In this Article we critically examine the use of Big Data in the legal system. Big Data is driving a trend towards behavioral optimization and personalized law, in which legal decisions and rules are optimized for best outcomes and where law is tailored to individual consumers based on analysis of past data. Big Data, however, has serious limitations and dangers when applied in the legal context. Advocates of Big Data make theoretically problematic assumptions about the objectivity of data and scientific observation. Law is always theory-laden. Although Big Data strives to be objective, law and data have multiple possible meanings and uses and thus require theory and interpretation in order to be applied. Further, the meanings and uses of law and data are indefinite and continually evolving in ways that cannot be captured or predicted by Big Data. Due to these limitations, the use of Big Data will likely generate unintended consequences in the legal system. Large-scale use of Big Data will create distortions that adversely influence legal decision-making, causing irrational herding behaviors in the law. The centralized nature of the collection and application of Big Data also poses serious threats to legal evolution and democratic accountability. Furthermore, its focus on behavioral optimization necessarily restricts and even eliminates the local variation and heterogeneity that makes the legal system adaptive. In all, though Big Data has legitimate uses, this Article cautions against using Big Data to replace independent legal judgmen

A Sceptical Look

Organizational routines and capabilities have become key constructs not only in evolutionary economics, but more recently also in business administration, specifically strategic management. In this chapter we explicate some of the underlying theoretical problems of these concepts, and discuss the need for micro-foundations. Specifically, we focus on some of the explanatory problems of collective-level theorizing, and what we think are tenuous assumptions about human beings. We argue that individual-level considerations deserve significantly more consideration, and that evolutionary economics and strategic management would be well served by building on methodological individualism

Social Reality, the Boundaries of Self-fulfilling Prophecy, and Economics

Organizational scholars have recently argued that economic theories and assumptions have adversely shaped management practice and human behavior, leading not only to the incorporation of trust-eroding market-mechanisms into organizations but also unnecessarily creating self-interested behavior. A number of highly influential papers have argued that the self-fulfilling nature of (even false) theories provides the underlying mechanism through which economics has adversely shaped not just social science but also management practice and individual behavior. We question these arguments, and argue that there are important boundary conditions to theories falsely fulfilling themselves, boundary conditions that have hitherto been unexplored in organizational research, and boundary conditions which question the underlying premises used by organizational scholars and social scientists to attack economics. We specifically build on highly relevant findings from social psychology, philosophy and organizational economics to show how (1) objective reality and (2) human nature provide two important boundary conditions for theories (falsely or otherwise) fulfilling themselves. We also defend organizational economics, specifically the use of high-powered incentives in organizations, and argue that self-interest (rightly understood) facilitates in creating beneficial individual and collective and societal outcomes