Daniel A. Wren on Theory of the firm

“BEHAVIORAL THEORIES OF THE FIRM: A turn from structure to internal processes was the theme of authors such as Richard Cyert and James March, Daniel Katz and Robert Kahn, and Karl Weick. Cyert, an economist, and March, a psychologist, emphasized internal competition for scarce resources, interest groups forming coalitions, conflict resolution, organizational learning, and among other concepts, the adaptive processes of decision making and performance feedback. Psychologists Katz and Kahn emphasized organizational roles, role conflict and ambiguity, the organization as an open input-output system, and circumstances when the hierarchy was preferable to participative styles. Weick, another psychologist, emphasized the organizing process rather than the organizational product and suggested that actions precede goals (goals are retrospective), that individual behaviors are interlocking, and so on.”

“All but one of those just mentioned was a psychologist by education, so it should not be surprising that their view of organization theory emphasizes internal processes and resembles the micro approach of organizational behavior. Another group of theorists, all but one educated as a sociologist, viewed organizations as a product of macro environmental forces. These behavioralists were Jeffrey Pfeffer and Gerald Salancik, Michael Hannan and John Freeman, and John Meyer and Richard Scott. Pfeffer (the only nonsociologist) and Salancik presented a resource-dependent theory that postulates that organizations require support from their external environment and can only survive to the extent that this support is forthcoming. Managers form coalitions to gather support in an open system of external relationships in which there are constraints that create either a munificent or scarce resource situation. Hannan and Freeman’s organizational ecology theory offers the idea that organizational survival is a process of adaptation and success, or fail to adapt and exit. The authors recognized the Darwinian nature of their theory, but have used it to study organizational populations such as labor unions and newspapers for population entries, adaptation, and mortality. The neo-institutional theory of Meyer and Scott (and others) holds that organizational environments are shaped by societal expectations that provide legitimacy to an organization’s existence. By conforming to cultural rules, such as custom or law, formal organizations are able to take on the prevailing view of society.”