Summary of Behavioral Decision Theory

Behavioral decision theory starts from March and Simon's (1958) intention to understand the process of how organizations make their decisions. They make two groups of assumptions. One group of assumptions is about individuals and the other group of assumptions is about organizations. 

1)    Model of man: There are two different models of man : 
a) man will compute and make rational decision when goals are set. The goals are influenced by the group characteristics
b) Individuals’ desire, want and value are assumed away and their behavior can be deliberately controlled, therefore, the behavior of the organization is the behavior of the individuals.
When individuals make decision, they first give definition of the situation and retrospect their past experience. After coming up with several possible solutions, they will make a satisfying decision.

2)    Model of organizations:
a)    When individuals have bounded rationality in making their decisions, different individuals will have different solution regarding the same problem, which usually conflict with other people’s way of solving problems. Aggregating these decisions together leads to extremely uncertain decision environment and organized anarchy, which is termed as "garbage can model" (Cohen, 1972)

b)    Organizations can make rational decision by controlling the routines actors use to make decision and define situations for them. Therefore, the model for the firms should be the leaders set up the goal and break the goal into subgoals.

c)    Control: Barnard’s control of organizations reside in rules and regulations, but March and Simon tend to illustrate another kind of control: the latent control form expectations, professional trained routines and informal group pressures.

However, March and Simon's (1958) theory has two main limitations. First,  They fail to theorize conflict in organizations because 1) they assume there is one goal for the organizations. 2) They assume resources are always abundant, which is not. 
Second, technology is not tackled because there are organizational characteristics that are independent of goals and structures: raw material and techniques used to transform the raw materials.

Behavioral decision theory was later clarified by Cyert and March (1963), where they develop a whole model describing how decisions are made in a firm. 


Organizational learning (Argote and Miron-Spektor, 2011)
As an important branch developed from behavioral decision theory, organizational learning has been looked at how organizations deal with current situation through what they have experienced before (Levitt and March, 1988). 

The core definition of organizational learning is that the knowledge of the organization change with the organizations' experience and the knowledge further changes the behaviors and cognition of members in the group. Knowledge can be stored in individuals, routines, transactive memory systems. 

The basic idea is that organizations' knowledge change by interacting with the environment. Members, tools and tasks, networks, structures of the organizations are the mechanisms through which the knowledge of the organizations is changed. 

There are mainly four themes in organizational learning:

Organization experience
Organizations can learn through their own experience or others' experience (knowledge transfer).  Experience can come from individuals or tasks; or before/during/ after tasks; rarity. 

Context
The main idea is that cognition can only be understood in the context. The context moderate the relationship between experience and outcomes. Development in this direction focus on how to figure out the characteristics of the context that will influence learning.

Organizational learning process
It contains knowledge creation, knowledge transfer and knowledge retention. There are four dimensions of learning process: mindfulness/ mindlessness (Levinthal and Rerup, 2006); extent to which learning processes are distributed among members; bottom-up or top-down; exploration or exploitation (March, 1991). 

Analyzing knowledge creation, retention, and transfer
Knowledge creation and innovation; knowledge stock and flow; factors that facilitate or inhibit knowledge transfer.

Warren Bennis had tried to argue that organizations will finally become decentralized because of three reasons.
1)    Increasing professionalization of managers demand more responsibility
2)    Environment changes fast
3)    Technology increase importance, which gives more power to engineers and scientists, which requires decentralized decision making. (Matrix form)
However, the argument is rebutted by the idea that even though the finishing the tasks only needs part of the expertise of the staffs, they still need to be kept when the tasks are finished. Therefore, simply from organizational learning perspectives, we cannot fully understand why organizations become decentralized. 

References:

Argote, L., & Miron-Spektor, E. (2011). Organizational learning: From experience to knowledge. Organization Science, 22(5), 1123-1137.

 Cohen, M. D., March, J. G., & Olsen, J. P. (1972). A garbage can model of organizational choice. Administrative science quarterly, 1-25.

March, J. G., & Simon, H. A. (1958). Organizations.

Levinthal, D. A., & March, J. G. (1993). The myopia of learning. Strategic management journal, 14(S2), 95-112.

Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of management review, 23(4), 660-679.