Working Paper Series, Department of Industrial Economics & Strategy, Copenhagen Business School
No 98-8:
How Do Aspiration Levels come About? Bounded Rationality and Dynamic Search
Mie Augier and Volker Mahnke
Abstract: Although the Behavioral Theory of the Firm has served as
continuing stimulus in diverse field of inquiry such as organizational
learning, the theory of the firm, and decision making research more
generally and there is good reason to expect that this influence continues
to remain significant, the reach of the theory as it stands in situation of
genuine uncertainty remains limited. This paper seeks to address this gap
by taking steps towards extending the theory of search. A key departure
from earlier approaches to the theory of search is the inclusion of the
question How do aspiration levels come about? in addition to the received
question How do aspiration levels change. This approach highlights the
significance of an extended model of search in situations of Knightian
uncertainty and Shacklian surprise. For instance, the concept of dynamic
search sheds light on the role of 1) experimentation and play in the
creation of aspirations, 2) creating disbelief in situations of lacking
prior experience, and 3) disengaging limits of imagination. This paper
develops aspects of the theoretical foundations of the concept of dynamic
search and clarifies processes leading to new aspirations that guide
subsequently firm adaptation. While many implications of dynamic search are
still unexplored, building on insights from specifically the economists
Shackle, Knight and the recent work of March and more generally from the
‘bounded rationality’ - tradition appears to be a promising avenue for new
advances in organization science.
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