Examining the Behavioral Factors Influencing Strategic Decision Making: A Case Study on General Electric (GE)

Examining the Behavioral Factors Influencing Strategic Decision Making: A Case Study on General Electric (GE)

Alain Verbeke

Prof. of International Business Strategy, University of Calgary, Calgary, Alberta, Canada

Rosa Hendijani

Assistant Prof., Faculty of Management, University of Tehran, Tehran, Iran

1. 1-24

Abstract

One of the most influential theories of organizations is Transaction Cost Economics (TCE). This theory explains many organizational phenomena. But, TCE is based on two behavioral assumptions: bounded rationality and opportunism. These behavioral assumptions have been widely criticized because of their partial view of the underlying behavioral mechanisms within the firms. Using a case study on General Electrics (GE), we found that social and psychological bounds on reliability such as organizational actors’ preference reversal due to overvaluation of current commitments and status seeking and relationship preferences contributed to commitment failure within the firms. In this article, we will expand the concept of bounded reliability and develop a model for commitment failure and its related preventive mechanisms.

Keywords: Transaction Cost Economics, Bounded Reliability, Commitment Failure, Bounded Rationality, Opportunism.

Corresponding Author: Rosa Hendijani

E-mail: rosa.hendijani@ut.ac.ir