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Bounded rationality and tacit knowledge in the organizational capabilities approach: an assessment and a re-evaluation

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  • Nicolai J. Foss

Abstract

The famous three chapters in Nelson and Winter's An Evolutionary Theory of Economic Change (1982) that focus on firm routines and capabilities are often taken to be solidly founded on an assumption of bounded rationality. I argue that, in actuality, bounded rationality plays a rather limited role in Nelson and Winter (1982), that the very different assumption of tacit knowledge is much more central, and that the links between bounded rationality and routines-capabilities are not clear. I then argue that the absence in Nelson and Winter of a clear methodological individualist foundation for notions such as routines, capabilities, competencies, etc., has resulted in certain explanatory difficulties in the modern organizational capabilities approach that has taken so much inspiration from their work. Copyright 2003, Oxford University Press.

Suggested Citation

  • Nicolai J. Foss, 2003. "Bounded rationality and tacit knowledge in the organizational capabilities approach: an assessment and a re-evaluation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 12(2), pages 185-201, April.
    • Handle: RePEc:oup:indcch:v:12:y:2003:i:2:p:185-201
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    Cited by:

    1. David Cayla, 2008. "Learning, Rationality and Identity Building," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00340832, HAL.
    2. Annosi, Maria Carmela & Martini, Antonella & Brunetta, Federica & Marchegiani, Lucia, 2020. "Learning in an agile setting: A multilevel research study on the evolution of organizational routines," Journal of Business Research, Elsevier, vol. 110(C), pages 554-566.
    3. Filippo Belloc & Gabriel Burdin & Fabio Landini, 2020. "Corporate Hierarchies and Labor Institutions," Department of Economics University of Siena 827, Department of Economics, University of Siena.
    4. David Obstfeld, 2012. "Creative Projects: A Less Routine Approach Toward Getting New Things Done," Organization Science, INFORMS, vol. 23(6), pages 1571-1592, December.
    5. Belloc, Filippo & Burdin, Gabriel & Landini, Fabio, 2020. "Corporate Hierarchies under Employee Representation," IZA Discussion Papers 13717, Institute of Labor Economics (IZA).
    6. repec:dau:papers:123456789/5005 is not listed on IDEAS
    7. Nicolai Foss, 2006. "Knowledge and Organization in the Theory of the Multinational Corporation: Some Foundational Issues," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 10(1), pages 3-20, March.
    8. Christian Julmi, 2019. "When rational decision-making becomes irrational: a critical assessment and re-conceptualization of intuition effectiveness," Business Research, Springer;German Academic Association for Business Research, vol. 12(1), pages 291-314, April.
    9. Peter Abell & Teppo Felin & Nicolai Foss, 2008. "Building micro-foundations for the routines, capabilities, and performance links," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(6), pages 489-502.
    10. F. Landini & C. Franco, 2020. "Organizational Drivers of Innovation: The Role of Workforce Agility," Economics Department Working Papers 2020-EP01, Department of Economics, Parma University (Italy).
    11. Franco, Chiara & Landini, Fabio, 2022. "Organizational drivers of innovation: The role of workforce agility," Research Policy, Elsevier, vol. 51(2).
    12. Richard Adelstein, 2010. "Firms as Social Actors," Wesleyan Economics Working Papers 2013-003, Wesleyan University, Department of Economics.
    13. Fritz Rahmeyer, 2006. "From a Routine-Based to a Knowledge-Based View: Towards an Evolutionary Theory of the Firm," Discussion Paper Series 283, Universitaet Augsburg, Institute for Economics.

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