The Theory of the Firm and Alternative Theories of Firm Behaviour: a critique

Behavioural Theories of the Firm (Quantitative Studies)  

 

Hornby, (1995) found that 51.9% of firms could be classified as satisfiers by his 

definition.  That is, “once an objective or target had been reached there was no 

impetus to improve on this”.  Shipley (1981) found that 52.3% of firms could be 

similarly classified.  What if this target or objective was profit maximizing?  These 

results suggest that the firms were not consequently seeking to improve on their 

current performance but they do not tell us what their current performance is.  Also, 

there is no mention of time period.  Were they satisfying over a period of one year or 

forever? 

 

The behavioural theories have claimed that satisfying action was due to individuals 

within the model having different objectives.  These results do not offer any insight 

into this question and as a consequence do not validate the theory.