Limited Rationality, Formal Organizational Rules, and Organizational Learning (OL)

In spite of a broad agreement among researchers in organizational theory on the importance of rules for the functioning of organizations, most theories of OL neglect or tend to underestimate the role of organizational rules in processes of OL. However, there is one important exception: James G. March, his cooperators and his students. He and Richard Cyert (1963) developed a theory of OL long before this concept became a management fashion. And since that then he and his group have continuously revised and developed this theory. These theories provide fundamental insights into processes of OL, although, so far, they have not yet received adequate recognition in the more popular management literature. These theories assume that complex organizations learn by the ways in which individuals experiment, form inferences and code the lessons of history into rules. OL is based on routines. It is history-dependent and target-oriented. To a large extent OL depends on the relation between observed organizational outcomes and the aspirations set for these outcomes (Levitt and March, 1988: 320). In this article we try to give an introduction into the theories on learning in the March school and link it with our own conceptual and empirical work.