Capability Building and Learning: An Emergent Behavior Approach

Andreu Rafael, Riverola Josep, Rosanas Josep Mª and Santiago Rafael de
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Andreu Rafael: Strategic Management Department, IESE Business School
Riverola Josep: Production, Technology and Operations Management Department, IESE Business School
Rosanas Josep Mª: Accounting and Control Department, IESE Business School
Santiago Rafael de: Managerial Decision Sciences Department, IESE Business School

International Journal of Management and Economics, 2014, vol. 44, issue 1, 7-38

Abstract: Economics-based models of firms typically overlook management acts and capability development. We propose a model that analyzes the aggregate behavior of a population of firms resulting from both specific management decisions and learning processes, that induce changes in companies’ capabilities. Decisions are made under imperfect information and bounded rationality, and managers may sacrifice short-term performance in exchange for qualitative outcomes that affect their firm’s future potential. The proposed model provides a structured setting in which these issues -often discussed only informally- can be systematically analyzed through simulation, producing a variety of hard-to-anticipate emergent behaviors. Economic performance is quite sensitive to managers’ estimates of their firms’ capabilities, and companies willing to sacrifice short-run results for future potential appear to be more stable than the rest. Also, bounded rationality can produce chaotic dynamics reminiscent of real life situations.

Keywords: Capability building vs. economic performance; imperfect information; learning; bounded rationality (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ijomae:v:44:y:2014:i:1:p:7-38:n:1

DOI: 10.1515/ijme-2015-0007

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