The author develops a theory of competitive rationality that proposes a firm's success depends on the imperfect procedural rationality of its marketing planners. Theories of economic psychology and information economics are integrated with the Austrian economic school of thought and with marketing management concepts and scholarship. Implications for managers and scholars are discussed.
Get full access to this article
View all access options for this article.
References
1.
AguilarFrancis J. (1967), Scanning the Business Environment. New York: Macmillan Publishing Company, Inc.
2.
AhmadSyed (1990), “Adam Smith's Four Invisible Hands,” History of Political Economy, 22 (1), 137–44.
3.
AlchianArmen A. (1950), “Uncertainty, Evolution and Economic Theory,” Journal of Political Economy, 58 (3), 211–21.
4.
AldersonWroe (1957), Marketing Behavior and Executive Action: A Functionalist Approach to Marketing Theory. Homewood, IL: Richard D. Irwin, Inc.
5.
AmesB. Charles and HlavacekJames D. (1990), “Vital Truths About Managing Your Costs,” Harvard Business Review, 68 (January–February), 140–7.
6.
AndersonErin (1988), “Strategic Implications of Darwinian Economics for Selling Efficiency and Choice of Integrated or Independent Sales Forces,” Management Science, 34 (May), 599–618.
7.
AndersonPaul F. (1982), “Marketing, Strategic Planning, and the Theory of the Firm,” Journal of Marketing, 46 (Spring), 15–26.
8.
ArlinPatricia K. (1977), “Piagetian Operations in Problem Finding,” Developmental Psychology, 13 (3), 297–8.
9.
ArrowKenneth (1959), “Toward a Theory of Price Adjustment,” in The Allocation of Economic Resources, AbramvitzJ.et al., eds. Stanford, CA: Stanford University Press.
BarabbaVincent P. and ZaltmanGerald (1991), Hearing the Voice of the Market. Cambridge, MA: Harvard Business School Press.
12.
BarnesJ. H. (1984), “Cognitive Biases and Their Impact on Strategic Planning,” Strategic Management Journal, 5 (April–June), 129–38.
13.
BartelsRobert (1988), The History of Marketing Thought. Columbus, OH: Publishing Horizons Inc.
14.
BaumolWilliam J. (1986), “Entrepreneurship and the Long Run Productivity Record,” manuscript, New York University.
15.
BaumolWilliam J. (1988), “Entrepreneurship: Productive, Unproductive and Imitative; or the Rule of the Rules of the Game,” manuscript, New York University.
16.
BhagwatiJagdish (1982), “Directly Unproductive Profit-Seeking Activities,” Journal of Political Economy, 90 (October), 988–1002.
17.
BhideAmar (1986), “Hustle as Strategy,” Harvard Business Review, 64 (September–October), 59–65.
18.
BoekerWarren (1989), “Strategic Change: The Effects of Founding and History,” Academy of Management Journal, 32 (3), 489–515.
19.
BonomaThomas V. (1981), “Marketing Success Can Breed Marketing Inertia,” Harvard Business Review, 59 (September–October), 115–21.
20.
BowerJoseph L. and HoutThomas M. (1988), “Fast-Cycle Capability for Competitive Power,” Harvard Business Review, 66 (November–December), 110–18.
21.
BrownJames K. (1979), This Business of Issues: Coping With the Company's Environment. New York: The Conference Board.
22.
ChakravartiDipankar, MichellAndrew, and StaelinRichard (1981), “Judgment-Based Marketing Decision Models: Problems and Possible Solutions,” Journal of Marketing, 45 (Fall), 13–23.
23.
ChandlerAlfred D. (1990), “The Enduring Logic of Industrial Success,” Harvard Business Review, 68 (March–April), 130–40.
24.
ClarkJ. M. (1961), Competition as a Dynamic Process. Washington, DC: Brookings Institution.
25.
DayGeorge S., ShockerAllan D., and SrivastavaRajendra K. (1979), “Customer-Oriented Approaches to Identifying Product Markets,” Journal of Marketing, 43 (Fall), 8–19.
26.
DayGeorge S., ShockerAllan D., and WensleyRobin (1983), “Marketing Theory With a Strategic Orientation,” Journal of Marketing, 47 (Fall), 79–89.
27.
DayGeorge S., ShockerAllan D., and WensleyRobin (1988), “Assessing Advantage: A Framework for Diagnosing Competitive Superiority,” Journal of Marketing, 52 (April), 1–20.
28.
DayRichard H. (1987), “The Evolving Economy,” European Journal of Operations Research, 30 (June), 251–7.
29.
De GeusArie P. (1988), “Planning as Learning,” Harvard Business Review, 66 (March–April), 70–4.
30.
DeshpandeRohit and ZaltmanGerald (1984), “A Comparison of Factors Affecting Researcher and Manager Perceptions of Market Research Use,” Journal of Marketing Research, 21 (February), 32–8.
31.
DicksonPeter R. (1982), “Person-Situation: Segmentation's Missing Link,” Journal of Marketing, 46 (Fall), 56–64.
32.
DicksonPeter R. and GinterJames L. (1988), “Market Segmentation, Product Differentiation and Marketing Strategy,” Journal of Marketing, 52 (April), 1–10.
33.
DicksonPeter R. and KalapurakalRosemary (1991), “The Theory and Reality of Environment Analysis in the Marketing Plan,” College of Business Working Paper, The Ohio State University.
34.
DicksonPeter R. and UrbanyJoel E. (1991), “Reactions to a Competitive Pricing Move and Implications for Market Learning,” College of Business Working Paper, The Ohio State University.
35.
DruckerPeter F. (1954), The Practice of Management. New York: Harper & Row Publishers, Inc.
36.
DumaineBrian (1989), “How Managers Can Succeed Through Speed,” Fortune (February 13), 54–9.
37.
DusenberryWarren (1967), “CPM for New Product Introductions,” Harvard Business Review, 56 (July–August), 124–39.
38.
EliashburgJehoshua and ChatterjeeRabikar (1985), “Analytical Models of Competition With Implications for Marketing: Issues, Findings, and Outlook,” Journal of Marketing Research, 22 (August), 237–61.
39.
FeltzEdward J. (1970), “The Cost of Crashing,” Journal of Marketing, 34 (July), 64–7.
40.
FinkStephen L., BeakJoel, and TaddeoKenneth (1971), “Organization Crisis and Change,” Journal of Applied Behavioral Science, 7 (1), 15–37.
41.
FriedmanMilton and FriedmanRose (1980), Free to Choose. New York: Harcourt Brace Jovanovich.
42.
GatignonHubert and RobertsonThomas S. (1986), “Technology Diffusion: An Empirial Test of Competitive Effects,” Journal of Marketing, 53 (January), 35–49.
43.
GersickConnie J. G. and Richard HackmanJ. (1990), “Habitual Routines in Task-Performing Groups,” Organizational Behavior and Human Decision Processes, 47, 65–97.
44.
HayekF. A. (1978), New Studies in Philosophy, Politics, Economics and the History of Ideas. London: Routledge and Kegan Paul, Chapter 12.
45.
HayesRobert H. and WheelwrightSteven (1984), Restoring Our Competitive Edge: Competing Through Manufacturing. New York: John Wiley & Sons, Inc.
46.
HochStephen J. (1987), “Perceived Consensus and Predictive Accuracy: The Pros and Cons of Projection,” Journal of Personality and Social Psychology, 53 (2), 221–34.
47.
HogarthRobin M. (1981), “Beyond Discrete Biases: Functional and Dysfunctional Aspects of Judgmental Heuristics,” Psychological Bulletin, 90 (2), 197–217.
48.
HogarthRobin M. and MakridakisSpyros (1981), “Forecasting and Planning: An Evaluation,” Management Science, 27 (February), 115–38.
49.
HoustonFranklin S. (1986), “The Marketing Concept: What It Is and What It Is Not,” Journal of Marketing, 50 (April), 81–7.
50.
HuttMichael D., ReingenPeter H., and RonchettoJohn R.Jr. (1988), “Tracing Emergent Processes in Marketing Strategy Formation,” Journal of Marketing, 52 (January), 4–19.
51.
IsenbergDaniel J. (1984), “How Senior Managers Think,” Harvard Business Review, 62 (November–December), 81–90.
52.
ItamiHiroyuki and RoehlThomas W. (1987), Mobilizing Invisible Assets. Cambridge, MA: Harvard University Press.
53.
JacobsonRobert and AakerDavid A. (1985), “Is Market Share All That It's Cracked Up to Be?” Journal of Marketing, 49 (Fall), 11–22.
54.
JauchLawrence R. and KraftKenneth L. (1986), “Strategic Management of Uncertainty,” Academy of Management Review, 11 (4), 777–90.
55.
JaworskiBernard J. (1988), “Toward a Theory of Marketing Control: Environmental Context, Control Types, and Consequences,” Journal of Marketing, 52 (July), 23–39.
56.
JohnsonEric and Edward RussoJ. (1984), “Product Familiarity and Learning New Information,” Journal of Consumer Research, 11 (June), 550–62.
57.
JoskowPaul L. (1975), “Firm Decision-Making Processes and Oligopoly Theory,” American Economic Review, 65 (May), 270–9.
58.
KahnemanDaniel, SlovicPaul, and TverskyAmos (1982), Judgment Under Uncertainty: Heuristics and Biases. Cambridge, UK: Cambridge University Press.
KeithR. J. (1960), “The Marketing Revolution,” Journal of Marketing, 24 (January), 35–8.
61.
KirznerIsrael M. (1978), Competition and Entrepreneurship. Chicago: University of Chicago Press.
62.
KirznerIsrael M. (1981), “The ‘Austrian’ Perspective on the Crisis,” in The Crisis in Economic Theory, BellDaniel and KristolIrving, eds. New York: Basic Books, Inc., 111–22.
63.
KirznerIsrael M. (1985), Discovery and the Capitalist Process. Chicago: University of Chicago Press.
64.
KohliAjay K. and JaworskiBernard J. (1990), “Market Orientation: The Construct, Research Propositions, and Managerial Implications,” Journal of Marketing, 54 (April), 1–18.
65.
KruegerNorris and DicksonPeter R. (1990), “Self-Efficacy, Opportunity Seeking, Threat Avoidance and Risk-Taking,” College of Business Working Paper, The Ohio State University.
66.
LangloisRichard N., ed. (1986), Economics as a Process: Essays in the New Institutional Economics. Cambridge, UK: Cambridge University Press.
67.
LevittTheodore (1960), “Marketing Myopia,” Harvard Business Review, 38 (July–August), 24–47.
68.
LindblomC. E. (1959), “The Science of Muddling Through,” Public Administration Review, 19, 79–88.
69.
LinstoneH. A. (1984), Multiple Perspectives for Decision Making. New York: North-Holland Publishing Company.
70.
LippmanS. A. and RumeltR. P. (1982), “Uncertain Instability: An Analysis of Interfirm Differences in Efficiency Under Competition,” Bell Journal of Economics, 13 (2), 418–38.
71.
LoomisCarol J. (1991), “Can John Akers Save IBM?” Fortune (July 15), 40–56.
72.
LuchinsAbraham S. and LuchinsEdith H. (1970), Wertheimer's Seminars Revisited: Problem Solving and Thinking, Vol. III. Albany: State University of New York at Albany.
73.
MacworthNorman H. (1965), “Originality,” American Psychologist, 20 (January), 51–66.
74.
MakridakisSpyros G. (1990), Forecasting, Planning, and Strategy for the 21st Century. New York: The Free Press.
75.
MayerRichard E. (1983), Thinking, Problem Solving, Cognition. New York: W. H. Freeman and Company.
76.
McDanielStephen W. and KolariJames W. (1987), “Marketing Strategy Implications of the Miles and Snow Strategic Typology,” Journal of Marketing, 51 (October), 19–30.
77.
McKeeDaryl O., Rajan VaradarajanP., and PrideWilliam M. (1989), “Strategic Adaptability and Firm Performance: A Market-Contingent Perspective,” Journal of Marketing, 53 (July), 21–35.
78.
MilesRaymond E. and SnowCharles C. (1978), Organizational Strategy, Structure and Process. New York: McGraw-Hill Book Company.
NarverJohn C. and SlaterStanley F. (1990), “The Effect of a Market Orientation on Business Profitability,” Journal of Marketing, 54 (October), 20–35.
81.
NelsonRichard R. and WinterSidney G. (1982), An Evolutionary Theory of Economic Change. Cambridge, MA: Harvard University Press.
82.
NuttPaul C. (1990), “Preventing Decision Debacles,” Technological Forecasting and Social Change, 38, 159–74.
83.
OakleyAllen (1990), Schumpeter's Theory of Capitalist Motion. Hampshire, England: Edward Elgar Publishing Limited.
84.
OuchiWilliam G. (1979), “A Conceptual Framework for the Design of Organizational Control Mechanisms,” Management Science, 25 (September), 833–47.
85.
OuchiWilliam G. (1980), “Markets, Bureaucracies, and Clans,” Administrative Science Quarterly, 25 (March), 129–41.
86.
PetersTom (1987), Thriving on Chaos. New York: Harper & Row Publishers, Inc.
87.
PhilipsLouis (1988), The Economics of Imperfect Information. Cambridge, UK: Cambridge University Press.
88.
PlaterMichael A. and RahtzDon R. (1989), “The Schumpeter System as a Base for Entrepreneurial Studies,” in Enhancing Knowledge Development in Marketing, AMA Educators' Proceedings, BloomPaul, ed. Chicago: American Marketing Association.
89.
PorterMichael (1980), Competitive Strategy. New York: The Free Press.
90.
PrietulaMichael J. and SimonHerbert A. (1989), “The Experts in Your Midst,” Harvard Business Review, 67 (January–February), 120–4.
91.
PutoChristopher P. (1987), “The Framing of Buying Decisions,” Journal of Consumer Research, 14 (December), 301–15.
92.
QuinnJames Brian (1980), Strategies for Change: Logical Incrementalism. Homewood, IL: Richard D. Irwin, Inc.
93.
QuinnJames Brian (1981), “Formulating Strategy One Step at a Time,” Journal of Business Strategy, 1 (Winter), 42–63.
94.
ReekieW. Duncan and SavittRonald (1982), “Marketing Behavior and Entrepreneurship: A Synthesis of Alderson and Austrian Economics,” European Journal of Marketing, 16 (7), 55–66.
95.
RobertsonThomas S. and GatignonHubert (1986), “Competitive Effects on Technology Diffusion,” Journal of Marketing, 50 (July), 1–12.
96.
RobinsonWilliam T. and FornellClaes (1985), “Sources of Market Pioneering Advantages in Consumer Goods Industries,” Journal of Marketing Research, 22 (August), 305–17.
97.
RosenbergNathan (1979), “Adam Smith and Laissez-Faire Revisited,” in Adam Smith and Modern Political Economy, O'DriscollGerald P.Jr., ed. Ames, IA: The Iowa State University Press, 19–34.
98.
RuekertRobert W., OrvilleC. WalkerJr., and RoeringKenneth J. (1985), “The Organization of Marketing Activities: A Contingency Theory of Structure and Performance,” Journal of Marketing, 49 (Winter), 13–25.
99.
RumeltRichard P. (1987), “Theory, Strategy, and Entrepreneurship,” in The Competitive Challenge: Strategies for Industrial Innovation and Renewal, TeeceDavid J., ed. Cambridge, MA: Ballinger Publishing Company, 137–58.
100.
RussoJ. E. and SchoemakerP. J. H. (1989), Decision Traps: Ten Barriers to Brilliant Decision Making and How to Overcome Them. New York: Doubleday.
101.
SamuelsonWilliam and ZeckhauserRichard (1988), “Status Quo Bias in Decision Making,” Journal of Risk and Uncertainty, 1 (1), 7–59.
102.
SchmalenseeRichard (1982), “Product Differentiation Advantages of Pioneering Brands,” American Economic Review, 72 (3), 349–65.
103.
SchmitzJames A.Jr. (1989), “Imitation, Entrepreneurship and Long-Run Growth,” Journal of Political Economy, 97 (3), 721–39.
104.
SchoemakerPaul J. H. (1990), “Strategy, Complexity and Economic Rent,” Management Science, 36 (October), 1178–92.
105.
SchumpeterJoseph A. (1934), The Theory of Economic Development. Cambridge, MA: Harvard University Press, 131ff.
106.
SchumpeterJoseph A. (1942), Capitalism, Socialism and Democracy. New York: Harper and Brothers.
107.
SimonHerbert A. (1964), “On the Concept of Organizational Goal,” Administrative Science Quarterly, 9 (June), 1–22.
108.
SimonHerbert A. (1976), “From Substantive to Procedural Rationality,” in Method and Appraisal in Economics, LatsisSpiro J., ed. Cambridge, UK: Cambridge University Press, 129–48.
109.
SimonHerbert A. (1978), “Rationality as Process and as Product of Thought,” American Economic Review, 68 (May), 1–16.
110.
SimonHerbert A. (1979), “Rational Decision Making in Business Organizations,” American Economic Review, 69 (September), 493–512.
111.
SmithAdam (1867), The Theory of Moral Sentiments. London: Alex Murray.
112.
SmithAdam (1937), The Wealth of Nations. New York: Random House.
113.
StalkGeorge (1988), “Time–The Best Source of Competitive Advantage,” Harvard Business Review, 66 (July–August), 41–51.
114.
StaschStanley F. and LanktreePatricia (1980), “Can Your Marketing Planning Procedures Be Improved?” Journal of Marketing, 44 (Summer), 79–90.
115.
StiglerGeorge J. (1961), “The Economics of Information,” Journal of Political Economy, 69 (June), 213–25.
116.
SuttonHoward (1990), The Marketing Plan. New York: The Conference Board.
117.
SwedbergRichard (1990), Economics and Sociology. Princeton, NJ: Princeton University Press.
118.
TaylorRonald N. (1976), “Psychological Determinants of Bounded Rationality: Implications for Decision-Making Strategies,” Decision Sciences, 6, 409–29.
ThomasGloria P. and SoldowGary F. (1988), “A Rules-Based Approach to Competitive Interaction,” Journal of Marketing, 52 (April), 63–74.
121.
TverskyAmos and KahnemanDaniel (1986), “Rational Choice and the Framing of Decisions,” Journal of Business, 59 (4), S251–78.
122.
UrbanyJoel E., DicksonPeter R., and WilkieWilliam L. (1989), “Buyer Uncertainty and Information Search,” Journal of Consumer Research, 16 (2), 208–15.
123.
UrbanyJoel E. and DicksonPeter R. (1990), “Prospect Theory and Pricing Decisions,” Journal of Behavioral Economics, 19 (1), 69–80.
124.
UrbanyJoel E. and DicksonPeter R. (1991), “Reactions to a Competitive Pricing Move,” Marketing Letters (forthcoming).
125.
VenkatramanN. and CamillusJohn C. (1984), “Exploring the Concept of ‘Fit’ in Strategic Management,” Academy of Management Review, 9 (3), 513–25.
126.
LeopoldVon Wiese (1929), “Die Konkurrenz, vorwiegend in soziologisch-systematischer Betrachtung,” Verhandlungen des 6. Deutschen soziologentages, p. 27.
127.
WaltonMary (1986), The Deming Management Method. New York: Putnam.
128.
WebsterFrederick E. (1988), “Rediscovering the Marketing Concept,” Working Paper No. 88-100. Cambridge, MA: Marketing Science Institute.
129.
WeitzBarton A. (1985), “Introduction to Special Issue on Competition in Marketing,” Journal of Marketing Research, 22 (August), 229–36.
130.
WensleyRobin (1982), “PIMS and BCG: New Horizons or False Dawn?” Strategic Management Journal, 3 (April–June), 147–58.
131.
WilliamsonOliver E. (1979), “Transaction-Cost Economics: The Governance of Contractual Relations,” Journal of Law and Economics, 22 (October), 233–62.
132.
WilliamsonOliver E. (1985), The Economic Institutions of Capitalism. New York: The Free Press.
133.
WindYoram (1978), “Issues and Advances in Segmentation Research,” Journal of Marketing Research, 15 (August), 317–37.
