This chapter presents rationale for a theory of organizational cognition on the basis of contingency theory and bounded rationality concepts. According to the bounded rationality theory (Simon, 1947, 1982a, 1997a, and 1997b), this book advocates that organizations have limitations of knowledge management and computational capacity. A theory of organizational cognition is important and necessary when we decide to design organizations with higher capabilities of information processing and uncertainty management. In such a way, organizational cognition is a discipline which contributes to improve the computational capacity of the organization and its ability for knowledge management. Moreover, the theory of organizational cognition as proposed in this book, plays an important part, and introduces a new perspective, in the analysis of the relations between the organization, its elements and the environment. Assuming such core rationale, this chapter introduces a methodology to support the choice of strategies of organization design which either reduces the amount of information that the organization needs to process, or increases the degree of cognition of the organization. The alternative of design that provides an increase in the degree of organizational cognition is the one selected from such a methodology. Moreover, technology and participants (both including cognitive machines) are the elements of design that we choose in order to improve the degree of cognition of the organization – that is in order to improve the organization capability of information processing and uncertainty management.
MSME’s sustainable economic behavior for struggling poverty: Agency theory vs. bounded rationality theory
