Extending the Behavioral Theory of the Firm to Entrepreneurial Firms

While the Behavioral Theory of the Firm (BTOF) is one of the most popular theories of organizational change in the strategic management literature, the empirical work used to develop the theory used established firms; most empirical tests of the theory do likewise. Over the past decade or so, however, a number of studies have attempted to extend the BTOF to entrepreneurial firms. This paper examines the extent to which the BTOF applies to entrepreneurial firms. We propose that while some constructs and mechanisms specified in the BTOF (such as aspirations, routines, search, and learning) have limited relevance for entrepreneurial firms and need modifications to be relevant, other constructs and mechanisms (such as dominant coalitions and biases) have greater visibility and relevance in entrepreneurial firms than in larger firms. We conclude with a discussion of how we can most fruitfully apply the BTOF to explaining decision-making by entrepreneurial firms.