Abstract
Prior to an exploration of bounded rationality in internationalization processes of companies, it is necessary to take a closer look at the general matter of rationality in judgment and decision-making processes. This is because internationalization processes are shaped by a series of consecutive decisions based on the individual and organizational expectations of decision-makers. These judgment and decision-making processes should be based on rational grounds, or in other words, on an appropriate analysis of alternatives as well as on information processing. Rationality is the basic criterion for the evaluation of the plausibility of processual decisions. Yet, as already pointed out in the introduction of this dissertation, the actions of decision-makers and their expectations are not necessarily based on objective, fully justifiable grounds: Not only are managers working in difficult environments (particularly in the context of international business), in which they are confronted with imperfect situational contexts, e.g., lack of information, but they are also subjected to cognitive dispositions that trigger boundedly rational and even so-called irrational behavior. But in addition to potential limits of rationality there is furthermore the fundamental question of what rationality actually is. What defines ‘objective and fully justifiable’ grounds? In different contexts, the term of rationality is used by philosophers, theologians, mathematicians, sociologists, and economists. A clarification of this dissertation’s underlying understanding of rationality is therefore inevitable for a thorough analysis of bounded rationality in the context of internationalization processes. This clarification will be conducted in Sect. 2.1.
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Notes
- 1.
Cf. Bronner (2004, col. 229).
- 2.
- 3.
- 4.
Cf. Johanson and Vahlne (1977, pp. 23 ff.).
- 5.
- 6.
- 7.
Cf. Mallard (2012, p. 675).
- 8.
Cf. Boudon (2007, p. 26), for a broad—rather philosophical—discussion of a general theory of rationality and an understanding of ‘common sense’.
- 9.
Cf. Hempel (1961–1962, p. 5).
- 10.
Weber (1972, p. 13).
- 11.
Cf. Read (2007, p. 46).
- 12.
Cf. Schumpeter (1984, p. 580).
- 13.
Cf. Scott (1999, p.126).
- 14.
- 15.
Cf. Sugden (1991, p. 751).
- 16.
Cf. Sect. 2.2.1.2 of the present study for a more detailed overview of these assumptions.
- 17.
Cf. Sect. 2.1.1.3 for more information on varieties of rationality.
- 18.
Hollis (1977, p. 21).
- 19.
Cf. Persky (1995, p. 222).
- 20.
Cf. Smith (1966, pp. 12–14).
- 21.
- 22.
- 23.
Cf. Zouboulakis (2014, pp. 3 ff.).
- 24.
Arrow (1986, p. S388).
- 25.
- 26.
- 27.
Cf. Vriend (1996, p. 270).
- 28.
Cf. Kirchgässner (2008, p. 15).
- 29.
Cf. Sect. 2.1.2 for an alternative understanding of rationality (as in bounded rationality).
- 30.
Cf. Doucouliagos (1994, p. 877).
- 31.
Cf. Zintl (1989, p. 53).
- 32.
Cf. Gäfgen (1974, p. 27).
- 33.
Cf. Tietzel (1981, p. 119).
- 34.
Cf. Kerscher (2013, p. 15).
- 35.
Cf. Machlup (1978, pp. 269–273).
- 36.
Cf. Dahrendorf (2006, pp. 105–106).
- 37.
- 38.
Machlup (1978, p. 267).
- 39.
Cf. Sect. 2.1.2.
- 40.
Cf. the following section for information on individual internationalization benefits for managers.
- 41.
Cf. Jensen and Meckling (1976) for fundamental literature on agency theory.
- 42.
- 43.
Freeman (1984, p. 9), argues that owners also seek management control besides returns. Hence, shareholders have a strong but not exclusive priority on returns.
- 44.
Wright and Ferris (1997, pp. 77 ff.).
- 45.
- 46.
- 47.
Rational actions from a company perspective, for example, should yield in long term economic success with the highest possible benefit for all stakeholders.
- 48.
- 49.
- 50.
Cf. Grünig and Kühn (2013, p. 38).
- 51.
Davidson (2004, pp. 39 ff.).
- 52.
Cf. Grüning and Kühn (2013, p. 37).
- 53.
- 54.
Yet this differs slightly from Max Weber’s understanding of value-rational decisions, which are much more the consequence of social intentions.
- 55.
Cf. Davis et al. (1997, p. 25).
- 56.
Cf. Oesterle et al. (2013, p. 190).
- 57.
Cf. Harris and Raviv (1991, p. 300).
- 58.
Cf. Oesterle et al. (2013, pp. 187 ff.).
- 59.
Admittedly, the presented line of argumentation concentrates on owners and managers. ‘Blue-collar-employees’ can very well be negatively affected by internationalization processes as internationalization can lead to production offshoring and job-losses.
- 60.
- 61.
Cf. Strange et al. (2009, p. 396).
- 62.
Cf. Saßmannshausen (2009, p. 61).
- 63.
Simon (1976, p. xxviii).
- 64.
Cf. Sect. 2.1.1.2.
- 65.
- 66.
For further information on the relation between these two scholarly disciplines refer to DellaVigna (2009, p. 315).
- 67.
Cf. Selten (2002, p. 13).
- 68.
Simon (1955, p. 99).
- 69.
Cf. Simon (1990, p. 7).
- 70.
Cf. Basel and Brühl (2013, p. 747).
- 71.
Cf. Pomerol and Adam (2006, p. 34).
- 72.
Cf. Camerer et al. (2004) and their Roundtable Series in Behavioral Economics for an overview of recent studies.
- 73.
Cf. Bendor et al. (2009, p. 1).
- 74.
Cf. Simon (1979, pp. 500–503).
- 75.
Cf. Basel and Brühl (2013, p. 747).
- 76.
- 77.
Cf. Lipsey and Lancaster (1956, p. 11), for essential literature on the ‘theory of the second best’. A Paretian optimum requires the criterion that all of its preconditions must be met in order to reach the optimal state. However, if only one precondition is not met, the fulfillment of all other preconditions is not necessarily any longer desirable. On the contrary, a second best equilibrium could be rather worthwhile, as long as the preconditions for this alternative are actually entirely met. William J. Baumol (1965, p. 138) argues that in a scenario, in which 5000 supply-demand equations must be satisfied for an optimal resource allocation, the fulfillment of 3900 of these conditions is not necessarily superior to the fulfillment of only 2400.
- 78.
- 79.
Cf. Tversky and Kahneman (1974, p. 1124).
- 80.
Cf. Forbes (2005, p. 624).
- 81.
- 82.
- 83.
Cf. Chugh and Bazerman (2007, p. 1).
- 84.
- 85.
- 86.
Cf. Gigerenzer (1991, pp. 83 ff.).
- 87.
Cf. Gigerenzer and Gaissmaier (2011, p. 454).
- 88.
- 89.
Cf. Sect. 3.3.2 of the present study.
- 90.
Cf. Tirole (2002, p. 640).
- 91.
Cf. Gigerenzer and Selten (2002, p. 4).
- 92.
Cf. Walliser (2008, p. 103).
- 93.
- 94.
Cf. Eisenführ et al. (2010, p. 3).
- 95.
Cf. von der Oelsnitz (1999, p. 157).
- 96.
- 97.
Cf. Sect. 3.2.
- 98.
- 99.
Cf. Osterloh (2004, col. 222).
- 100.
Cf. Dunning (1988, p. 14).
- 101.
Cf. Fox (2015, p. 85).
- 102.
- 103.
Cf. Rapoport (1989, p. vii).
- 104.
Cf. Simon (1959, p. 255).
- 105.
Cf. Langer and Rogowski (2011, p. 180).
- 106.
Cf. Rapoport (1989, p. vii).
- 107.
- 108.
Cf. Laux et al. (2014, pp. 155–157).
- 109.
It has been referred to ‘seemingly’ because the reader should recall that the advisory capability of prescriptive JDM approaches is heavily constricted by rigid assumptions.
- 110.
- 111.
Cf. Laux et al. (2014, pp. 157–158).
- 112.
- 113.
- 114.
Cf. Laux et al. (2014, p. 41).
- 115.
Cf. von Winterfeldt (1989, pp. 499 ff.).
- 116.
- 117.
Cf. Loomes and Sugden (1982, pp. 805 ff.) and their Regret Theory as an example.
- 118.
Cf. Bamberg et al. (2012, p. 6).
- 119.
- 120.
Cf. Laux et al. (2014, p. 4).
- 121.
Cf. Wolf (2013, p. 128).
- 122.
Cf. Starmer (2000, pp. 332 ff.).
- 123.
Cf. Savage (1972, pp. 27 ff.) for a fundamental basis of subjective EUT.
- 124.
- 125.
Cf. Hammond (1998b, p. 215); see also March and Olsen (1989, pp. 160–162), on the logic of consequentiality (against the logic of appropriateness): “In a logic of consequentiality, behaviors are driven by preferences and expectations about consequences. Behavior is willful, reflecting an attempt to make outcomes fulfill subjective desires, to the extent possible.”
- 126.
- 127.
Cf. Bernoulli (1954, p. 24): “[…] the determination of the value of an item must not be based on its price, but rather on the utility it yields.”
- 128.
Cf. Starmer (2000, p. 333).
- 129.
Cf. Samuelson (1977, p. 25); cf. also Casella (1985, pp. 83 ff.), for a broad review of Bayes methods; according to the Bayes estimator (μ-rule), the expected utility of the lottery is calculated as follows: \( E\left({2}^n\right)={\sum}_{n=1}^{\infty }{2}^n\ {\left(\frac{1}{2}\right)}^n=+\infty \).
- 130.
- 131.
Cf. Heun (2007, p. 20).
- 132.
Cf. von Neumann and Morgenstern (1953, pp. 73–76).
- 133.
- 134.
- 135.
- 136.
Cf. Hammond (1998a, pp. 152–157).
- 137.
Cf. Eisenführ et al. (2010, pp. 250 ff.).
- 138.
Cf. Coombs et al. (1970, pp. 122–126).
- 139.
Cf. Eisenführ et al. (2010, pp. 248–250).
- 140.
Cf. Starmer (2000, p. 334).
- 141.
Cf. Tversky (1975, p. 163).
- 142.
- 143.
Cf. Tversky (1975, p. 163).
- 144.
- 145.
Cf. Kahneman and Tversky (1979, p. 263).
- 146.
- 147.
- 148.
Amos Tversky deceased in 1996.
- 149.
Cf. Levy (1997, pp. 89–93).
- 150.
Cf. Tversky and Kahneman (1992, p. 298).
- 151.
Cf. Sharp and Salter (1997, pp. 103–104).
- 152.
- 153.
Cf. Allais (1953, p. 505).
- 154.
Unlike Allais’s original consideration, their variation of the experiment referred to moderate instead of very large gains.
- 155.
Kahneman and Tversky (1979, pp. 265–266).
- 156.
Cf. the previous section on EUT and its axiomatic foundation.
- 157.
Cf. Fiegenbaum and Thomas (1988, p. 88).
- 158.
Tversky and Kahneman (1992, p. 298).
- 159.
Cf. Bazerman (1984, p. 333).
- 160.
Cf. Kahneman and Tversky (1979, pp. 268–269); Kahneman and Tversky label this observation as a ‘reflection effect’.
- 161.
Cf. Loewenstein and Issacharoff (1994, pp. 157 ff.).
- 162.
- 163.
Cf. Tversky and Kahneman (1992, pp. 297–298).
- 164.
- 165.
- 166.
Cf. Schaub (1997, p. 171).
- 167.
Cf. Levy (1992, p. 181).
- 168.
Cf. Kahneman and Tversky (1979, pp. 275–276).
- 169.
- 170.
Cf. Levy (1997, p. 105).
- 171.
Cf. Shimizu (2007, p. 1496).
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Röber, B. (2018). Rationality as the Basic Criterion for the Evaluation of Judgment and Decision-Making Processes. In: Escalation of Commitment in Internationalization Processes. MIR Series in International Business. Springer, Cham. https://doi.org/10.1007/978-3-319-69102-2_2
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