ABSTRACT
The behavioural theory of the firm emerged out of a critique of the neoclassical theory of the firm in early 1960s in the work of, most notably, Herbet Simon, and R. M. Cyert and J. G. March of American Carnegie School. Behavioural assumptions have showed a wide influence on both economic and strategic management literature. The members of the coalition are assumed to have conflicting goals such as production, sales, market share, inventory and profit. The behavioural theory of the firm reflects a realistic description of internal and external environments of the firm, which seems to be compatible with that of strategic management. As for the problem of sustainability, behavioural theorists contend, as Whittington observes, that 'it is to the very imperfections of organisational and market processes that managers owe their strategies and competitive advantage'. The behavioural construct manifests an alternative view of the firm as a coalition of conflicting interest groups to the neoclassical theory of the firm.
