SPE Economics & Management
Volume 4, Number 3, July 2012, pp. 190-193

Summary

The combination of computer technology and decision theory has failed to produce the dramatic improvement in the quality of corporate decisions that some predicted. In this paper, I suggest that this failure comes, at least in part, because too little attention has been paid to the environment in which corporate decisions are made. Specifically, this article proposes that corporate decision processes are not constructivist rationality, but more closely resemble the ecological rationality of biological systems shaped by evolution and natural selection. That is, decision processes in corporations evolve over time to satisfy, although not necessarily to optimize, both stated and unstated objectives subject to complex information cost structures and constraints. To illustrate, examples of persistent information asymmetry and economic signaling in nature and in decision processes are shown. Finally, this article suggests that improved understanding of the forces that impact the evolution of corporate decision processes may allow decision theory to come closer to achieving its potential.

© 2012. Society of Petroleum Engineers

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History

• Original manuscript received: 2 June 2011
• Revised manuscript received: 18 August 2011
• Manuscript approved: 21 April 2012
• Published online: 27 June 2012
• Version of record: 13 July 2012