Handbook on the Economics and Theory of the Firm
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Handbook on the Economics and Theory of the Firm

Edited by Michael Dietrich and Jackie Krafft

This unique Handbook explores both the economics of the firm and the theory of the firm, two areas which are traditionally treated separately in the literature. On the one hand, the former refers to the structure, organization and boundaries of the firm, while the latter is devoted to the analysis of behaviours and strategies in particular market contexts. The novel concept underpinning this authoritative volume is that these two areas closely interact, and that a framework must be articulated in order to illustrate how linkages can be created.
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Chapter 21: Cognitive Theory of the Firm: A Pragmatic Perspective

Bart Nooteboom


21 Cognitive theory of the firm: a pragmatist perspective Bart Nooteboom 21.1 INTRODUCTION Why a cognitive turn in theory of the firm? We talk of the knowledge economy, organizational learning, knowledge management and the like, and we should then know what we are talking about, and rather than reinventing wheels let us employ insights from cognitive science that are available. This chapter will adopt what is known as an ‘embodied cognition’ view, which has roots in philosophical pragmatism. This yields a constructivist, interactionist view of cognition. Cognition is internalized action. Goals, ideas, dispositions are largely unconscious and when they are exercised in action they run into obstacles and novel opportunities that cause them to shift. This view goes against rationalist assumptions of autonomous, pre-established goals for which optimal use of means is sought. This has important implications for theory of the firm and of inter-firm relationships. 21.2 EMBODIED COGNITION When we turn to cognitive science the problem is that there are different schools of thought. I opt for the ‘embodied cognition’ school, in the work of Damasio (1995, 2003), Lakoff and Johnson (1999) and Hendriks-Jansen (1996). It rejects Cartesian separation of body and mind and recognizes that cognition is rooted in largely unconscious bodily processes of perception, feelings and emotions. In this, Damasio (2003) goes back to the insights of Spinoza (in the second part of his Ethics). The embodied view is also found in the work of Merleau-Ponty (1964). In this embodied view, cognition is a wide concept, including...

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