Methodology

ORGANIZATION THEORY AND METHODOLOGY

Michael C. Jensen

Harvard Business School

mjensen@hbs.edu

Abstract

The foundations are being put in place for a revolution in the science of organizations. Some major analytical building blocks for the development of a theory of organizations are outlined and discussed in this paper. This development of organization theory will be hastened by increased understanding of the importance of the choice of definitions, tautologies, analytical techniques, and types of evidence. The two literatures of agency theory are briefly discussed in light of these issues. Because accounting is an integral part of the structure of every organization, the development of a theory of organizations will be closely associated with the development of a theory of accounting. This theory will explain why organizations take the form they do, why they behave as they do, and why accounting practices take the form they do. Because such positive theories as these are required for purposeful decision making, their development will provide a better scientific basis for the decisions of managers, standard-setting boards, and government regulatory bodies.

© M. C. Jensen, 1983

The Accounting Review, April 1983, v. LVIII, No. 2, pp. 319 - 339, also published in Foundations of Organizational Strategy, Michael C. Jensen, Harvard University Press, 1998.

This document is available on the Social Science Research Network (SSRN) Electronic Library at: http://papers.ssrn.com/sol3/paper.taf?ABSTRACT_ID=94036

ORGANIZATION THEORY AND METHODOLOGY

Michael C. Jensen*

The Accounting Review, April 1983, v. LVIII, No. 2, pp. 319 - 339, and Michael C. Jensen, Foundations of Organizational Strategy, Harvard University Press, 1998.

I. Introduction A major challenge facing social scientists is the development of a body of theory to explain why organizations take the form they do and why they behave as they do. My objective is to outline some aspects of this...