Managerial Theories of the Firm

These flashcards cover key concepts and applications of managerial theories of the firm, including various models and their influence on management decisions.

What does the Baumol Model suggest is the primary objective of a firm's management?

To maximize sales revenue rather than profit.

In the Marris Model, what is the main goal of managers?

To maximize the growth rate of the firm.

What does the Williamson Model emphasize about the behavior of managers?

Managers have discretion over operations and may pursue goals other than profit maximization.

According to the Cyert and March Model, what factors influence firm decision-making?

Bounded rationality, uncertainty, and stakeholder satisfaction.

What is the agency problem as described in the Jensen-Meckling Agency Theory?

Managers may make decisions that benefit themselves at the expense of the firm's owners.

What does Transaction Cost Theory focus on regarding firm structure and decision-making?

Minimizing transaction costs in organizing the firm.

In the Baumol and Marris Models, what do both models prioritize?

The growth of a firm is a primary concern for managers.

How does the Hart and Moore Property Rights Theory relate to managerial behavior?

Managers' behavior is influenced by their rights to the firm's assets and decision-making control.

What is a real-world example of the Baumol Model in action?

A company aggressively expands market share through pricing and advertising to increase sales revenue.

What example illustrates the Marris Model's focus on growth maximization?

A tech company acquiring startups to increase its market presence.

What can managers prioritize according to the Williamson Model?

Personal power, influence, or job security.

What does bounded rationality mean in the context of the Cyert and March Model?

Decision-making is constrained by limited information and environmental complexity.

What mechanisms can align the interests of managers and owners according to Agency Theory?

Performance-based compensation and monitoring.

What is an example of a company's decision influenced by Transaction Cost Theory?

A company vertically integrating its supply chain to reduce transaction costs.

How do managerial theories challenge traditional economic models?

They suggest that managers often have different objectives, such as growth and personal utility, rather than solely maximizing profits.