Theory-Based Decisions: Foundations and Introduction

Theories are foundational for decision making. We point to a normative agenda that emphasizes the need for decision makers—including managers, firms, entrepreneurs, and startups—to develop their own theories. Our argument is that decision makers should be like scientists and use the scientific method—theories, causal reasoning, and experimentation—to problem solve and generate new data and value. In this paper and special issue introduction, we discuss the foundations of the theory-based view (TBV), particularly as it relates to forward-looking reasoning and decision making under uncertainty. Rather than handing prescriptive theories to others, the goal of the TBV is to provide the scaffolding for economic actors themselves to develop their own, idiosyncratic theories. Theories are built on heterogeneous beliefs and causal reasoning that enable the generation of unique paths to value. We discuss the implications of this argument for key theories within strategy and economics, along with highlighting research opportunities at the nexus of the TBV and topics such as learning, entrepreneurship, finance, ownership and leadership. We also introduce the special issue papers and discuss their contributions to the TBV. Funding: We appreciate ION Management Science Laboratory at Bocconi for funding the special issue conference and related activities. A. Gambardella also acknowledges support from the European Research Council (ERC) under the European Union’s Horizon 2020 Research and Innovation Programme [Grant 101021061].