Abstract: How do institutions shape decisions? The case of firms

Abstract

How do Institutions shape Decisions? The case of firms 

If one tries to understand our current failure to cope effectively with the climate crisis and the loss of biodiversity, two complementary explanations come to mind. One is broadly psychological and focusses on the ways people perceive and behave in situations of enfolding crises. The other one is broadly institutional, organizational, or cultural and focusses on the impediments that result from the specific incentives, cultural norms, and expectations people are facing when making decisions. This lecture focusses on these latter explanations and thereby puts specific emphasis on decision making within firms. Firms can be perceived as organizations with specific cultures and incentives that powerfully shape mindsets and decisions. Their powerful role in a globalized capitalist world makes it a matter of highest importance to understand their internal mechanisms that shape their decisions.

These incentives cannot, however, be understood in isolation as they are themselves embedded in a market, industry, and regulatory context that constrain behavior. The purpose of this lecture is to better understand the specific behavioral incentives that result from this embedded institutional structure in order to identify important impediments or gridlocks for sustainable behavior. These findings shall open a discussion about if and how firms can play a constructive role in the process of making the economy sustainable.