Applying Agent-Based Modeling to Integrate Bounded Rationality in Organizational Management Research

Simulation models to analyze the dynamics of organizations have lately become more widely-used in organizational science. In contrast to traditional research, which is typically based on more stable and predictable characteristics, these computational models are better able to take into consideration the dynamics and complex interrelationships of today´s organizations.Addressing the methodological question of how to model organizations, we give an overview on different computational approaches such as discrete event simulation, system dynamics and agent-based models to map these complex interactions between organizations and their environments. Utilizing a variety of criteria, we discuss the use and value of different simulation approaches in organizational theory and present both their advantages and shortcomings.In particular, while focusing on the information processing view of organizations, we explain the concept of bounded rationality and its implementation in simulation approaches. In this context, we show that agent-based models represent strong methodological tools to analyze both the inherent organizational dynamics and the coevolution between organizations and their environments.