Elements of a Cognitive Theory of the Firm

This paper presents elements of a cognitive theory of the firm, from the perspective of embodied cognition.It entails the notion of 'cognitive distance' between people that have developed their cognition in different environments. This yields the notion of the firm as a 'focusing device', to reduce cognitive distance for the sake of efficient collaboration and for the resolution of conflict.This focus yields organisational myopia, which needs to be compensated by outside relations, between firms, at some cognitive distance.Next, on the basis of principles derived from cognitive science, this paper tries to resolve the problem of combining structural stability and change, which in economics is known as the problem of combining exploitation and exploration.This provides the basis for a theory of learning and innovation in organisations and economies.The theory is elaborated on the basis of the notion of 'scripts', also derived from cognitive science.