Developing Theory Through Formal Models

Despite recent calls for increasing the use of formal mathematical modeling methods, such techniques remain rare relative to more traditional means of theory development in strategy and organizations. This appears to be due to a general lack of awareness regarding proper execution of formal modeling methods, a lack of clarity associated with their role in theory development, and unfamiliarity with such models among general readers. We address this gap through an inductive review of recent formal modeling research as well as extensive interviews with formal modeling scholars. In particular, we propose specific guidelines for the identification of appropriate research questions, construction of models to address these questions, and development of theoretically relevant results. We also tie formal modeling to other approaches to theory building, notably inductive case studies. The result is a more detailed guide for the use and evaluation of formal models than has previously existed.