Probability Theories and Organization Science: The Nature and Usefulness of Different Ways of Treating Uncertainty

Given the prevalence of statistical techniques that use probability to quantify uncertainty, the aim of this article is to highlight the theoretical aspects and implications of the major current probability interpretations that justify the development and use of such techniques. After briefly sketching the origins and development of the notion of probability, its theoretical interpretations will be outlined. Two main trends will be distinguished: one epistemic and one empirical, corresponding to the twofold meaning characterizing probability. The epistemic type embodies the so-called classical theory put forward by Laplace as well as the logical and subjective approaches. By contrast, the frequency and propensity theories are, in theory, empirical in character. This way of understanding probability contrasts with both the tenet that there is a “Bayesian interpretation” of probability and the tendency to conflate Bayesian probability with the subjective interpretation, both of which are misleading for reasons that emerge from the following discussion. The final section of the paper addresses the question of which type of probability is best suited for the organization sciences and suggests the subjective interpretation as the best option by virtue of its pluralism and awareness of context.