Strategic Management and Economics

Strat gic ainaiagement (anld Economics 13
the basic ideas of the Mason/Blain structure- view is that the persistenice of strategies and of
conduct-performiance paradigm, Porter changed performance both stem from mechanisms which
the perspectivc from that of the industry to that link and binid actions over time. l-ie idenitifies
of the firmi. and formulated what had been lock-ini, lock-out, lags, and inertia as the key
learned froimi this perspective inlto a theoiry of irreversibilities at work and reinterprets a great
competitive strategy. Porter catalogued, deal of strategic doctrinie in terms of the selection
descr-ibed, and discussed a wNide range of pheniom- and managyemnent of commiiitimietits.
ena w-hich initerfered with frec conipetitioni, thus In suimmiry, the single most significant impact
allowing abnormal returns, and suggested hiow of econlomilics in strategic management has been
their interaction and irelative importance varied to radically alter explanations of success. Where
across contexts. Porter's (1985) later approach, the traditional frameworks haid success tollow
delineated in C'omIetitive AdMvatage extenidedt leadership. clarity of purpose, anid a general
the earlier analysis of competitive strategy to niotioIl of 'fit' betweeni the enterprise and its
encompass positioniilg withini an inidustry (or enivironimlenlt, the niew framework focusecd onl the
strategic g roup) so as to achieve sustained impedimiienits to the elimination o.f abnormli
comilpetitive advantage. Positinig two basic types r-eturnis. Dependiinig upoIn the frarmework
of firn-specific advantage (cost-based or differenl- emilployed, success is nlow seen as sustained
tiation-based), Porter argued that advantage by mobility barriers, entry barriers, market
could be sustained fi-om ia prioduct-miairket positioIn
and a configuration of internal activities that
preemiiptioni, asset specificity, leariniiig, ambiguity.
tacit knowledge, nonimitable resources ailnd skills.
were mutullly reiniforcinig (i.e. stronig comlplemileni- the shar-inig of core colimpetenices, and coimmittarities
anmongst activities and the conditionis of menit. That 'fit' was correlated with success can
demrand).'"
be argued. that it is cauSaIl cannot be. The fit
A second effort at synthesis is the resource- argument lies in the long linie of work that Plorter
based view of strategy. This view shifts attention (this issue) describes as a continluinig search for
away from product-mnarket barriers to coIlmpe- causal explaniation. TFeaching frameworks that
tition, and towiards factor-market impedimiienits suggest the importanince of fit are correct so far
to resotuce flows. Identifinga abnormal returnis as they go, but it is the new economilic frameworks
as rents to uniqlue resource combinations, rather which estalblish the causal linkages. That has
than market pover, this perspective emphasizes been learined from the pressure of askinag questhe
importaince of specialized, difficult-to-imitate tioIns from an econ omiiics perspective.
resources. The creationi of such resources is
seeni as entreprenleurship: strategic management
conisists of properly idenitityinig the existence and
TFhe changing nattire of economics
quality of resources, and in building product- The econoimist's neoclassical moodel of the firm.
market positioins and contractual arrangements enshrinied in textbooks, was a smoothly runninilg
that monst effectively utilize, maintain, aind extend machinie in a world without secrets, without
these resources. This perspective finids its greatest frictions or uncertainty, and without a temporal
use in examining heterogeneity withini industries, dimenisioni. That such a theory. so obviously
and in the dliscussioni of 'relatedness' aIIlmoig divorced from the mlost elementarv conditionis of
diversified businesses. Nelsoni (this issue) dis- real firms, should continue to be taught in most
cusses a recenit versioni of this viewpoint, incorpo- businiess schools as the theory of the firm' is a
Irating(, learnincg, that is called the 'dyarnmic truly! amiazing victorv of doctrine over reality.
capabilities' approach. Prahalad and Hamel's Thiis erai miy. however, finallv be comliling to an
[1990] recent discussion of core competenices is end(i as the cumulltive impact of new insights
an expressioni of the resource-based view. take their toll. During the past 3() years, and
Ghemawat [1 991] provides a new attempt at especially during the last 2() years. at least five
svnthlesis around the idea of comnnitment. His substantial monkev wrenches have been throwin
into what was a smoothly runiniiig maichinie. They
T5 l his airgument can be couched in strict equilibrium terms
by introducillg straitegy-specific assets or other sources of
first-mover advantage.
are cal led uncertain tx', itnforination asymmnietry,
bouniided rationazlity. opportunisni, and asset specificity.
Each ot these phenoimenaii, takeni alone,