Strategic Management and Economics

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0 143-2095/91/1 00005-25$ 12.50 ? 1991 bY John WileY & Sons, Ltd. Strategic Management Jouiai sll, Vol. 12, 5-29 (1991) STRATEGIC MANAGEMENT AND ECONOMICS RICHARD P. RUMELT Anderson Graduate School of Management, University of California, Los Angeles, California, U.S.A. DAN SCHENDEL Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana, U.S.A. DAVID J. TEECE Haas School of Business, University of California, Berkeley, California, U.S.A. This essaoy examines the relationslip ibetiveen strategic mtianiagemtienit anid economics. It introdhces the special isslse oni this samtie top3ic by providing a guidle to tihe eighit papers ontainedl in tihe special isslse, andt it offers tihe gluest edlitors viewpoints on t(ie ontribultions of each d-i.sciplinze to tihe otilier. The essay, niotes tie mai0jor contribution fromti ecionomics hias ibeen primi1arily' fromt tdie inldustrial organiZation literatlure, witii pirom iises of im-tiporttant gainis to be mtiadie ftromt the 'nzew' economics as it breaks away firom1 t(ie neoclassi(al tlieory of tile firm7*. Contribultions fromt strategic mtianiagemtienit to ecionomi(s are niotedi. Areas for fiurttier resear(ci lutiliZing tie relationsiliip betw'een strategic m7ianiagem7ienit and1b e(onomics aore also ildicated. INTRODUCTION relevaint to generail mainaigers, Is in Jeinsein's (1989) views oIn corporaite cointrol IInd Williaiim- The last decaide hais witnessed a minor revolution soi1's (1975, 1985) ainallysis of the efficieincy in straitegic mainaigemeint reseairch aind writiing. properties of the institutioins of caipitailism. As never before, aicaidemics haive aidopted the Although there caIIn be little doubt that Iianguaige aIInd logic of economiiics. This chainge is ecoinomic thiinkiing is reshaipiing straitegic mainalgeowed to the increaised use of economics by meint, opiInioIn is divided as to the usefulness of strategy scholairs aIInd to the increaised aibility of this trend. Within straitegic maniasigeimieint, there economists, airmed with new tools aIInd richer is a growing group who cross over between the theories, to aittaick problems of centrail interest fields, but imiintaiin an uinderstanIidiing of their to straitegic imanaiiiigemeint. Thus, duriing this paist distiinct strengths aind weaiknesses. However, decaide we haive seen straitegy scholairs reaiching there aire ailso some who see ecoinomiiics aIs the out to use or reformulaite econoimiic theory, as Isolution' to the straitegy problem (or, perhaips, in Porter's (1980) influentiail treaitmeint of industry to the 'tenure' problemi), rejecting the field's structure. In the other direction, we haive traiditioinail preoccupaitioin with situtioiil coIImseen some economists positioning their work aIs plexity aIId mainaigeriail processes. Finially, there are some who stroingly oppose the conflueince, seeing economiiics as 'imperialistic,' as takinig Key1 words: Editor's connmeit, strategic nmanagenmeint undue credit for formailiziing thait which was econonmics, research issues ailreaidy kinowin by others, aIInd as iinseinsitive to
6 R. P. Rumzelt, D. Schenclel antid D. J. Teece aispects of the humain situaitioin other thain the lighting sailient research issues. The fifth section raitionail pursuit of gaiin. Within economiiics, the situaitioin is simpler: there aire those who follow aIInd appreciate the contributionIs of straitegic maniasigemiieint reseairch, but there is ai much lalrger provides a guide to the paipers in this issue. Our summairy commilenits group who are unalwaire of traiditions outside of economiiics aniid apprehend business management oinly through their owIn coinstructs (aIInd an occaisionall reaiding of the Wall Str-ect Jolurntial). Our purpose for this speciail issue of the Strategic Maniagettietit Jolurnlal is to examiine the staite of the current coninectioin between straitegic imanaiiiigemiieint aniid ecoinomiiics. T"his examiiiinaltioin will be done in two waiys. The first waiy will be in preseintiing paipers froiim a lalrger collection of coiimimlissioined paipers aIInd coiimimeintairies thait aippeair elsewhere' aId which provide pairticulairly sailient exaimples of the intersectioin of the two fields. The second waiy is through this editorial essaiy which, in aidditioin to providing our interpretaitioins of the paipers selected for this speciail issue, is extended to provide our owIn views about the conniectioin betweein straitegy aind ecoinoiimics. These views aire intenided to chaillenge both ecoinomiiists aind straitegists to recoginize eaich others' coitributioins, liiimitaitioins, aIId the opportuinities ealch falces in coininectiing theory aIId aipplicaition. Along the waiy we hope thait new directions aind priorities for reseairch will be surfaiced for our reaiders, whether their primairy interest is straitegy or economiiics. Some commilenit will ailso be provided oIn the issue: Whait (aIInd who) should guide the intellectuail developmenit of the strategic maniasigemiieint field: strategic thiinkiing aIId straitegists, or ecoinomiiic theory aIId econoiiiists? Our essaiy is orgainized in this waiy: the next section briefly reviews the evolution of the conlniectioin betweein ecoinoiimics aIInd strategic maniasigemiieint. The third section aiddresses imiiportaint forces thait haive iinduced this coininection. The fourth section examinies the future of straitegic imanaiiiigemileint aIId ecoinomiiics, high- close the essaiy. A BRIEF HISTORY OF ECONOMICS WITHIN STrRATEGIC MANAGEMENT Straitegic maniasigemiieint, oftein cailled 'policy' or nowaidaiys simply 'strategy,' is aibout the direction of orgainizaitioins, aniid miiost ofteni, busiiness firmiis.2 It includes those subjects which aire of primairy concerni to senior management, or to ainyoine seeking reasons for the success aind faiilure aimoing orgainizaitioins. Firmis, if Inot all organizations, aire in comilpetitioin. competitioni for faictor inputs, competitioni for customers, IInd ultimiaitely, coImlpetition for revenues thait cover the costs of their chosen mannliier of surviving. Firms haive choices to maike if they aire to survive. Those which aire strategic include: the selection of goails, the choice of products aIId services to offer; the design aIId configuraitioni of policies determiniing how the firm positioIns itself to compete in productmairkets (e.g. competitive straitegy); the choice of an aippropriaite level of scope aIId diversity; aIId the desigin of orgainizaitioin structure, aldminiiiistraitive systemils aIId policies used to defiine aIId coordinalte work. It is a baisic proposition of the straitegy field that these choices haive critical iniflueince oIn the success or faiilure of the eniterprise, aIInd, thait they must be integraited. It is the integraitioni (or reinforciing paittern) aimong these choices thait maikes the set a straitegy. Straitegic Imanaiiiigemilenit aIs a field of inquiry is firimily grouinded in pralctice aIId exists becaiuse of the importance of its subject. The straitegic directioin of busiiness organizations is ait the heairt of weailth creaition inI moderin industrial society. T"he field has Iot, like politicail scieince, grown fromii ancient roots in philosophy, inor does it, like pairts of ecoinoimiics, attract scholairs becaIuse of the elegaince of its theoreticail underpiiniiings. Raither, like mediciine or engiineeriing, it exists I'IThe lairger collection of papers appears in Flwidme(ttietittil Issues in Sti'ategy, Richard P. Rurmelt, Dan Schendlcl. and 2 W will LISe a vairiety ot terrms interchangeably aindl aIssuLIle David .1. Teece, (Edls.), Hairvatrdl Business School Prcss, 1992. throughout the reader will interchainge them ieasily ais well. This book contaiins the papers in this special iSSLe, in some Such alternatives as firmn/orgatnizattion/enterprise; proutict/sercaises in extendled form. This companion volumle extendls the vice; policy/strategy/strategic management; administrative liscussion of strategic management and economics presentcd structUrc/organization structure/mianagtemnent process aIre in this special iSSLIe. broadens the scope to inciLlde other examples of terms and conccpts we use more or less social science dlisciplines. and providles a widlcr dliscuIsSion of interchangeably for sake of vairiety and convenience, and wc research issues fatcing the fieldl. trLIst, with no loss ol gencratlity.
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