Research in the Strategic Theory of the Firm: 'Isolationism' and 'Integrationism'

It has been increasingly often argued that strategy research should aim for a 'strategic theory of the firm', that is, a theory explains the existence, boundaries, organization and competitive advantage of the firm within a unified theoretical framework. This paper discusses two archetypal strategies in research in the strategic theory of the firm, namely 'isolationism' and 'integrationism'. While the former is representative of the positions that either the knowledge-based view or the modern economics of organization can develop into full-blown strategic theories of the firm, the integrationist strategy stresses that progress is more likely to emerge from a combination of insights and research procedures from both the knowledge-based view and the modern economics of organization. The paper argues in favour of integrationism. In addition, the paper presents some novel criticisms of both the knowledge-based view and the modern economics of organization.     

Optimal pricing strategy for foreign market entry: a game theoretic approach

Given that pricing plays an important role in a company's international competitive strategy, researchers have long argued the need for theory building in the area of international pricing. This study develops an optimal pricing strategy for foreign market entry using a game theoretic framework. The proposed model assumes two firms, a local incumbent and a foreign entrant, competing in a market. Consumers know the quality of the incumbent's offering, but do not know how it compares to that of the foreign entrant's. Based on these assumptions, and using the theory of inference making, we propose an upward price distortion by the entrant firm as an optimal entry strategy under incomplete information. The paper presents a game theoretic derivation to establish that the game has a unique intuitive separating equilibrium where the entrant firm stands to gain by engaging in upward price distortion to signal high quality to consumers. Copyright © 2006 John Wiley & Sons, Ltd.     

Linking Theory and Context: ‘Strategy Research in Emerging Economies’ after Wright et al. (2005)

Emerging economies provide a laboratory for investigating the interaction between firm strategies and local contexts. Mike Wright and colleagues have shaped this research agenda by creating legitimacy for this line of research, and by outlining how research in four types of strategy contexts can advance theories. We assess how this agenda has progressed in eight leading journals in the past decade, particularly during the five years following their review, with the aims to identify broad trends of theorizing, and to outline future research challenges. Emerging economy contexts challenge some of the assumptions of theories originally developed for markets that are relatively stable and efficient. Researchers have advanced several theoretical perspectives by addressing these challenges. Wright and colleagues focused on institutional theory as a major foundation for such work, and we find it continuing to be the most popular theoretical perspective. In addition, new perspectives have emerged, focusing on learning, relationships, real options, and spillovers as focal concepts for theorizing.     

资本结构与公司产品市场战略——一个模型分析

本文在总结了以前资本结构理论的基础上,提出了分析资本结构与产品市场战略关系的一般框架,按照公司债务是否能使公司在产品市场竞争中处于强势或弱势地位的标准,分别介绍不同的战略决策对公司财务杠杆的影响,得出了正的战略效应能够增加高负债水平的杠杆收益;负的战略效应会减少高负债水平的杠杆收益。与不考虑战略安排的情况相比,相应地应该举更多(更少)债务的结论。相反,我们也描述了负债对公司产品市场竞争战略的影响,得出了上述结论另一方面的解释。最后,讨论了结论的理论意义及现实意义。     

Developing Theories of Strategy Using Dominance Criteria

This article identifies key features of the strategy concept as a basis for reviewing existing theories of strategy. It also provides an agenda for future research. the article argues that there is a decision hierarchy in a firm, and defines strategy as the highest-level decision in the hierarchy. Consequently, strategy has to exhibit what may be called three features of dominance: vertical dominance, horizontal dominance, and dynamic dominance. A vertically dominant strategy is one that determines, directly or indirectly, other decisions of a firm. A horizontally dominant strategy seeks to optimize the value of the firm according to some criteria. Dynamic dominance implies that strategy should affect the subsequent decisions of a firm over a relevant period of time. With few exceptions, existing theories of strategy are issue-oriented and focus largely on horizontal dominance. More research should, therefore, be directed towards vertical and dynamic dominance criteria. If a comprehensive theory of strategy which satisfies the three dominance features cannot be developed, it is suggested that development should be directed towards integrating behavioural and economic approaches.     

Green management,firm innovations,and environmental turbulence

The multifaceted nature of firm innovation has prevented researchers from fully explaining the relationship between firm innovation and green management. This study, building on the Schumpeterian theory of innovation, explores this relationship by examining three major types of firm innovation—strategic innovation, managerial innovation, and product innovation—and their respective relationships with green management, considering several dimensions of environmental turbulence as distinctive boundary conditions. We propose that both strategic innovation and managerial innovation facilitate green management, which in turn mediates these effects on new product performance. The results of a survey of 303 Chinese firms provide strong support for this mediating logic. Moreover, we find that market turbulence weakens the effect of strategic innovation on green management whereas technological turbulence strengthens such effect but the effect of managerial innovation on green management is not influenced by environmental turbulence. Our research contributes to the innovation as well as green management and sustainability literatures by offering a framework in which to analyze firm innovation and green management and by showing how firms pursue sustainability and prosperity under specific environmental conditions.     

Action,knowledge and business–environment research: a case for grounded constitutive process theories and a sense of audience

Reflection upon the business–environment literature reveals a difficult transition from early concerns with raising awareness, to current interest in meeting the shortfall in knowledge that many recognize as a barrier to improving environmental performance. From its standpoint of ‘research as reflective conversation’, this paper suggests how research contributions can be framed to provide knowledge with which to address this shortfall. In particular, a case is presented for ‘constitutive process theories’: rich but concise stories of situated action from which others can draw lessons. The paper demonstrates how constitutive process theories can illuminate key aspects of the context, content and process of environmental initiatives. Criteria are identified for assuring rigour and relevance for theories developed in this genre. For instance, individuals involved in a particular initiative must recognize their story in its summary. Also, the theory should include meaningful cues for a wider practitioner audience. These points are illustrated in a constitutive process theory of how a multi‐agency network formed in response to concerns about air quality, transport and public health. Reflecting on lessons learned, the paper argues that the ability to be guided, but not limited, by an acute ‘sense of audience’ is a critical skill for researchers seeking to provide knowledge for action. Copyright © 2000 John Wiley & Sons, Ltd and ERP Environment     

Recasting Enterprise Strategy: Towards Stakeholder Research That Matters to General Managers

As well as specifying functional, business unit, and corporate levels of strategy, early strategy scholars delineated enterprise level strategy as the uppermost level of strategy. Enterprise strategy articulates how the firm engages with actors in its economic, social, and political environment to ensure long‐term corporate performance. As a growing body of evidence shows, heterogeneity in how firms identify, and engage with, their stakeholders can explain why some firms outperform their peers. However, my literature survey of more than three decades of published research reveals that enterprise strategy has stayed firmly in the shadows behind business and corporate strategy. Furthermore, many theories of firm–stakeholder relationships are normative (i.e. explain how firms should act) and do not inform strategy effectively. In this paper, I argue why enterprise strategy research is required as a cohesive body of work that connects with research in business and corporate strategy. I finish by proposing three research domains – strategic goals, organization design, and organization boundaries – that hold the potential to link stakeholder issues with mainstream concerns in strategy research and, thus, to revive a coherent research programme in enterprise level strategy.     

COMPETITIVE GROUPS AS COGNITIVE COMMUNITIES: THE CASE OF SCOTTISH KNITWEAR MANUFACTURERS*

This article explores how the mental models of organizational strategists determine perceptions of competing organizations and responses to competitive conditions. We first outline a cognitive perspective for discussing competitive strategy, and then use this framework to analyse the particular case of the Scottish knitwear industry. We show how the structure of that industry both determines and is determined by managerial perceptions of the environment. We conclude by drawing out a few general implications of our framework for research and theory on competitive strategy.     

The Puzzle of Firm Performance in China: An Institutional Explanation

China has achieved phenomenal economic growth in an institutional environment that defies conventional economic rationales. Researchers offer different theories to explain this puzzle. But so far, due to the lack of data, little effort has been made to test these theories at the firm level. We develop a framework of endogenous institutional change to explain this puzzle and we test our framework with firm-level data. We argue that the decentralization from the central to the local governments and from government to firms are the driving forces behind China's institutional changes that have shaped the roles of government and market, which in turn significantly affect firm performance. We then submit our theory to a vigorous empirical test using data from China's industrial census, covering all 2000 counties and over 500 manufacturing industries. The test shows that two results of decentralization, the involvement of low-level governments in business and the process of privatization, positively affect firm performance.     

Making sense of HR in family firms: Antecedents,moderators, and outcomes

Family business researchers have felt increasing distress with the lack of understanding about how families – i.e., their structure, relationships, emotions, and goals – shape how families manage family firms, leading to calls to more fully incorporate “family science” theories about the nature of family into research about family firms. It seems likely that families' first impact in family firms will be on how employees are treated and managed. Thus, this special issue brings together papers that offer an early glance at what is to be gained by leveraging theories about family to help explain how families influence human resource management within family firms, and how human resource management, in turn, impacts key family firm outcomes.     

Toward greater understanding of the pernicious effects of workplace envy

Despite the fact that envy is widely viewed as one of the most pernicious and dysfunctional workplace emotions, research has ignored its longer term consequences. This oversight can largely be attributed to over reliance on the relatively static affective events framework that does not account for how envy-eliciting events can threaten an individual's perceptions of social standing or trigger emotional schema from previous events. Hence, we propose an extension of this framework in order to address these shortcomings and in order to account more fully for the cumulative effects of prior envy-eliciting events. In particular, by integrating insights from social comparison and emotional schema theories into the current framework, we offer a deeper, more fine-grained explanation of the cumulative effects of emotionally congruent envious episodes. We believe that these additional insights will offer a perspective, for researchers and practitioners alike, into how envy-eliciting events can result in more malicious and chronic behavior. Future research and managerial implications are discussed.     

Building Better Theory by Bridging the Quantitative–Qualitative Divide*

abstract Qualitative methods for data collection and analysis are not mystical, but they are powerful, particularly when used to build new or refine existing theories. This article provides an introduction to qualitative methods and an overview of tactics for ensuring rigor in qualitative research useful for the novice researcher, as well as more experienced researchers interested in expanding their methodological repertoire or seeking guidance on how to evaluate qualitative research. We focus our discussion on the qualitative analytical technique of grounded theory building, and suggest that organizational research has much to gain by coupling of use of qualitative and quantitative research methods.     

Property rights theory,transaction costs theory,and agency theory: an organizational economics approach to strategic management

Property rights theory has common antecedents with contractual theories of the firm such as transaction costs and agency theories, and is yet distinct from these theories. We illustrate fundamental theoretical principles derived from these three theories by analyzing the business case of oil field unitization. Theoretical principles and application of theory to oil field unitization are each summarized. From this, it is possible to see how property rights theory is well suited to explain business situations where inefficient economic outcomes persist. Additionally, property rights theory forges new theoretical connections with other branches of organizational economics, in particular, resource‐based theory. Copyright © 2005 John Wiley & Sons, Ltd.     

Accounting,organizations & institutions. Essays in honour of Anthony Hopwood

In this article we discuss the motivation for and role of theory in management accounting. We argue that theories in an applied field such as management accounting research should provide explanations that are useful for those we study – managers, organizations and society. We evaluate the nature of theories currently used and developed. Those theories that are considered theories by the research community are largely imported from other disciplines, but have hardly anything that makes them unique to management accounting. Those theories that are not currently regarded as theories by many of our colleagues attempt to explain how to apply management accounting to achieve superior performance. We argue that both forms of theories, at present, largely fail to provide valid support for practitioners. We contend that management accounting theory should help us to answer questions of what kind of management accounting systems we should apply, how, in what circumstances, and how to change them. We provide suggestions on how management accounting research could proceed to produce better theories in this regard.     

Editorial: Purchasing and innovation: Past,present and future of the field of research

This paper introduces the special topic forum (STF) on purchasing and innovation. Presenting the findings from a systematic literature review, we take stock of the current state of the field, delineating themes, theories and methods, and identifying key trends over time. Our study shows a take-off in research on purchasing and innovation during the last decade. This has predominantly focused on private sector manufacturing firms although a recent expansion into public sector research is evident. Large-scale surveys and case studies are still the dominant research methods where the unit of analysis is typically the ‘firm’ or ‘project’. The findings also show how in the past the field was driven by questions on how purchasing can facilitate different types of innovation projects, seeking to derive practical implications, and rarely making explicit statements regarding theories applied; this still characterises much of the research but we find an increasing focus on theory development. We also see a shift in the type of technological innovation being investigated: past studies tended to focus on the role of purchasing in new product development (NPD) projects, which reflected a relatively low degree of technological uncertainty, but we see a trend towards innovation projects facing technological uncertainty. Research shows how this requires new ways of sourcing innovations and therefore new ways for purchasing to facilitate innovation sourcing. On the basis of the review, we offer our guidance for future research avenues to 1) carry out more research on procurement of innovation in the public sector; 2) consider new theories and research methods, and 3) go beyond firm-level or dyadic analysis to research networks and ecosystems. We conclude by introducing the papers in the STF.     

Theoretical implications from the case of performance-based human resource management practices in Japan: management fashion,institutionalization and strategic human resource management perspectives

In Japan, a new type of human resource management (HRM) practices called ‘performance-based HRM practices’ (seika-shugi in Japanese) emerged in the 1990s, and has been adopted by many Japanese firms. In this paper, I illustrate how these type of practices emerged as a management fashion, diffused across a large number of Japanese firms, and became institutionalized in the Japanese business context; and discuss the relationship between performance-based HRM practices and firm performance. This illustration is used to develop a theoretical framework to better understand the relationship between HRM practices and firm performance by integrating theories of management fashions, institutionalization and strategic HRM. Suggestions for future research are also discussed.     

Signalling Theory and Equilibrium in Strategic Management Research: An Assessment and a Research Agenda

Actors within organizations commonly must make choices armed with incomplete and asymmetrically distributed information. Signalling theory seeks to explain how individuals are able to do so. This theory's primary predictive mechanism is ‘separating equilibrium’, which occurs when a signal's expectations are confirmed through experience. A content analysis finds that most strategic management signalling theory studies have not fully leveraged separating equilibrium. This presents two possible paths for future research. First, some researchers may wish to incorporate separating equilibrium. We illustrate how doing so can uncover new relationships, generate novel insights, and fortify the theory's application. Others who want to theorize about signals, but not examine separating equilibrium, could integrate ideas from signalling theory with other information perspectives. Here a signal becomes one stimulus among many that corporate actors interpret and act upon. We provide research agendas so strategy scholars can apply signalling theory most effectively to meet their research objectives.