PDF Ebook On the Structural Dimension of Competitive Strategy
This paper aims at establishing the existence of systematic differences in the nature of competitive strategies available to individual firms across industries. By means of qualitative content analysis, we extracted a matrix of 76 industries times 12 strategies reported as being characteristic in a series of monographs. Subsequent tests for the statistical significance of observed differences in the typical strategy portfolio show an evident link to an industry’s general reliance on intangible investments, human resources, and inputs from external services.
A dominant attitude found in many popular books on business economics is to present corporate strategy as an almost exclusive feat of ingenuity and leadership performed by the top-level executives of the respective company. 1 In more thorough expositions, this thesis is often complemented by an emphasis on the social aspects of firm organization that bring the creative potential within its workforce to economically productive use. 2 Although we acknowledge that strategic choices are made by individuals within the more or less tightly- woven systems of social organization, our purpose in this paper is to test for the existence of a complementary structural dimension to corporate strategy. Specifically we demonstrate that systematic differences between industries with respect to their characteristic input relationships, have an important and statistically measurable impact on the set of strategic choices typically considered at the company’s executive board.
The core of our view of markets and firm organization is evolutionary. In particular, we share the emphasis on the fundamental diversity in corporate behaviour being a necessary condition for any kind of industrial dynamics. This assertion is rooted in two congruent strands of evolutionary economics. It is a necessary assumption in order to model market competition as a dynamic process driven by the evolutionary interplay of variation, cumulation and selection (e.g. Metcalfe, 1998), and it is also found in the resource-based (Penrose, 1959) or capabilities-based view of the firm (e.g. Teece-Pisano, 1998). All these scholars unequivocally stress the diversity in firm behaviour and the emergence of distinct capabilities as the ultimate source of competitive advantage.
At a first glance, we seem to have stumbled into a contradiction. Namely, if corporate strategy is a phenomena which has to be realised at the level of firms, often depending on individual proficiency and entrepreneurial spirit, why then should structural specifics of the industry have any statistically measurable impact on the firm’s strategy? The answer is also deeply moulded into the evolutionary approach that stresses the contingent nature of competitive behaviour. In other words, competitive performance depends on the capability to match a firm’s organization and strategy to the technological, social and economic restrictions imposed by its external environment. The immediate consequence of these considerations is also widely accepted among business economists: ‘Corporate success derives from a competitive advantage which is based on distinctive capabilities, which is most often derived from the unique character of a firm’s relationships with its suppliers, customers, or employees, and which is precisely identified and applied to relevant markets’ (Kay, 1990, p.4; emphasis added). While the first part of the quote repeats the common emphasis on diversity of firm behaviour, the second part highlights the dependence on the specific characteristics of the market.
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PDF Ebook On the Structural Dimension of Competitive Strategy
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