THEORY

THEORYAND
ANDRESEARCH
RESEARCHIN
INSTRATEGIC
STRATEGIC
MANAGEMENT
MANAGEMENTSWINGS
SWINGSOF
OFAAPENDULUM
PENDULUM
Robert E. Hoskisson, Michael A. Hitt, William
P. Wan & Daphne Yiu

PPRREESSEENNTTEEDD BY
BY :: MUBASHER
MUBASHER ALI
ALI

JAMRO
JAMRO

Journal of Management
1999, Vol. 25, No. 3, 417 45

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

ABSTRACT

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting
Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

strategic management has transformed

from capstone course to well established
field
significant growth in the diversity of
topics and variety of research methods
employed
This article review the state of theory
and research, examine accomplishments,
and prepare for continued progress in the
next century

Abstract
Abstract

since originated from applied

traditionally it is focused on

area,

Introduction
Introduction

business concepts that affect firm

Historical Overview
Historical Overview

performance

Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

field of strategic management is diverse

in nature but;
Resurgence of (RBV of firm) has, once
again, increased emphasis on firms
internal strengths and weaknesses
relative to their external opportunities
and threats
qualitative methods were used to
identify a firms resources, as sources

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments

This approach often uses single case

studies as used by early strategy scholars
to study particular firm strategies or
industry structure

Has
the
field
of
strategic
management come back to its roots
similar to the swing of a pendulum?

Swing Towards (IO)

Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

To explore this question, article reviews

major stages of developments in
strategic management
prominent theories developed and the
corresponding methodologies
employed in past
Current research in strategic
management

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

INTERNAL CHARACTERISTICS OF THE FIRM

Resurgence of RBV along with two content

areas knowledge-based view and strategic
leadership have returned attention to the
internal aspects of the firm
Early strategy researchers:
Andrews (Learned et al., 1965/1969)
Ansoff (1965)

Look for firms best practices that

contribute to firm success
internal characteristics focus can be
traced to the early classics such as
Chester Barnards (1938) The Functions of the Executives,
Philip Selznicks (1957) Leadership in Administration: A
Sociological Perspective,
Edith Penroses (1959) The Theory of the Growth of the Firm.

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

INTERNAL CHARACTERISTICS OF THE FIRM

Researchers in this stream share an

interest in the inner growth engines or
the black box of the firm

argue that a firms continued success is

chiefly a function of its internal and
unique competitive resources

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

INDUSTRIAL ORGANIZATION (IO) ECONOMICS

1970s focus was shifted to (IO) economics

This swing shifted the attention
externally toward industry structure and
competitive position in the industry
For example,
IO economics led the research on
strategic groups where firms are
categorized according to strategic
similarity or differences
(e.g., Hunt, 1972; Newman, 1973; Porter, 1973)

IO economics considers structural aspects

of an industry
whereas work on strategic groups is focused
on firm groupings within an industry

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

REEMERGENCE OF INTERNAL FIRM CHARACTERISTICS FOCUS

Research focus shifted towards

Competitive dynamics
Although borrowed from the
theories of IO economics but
research was based on real world
rather simulation
Boundary relationships between the
firm and environment
Transaction costs analysis

(Williamson, 1975, 1985)

Examines firm environment interface through

a contractual or exchange-based approach

Agency Theory

(Jensen & Meckling, 1976)

suggests that the firm can be viewed as a

nexus of contracts

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

REEMERGENCE OF INTERNAL FIRM CHARACTERISTICS FOCUS

Both transaction costs economics (TCE) and

agency theory have their roots in essay
Ronald Coases (1937) The Nature of the Firm

especially agency theory evolved from

Adolf Berle and Gardiner Means (1932)
The Modern Corporation and Private Property

TCE has fostered much research on firm

boundaries, markets versus hierarchies
e.g adoption of the multidivisional structure, vertical
integration and strategic alliances

Many studies on corporate governance has

been spawned by agency theory
Both been used to examine a variety of
topics, such as mergers/acquisitions,
divestitures, and downscoping ), greenmail and
leveraged buyouts

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

METHODOLOGIES

The case method was preferred by the

early strategy scholars
There was little attempt to generalize the
findings of a case to strategy making in
general, except for problem-solving skills
Due to which strategic management was
not regarded as a scientific field
As the field embraced IO economics it
began to emphasize scientific
generalizations based on study of broader
sets of firms
Additionally, more multivariate statistical
tools were used to test theory.

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

METHODOLOGIES

RBV poses a major methodological problem

It suggests that each firm may have
distinctive resources that contribute to
competitive advantages.
Econometric analyses appear to be
inadequate to measure unique firm
resources
generalizability of firm knowledge may be
questionable.
Although strategic management has
advanced theoretically through the RBV,
the methods that complement this
theoretical view are less certain and need
further development

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

IMPORTANT CONTRIBUTIONS
Chandlers (1962)
Strategy and Structure
Ansoff (1965)
Corporate Strategy
Learned et al.s (1965/1969)
Business Policy: Text and Cases

Abstract
Abstract

EARLIER CONTRIBUTIONS

Introduction
Introduction

Barnard (1938)

Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

Explained cooperation and organization

in business firms, & managerial
functions and processes

Selznick (1957)
Emphasized importance of distinctive
competence and leadership

Penrose (1959)
related firm growth and diversification
to the inherited resources, espcially
managerial capacities

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

EARLIER BEHAVIORAL CONTRIBUTIONS

Herbert Simon (1945)
Administrative Behaviors

Cyert and March (1963)

A Behavioral Theory of the Firm
provided input into the early
development of field
(e.g Ansoffs, 1965, Corporate Strategy)
emphasized organizations internal
processes and characteristics, such as
decision-making processes, informationprocessing limitations, power and
coalitions, and hierarchical structures

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

EARLY THEORIES
Chandlers (1962) Strategy and Structure
focused on how large enterprises develop
new administrative structures to
accommodate growth, and how strategic
change leads to structural change
According to Chandler:
strategy is the determination of the basic
long-term goals and objectives of an
enterprise, and the adoption of courses of
action and the allocation of resources
necessary for carrying out the goals, while
structure is the design of organization
through which the enterprise is
administered (1962: 1314)

Abstract
Abstract

EARLY THEORIES

Introduction
Introduction

Chandlers (1962) Strategy and Structure

Historical Overview
Historical Overview

Changes in strategy are mainly responses

to opportunities or needs created by
changes in the external environment,
e.g technological innovation

Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

His book also illuminates vividly the

active role of managers in pursuing
strategic changes

Abstract
Abstract

EARLY THEORIES

Introduction
Introduction

Ansoff (1965) Corporate Strategy

Historical Overview
Historical Overview

focused on strategic decisions, defined as

decisions on what kind of business the
firm should seek to be in (1965: viii)

Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

view strategy as the common thread

among a firms activities and productmarkets and is comprised of four
components:
1. product- market scope
2. growth vector (changes in product-market scope)
3. competitive advantage
4. synergy

Abstract
Abstract

EARLY THEORIES

Introduction
Introduction

Andrews and his colleagues

Historical Overview
Historical Overview

considered business policy as the study

of the functions and responsibilities of
general management and the problems
which affect the character and success of
the total enterprise

Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

define strategy as the pattern of

objectives, purposes, or goals and major
policies and plans for achieving these
goals, stated in such a way as to define
what business the company is in, or is to
be in and the kind of company it is or is
to be (1969: 15)

EARLY THEORIES

Abstract
Abstract
Introduction
Introduction

Andrews and his colleagues

Historical Overview
Historical Overview

They suggest that corporate strategy is

composed of two aspects
1. Formulation: identify four strategy components

Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

1)
2)
3)
4)

market opportunity
firm competence and resources
managers personal values and aspirations
obligations to segments of society other than
the stockholders

This broad definition of strategy is in accord with that of

Chandler & Selznick (1957) work

2. Implementation: comprised of a series of subactivities which are primarily administrative(1969:19)

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

EARLY THEORIES
The works by Chandler, Ansoff, and Andrews helped to
define
how strategy affects performance
importance external opportunities and internal
capabilities
structure follows strategy
distinction between formulation and implementation
active role of managers in strategic management.

Rumelt et al.: Nearly all of the ideas and issues that

concern us today can be found in at least embryonic
form in these key writings of the 1960s (1994: 18).
However, Rumelt et al. (1994) overlook the
contributions of Thompson (1967) who introduced the
notion of cooperative and competitive strategies and
coalition formation

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

EARLY METHODOLOGIES
Works by Ansoff and Andrews emphasized the
normative aspect of business knowledge &
inductive in nature
interested in identifying and developing
the best practices useful for managers
Their target audience was managers and
students
Their principal goal was to impart
knowledge to practitioners, rather than to
pursue knowledge for scientific
advancement

EARLY METHODOLOGIES

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

there are a large number of variables

unique to a certain organization therefore
Generalization is practically infeasible

in-depth case studies of single firms or

industries were considered most
appropriate method

these authors consider that other

disciplines knowledge may not be
appropriate for strategy studies

EARLY METHODOLOGIES

Abstract
Abstract
Introduction
Introduction

Historical Overview
Historical Overview

Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

Chandlers work is less normative but still inductive

in nature
Chandler mainly used a historical approach to
produce a detailed account of four firms (Du Pont,
GM, Exxon, and Sears Roebuck)
information on the firms was gathered from
publicly available sources, internal company
records, and interviews.
prior to the in-depth case studies of the four firms,
an extensive survey conducted
conducted comparative analysis among four firms
to investigate what and why enterprises adopted or
rejected the multidivisional structure.
Therefore, unlike Andrews and Ansoff, Chandler
attempted to seek generalizations regarding his
thesis across a wider population of firms

EARLY METHODOLOGIES

Abstract
Abstract
Introduction
Introduction

Historical Overview
Historical Overview

Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

Overall, approaches were mainly normative with indepth case analysis as the primary research tool.
To the extent that generalization is one of the
goals, it is primarily achieved through induction.
However, in many circumstances, generalization
was not a goal nor was it deemed feasible,
The need for a stronger theoretical base and for
empirical tests of the theory to allow
generalization produced a swing of the pendulum.
Early work examined firms largely as closed
systems. However, businesses, as all organizations,
are open systems. This contradiction moved swing
toward use of economic theory to examine
strategic management phenomena..

Abstract
Abstract
Introduction
Introduction
Historical Overview
Historical Overview
Early
Early
Developments
Developments
Swing Towards (IO)
Swing Towards (IO)
Swing Back
Swing Back
Towards
firm
Towards firm
Back Towards
Back Towards
Starting
Point
Starting Point
(RBV)
(RBV)
Future Directions
Future Directions
Conclusion
Conclusion

INDUSTRIAL ORGANIZATION (IO) ECONOMICS

During this swing, the influence of economics on strategy
research was substantial, and in terms of methodology,
strategy research became much more scientific.
This swing changed strategy research to deductive, largescale statistical analyses seeking to validate scientific
hypotheses, based on models abstracted from the structureconduct- performance (S-C-P) paradigm
also known as the Bain/Mason (Bain 1956, 1968; Mason, 1939) paradigm