Rethinking Strategy

Henk W Volberda, Tom Elfring, Henk W Volberda, Tom Elfring

• Publisher: SAGE Publications Ltd
• Year: 2001
• Print ISBN: 9780761956457, 9780761956440
• eBook ISBN: 9781446235768
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Unternehmensstrategie

`Readers interest in an overview of important aspects of the strategy field will find this book a helpful volume to add to their shelves? - Administrative Sciences Quarterly

This is a new overview of the strategy field, with internationally renowned contributors summarizing the latest directions and developments in strategic management theory in the context of their theoretical roots in economics, organization theory, and systems theory.

The contributors outline the most promising new directions on the basis of a systemic treatment of paradigms or schools of thought in strategy: redrawing firm boundaries, developing dynamic capabilities and discovering viable strategy configurations.

The volume will be an invaluable companion to advanced courses in strategy and management, used as a reader alongside case material and field studies. As well as providing a summary and evaluation of the different schools of thought in strategy, the volume offers a synthesis of the American and European approaches.

PART I

THEORY, SCHOOLS AND PRACTICE

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1

Schools of Thought in Strategic Management: Fragmentation, Integration or Synthesis

Tom Elfring and Henk W. Volberda

Over the last thirty years, strategic management has become established as a legitimate field of research and managerial practice (Shrivastava, 1986: 363). In the evolution of strategy research, a diversity of partly competitive and partly supplementary paradigms have emerged. To provide an unequivocal definition would mean ignoring the versatility of strategic management. The choice of a definition and the application of specific strategic management techniques is greatly dependent on which paradigmatic schools of thought in strategic management one prefers. In this book, we will therefore review the various schools of thought and their contribution to the theory and practice of strategy.

A school of thought is understood to be the range of thought of a specific group of researchers, which has crystallized within the field of strategic management (Brown, 1993). In other words, a school of thought can be seen as an institutionalized paradigm. Besides reflecting on the variety of schools in strategy, we will also sketch out new promising directions in strategy research and practice. Although some strategy scholars have argued that the achieved multiformity in schools of thought signifies an enrichment of the research within the field of study (cf. Mahoney, 1993), other scholars from related disciplines complain about the lack of consistency and coherence (Camerer, 1985). In particular, they argue that the field of strategic management is extremely fragmented and that there is no agreement concerning the underlying theoretical dimensions nor the methodological approach to be employed. In response, many strategists have advocated increased integration of theories within the strategy field.

What is needed is a greater emphasis on integration rather than differentiation of views. Research needs to be more concerned with reducing conceptual or theoretical barriers between disciplines and literatures and the consequent emphasis on eclectic approaches to explain organizational behaviour. (Hrebiniak and Joyce, 1985: 348)

Additional synthesis and pluralism is needed to advance integrated theory development – as opposed to fractionalism or applied functionalism – in the field of strategy. (Schoemaker, 1993: 108)

What are the new directions in strategy? Should we just accept the fragmentation in the field, strive towards an integration or even try to achieve a strategy synthesis? This opening chapter has a dual purpose. First we want to review the literature and discuss the issues of fragmentation and integration. What do we mean by fragmentation and what is the evidence that the strategy field is fragmented? There is also the question of why the field has become fragmented. Although not all strategy scholars see fragmentation as an inhibiting factor for progress, there is a general feeling that it is worth pursuing the challenge of integration at this stage in the field’s development (see Schoemaker, 1993 and his commentary in Chapter 8 of this book).

A variety of such attempts at integration within the field will be mapped out in this chapter. While the field could make progress via the integration of theories and the development of meta-theories, we suggest another scenario – that of synthesis of theory and practice, along some well-delineated research directions. In particular, we suggest further attention to three synthesizing schools, namely the ‘boundary’ school, the ‘dynamic capability’ school and the ‘configurational’ school. In contrast to the traditional schools, synthesizing schools are based on a number of disciplines and strongly connected to the practical problem areas within the field of study.

The second purpose of this chapter is to provide a roadmap for this book. We want to position the 19 contributors in our discussion of the field, centred around the debates on fragmentation, integration and three synthesizing schools.

The strategy literature provides us with diverse lists of different schools of thought (cf. Chaffee, 1985; Mintzberg, 1990b; Whittington, 1993). In this chapter, we shall shortly review different schools of thought based on a classification developed by Mintzberg (1990b) and Mintzberg et al. (1998). This particular way to distinguish nine different schools illustrates the fragmentation of the field. The over-accentuation of the base disciplines has led to theoretical frameworks that have little to say about the practical problems in strategic management. In contrast with an over-emphasis on base disciplines in the strategy field, Spender argues in Chapter 2, ‘Business Policy and Strategy as a Professional Field’, that strategy is a professional field with complex links to executive practice rather than an academic science or a coherent body of integrated theory. He debates that a proper balance between theory building and attention to the notion of executive praxis is crucial. Over-emphasis on theory construction may result in a splintering of the field into unconnected academic specialities. Spender does not judge the degree of fragmentation to be alarming. On the contrary, he believes ‘that there are several lines of theorizing converging on a new and powerful paradigm of strategic analysis’ (see Chapter 2, this volume).

Classifying Schools of Thought

The number of publications in the field of strategic management has greatly increased in size over the last 30 years. In the mid-1960s Andrews (1965) and Ansoff (1965) were the first to give the discipline of strategic management a separate profile. However, they can hardly be considered as the founders of strategic management. Many of the current lines of reasoning or schools of thought within strategic management have not built on their range of ideas or are actually inconsistent with the ‘design’ and ‘planning’ schools of thought associated with Andrews and Ansoff, respectively. In a number of classifications their contribution was labelled as the classical perspective (Rouleau and Séquin, 1995; Whittington, 1993). In contrast to many previous classification attempts, the taxonomies devised by Rouleau and Séquin and Whittington try to relate the classification criteria to the underlying principles of the various contributions in strategic management. Whittington’s four perspectives differ fundamentally along two dimensions: the outcome of strategy and the process by which it is made. Similarly, Rouleau and Séquin identify four ‘forms’ of strategic discourse, each of which suggests a particular arrangement of representations concerning the individual, the organization and its environment. These classifications are an improvement on some previous attempts. Distinctions of ‘content’ versus ‘process’ and strategy formulation versus strategy implementation are of limited value for a deeper understanding of the principles of these classifications, largely because they relate to practical categories (Rouleau and Séquin, 1995). Mintzberg has also developed a taxonomy that goes beyond the simple dichotomous classifications. In his view the differences between the schools are very much governed by the underlying base discipline. However, the unit of analysis (similar to Rouleau and Séquin, 1995) and the process of strategy (similar to Whittington, 1993) also have an impact on the dividing lines between the distinguished schools in his classification. Among the many typologies (cf. Chaffee, 1985; Whittington, 1993), we have chosen to use Mintzberg’s classification of nine schools of thought as a starting point for our discussion, because this classification clarifies on the most detailed level each school’s specific contribution to the strategy field. The characteristic contribution of each school is often the result of a clear choice with respect to approach and assumptions about the content, the process and the context of strategy formation. The distinctive contribution of each school can also be related to its roots in a specific base discipline.

The first distinction to be made between the nine schools of thought is between a prescriptive and a descriptive approach. The ‘design’ and ‘planning’ schools are both prescriptive in character, as is the ‘positioning’ school of thought. The other six schools belong to the descriptive category. First, the three more normative or prescriptive schools of thought will be briefly discussed. For each of the three prescriptive schools of thought a clear indication will be given of their own contribution to the field.

The ‘design’ school is responsible for the development of the Strength Weaknesses Opportunities Threats (SWOT) model. In this model the strengths and weaknesses of a company are mapped, together with the opportunities and threats in the market place. The data can be used to analyse various strategic options, which both exploit the internal opportunities and anticipate the market situation. Reaching a good fit between the internal opportunities (strengths and weaknesses) and the external circumstances (opportunities and threats) can be considered to be the central guideline of this school of thought. A key role in the strategy formation is played by the board of directors, and in particular by the chairperson. This approach can be further formalized into a more systematic approach. In this perspective, strategy formation consists of developing, formalizing and implementing an explicit plan. This school is known as the ‘planning’ school; strategy formation is developed not so much by the chair of the board but rather by the planners in a staff division.

The central focus of the ‘positioning’ school is the industrial–economic angle, with the work of Porter (1980, 1985) being particularly important. Competition and a competitive position are analysed mostly on the basis of economic concepts, and in this approach companies in a certain industry must choose one out of three generic strategies: cost-leadership, differentiation or focus. This school of thought is strongly influenced by economics while the ‘planning’ school has its theoretical roots in system theory and cybernetics. For the ‘design’ school it is very difficult to point to a specific root discipline. The approach used there has emerged from an attempt to develop an integrative perspective based on practice.

In the three schools of thought discussed above, the environment is seen as relatively constant. The challenge for strategy formation is to influence the environment, either responding to it or adjusting the organization to it. The underlying assumption here is that the environment can be analysed and that a company’s opportunities and threats can be distilled from it. Another assumption is that the company has the time, using a planned or unplanned approach, to realize the potential of a certain strategy. The ‘design’ school still works on the assumption that the CEO can design an explicit ‘grand strategy’ for the entire enterprise. Research by Mintzberg and Waters (1985) shows, however, that strategies are not always explicitly formulated, but can come about spontaneously without a priori intentions. It is also shown in empirical research carried out by Burgelman (1983) and the strategic decision-making models of Bourgeois and Brodwin (1984) that strategies often take place bottom-up and that the top management approves of these afterwards (‘retrospective sense making’). Likewise the ‘planning’ school assumes that a correct strategy can only come about by means of frequent and systematic forecasting, planning and control. Empirical research by Fredrickson (1983), Fredrickson and Mitchell (1984) and Mintzberg (1973a) shows that in turbulent environments planning is, however, often insufficient and leads to rigidity. The annual planning rituals within an organization restrict its innovative potential; options are fixed and new options are not noticed.

As a consequence of the untenability of the normative assumptions of the above-mentioned prescriptive schools, the more descriptive schools are increasingly gaining influence in the discipline (see Table 1.1). The latter schools, like the ‘entrepreneurial’, the ‘cognitive’ and the ‘learning’ schools are not prescriptive but they try instead to describe the actual strategy formation in enterprises on the basis of empirical research.

TABLE 1.1 Normative assumptions of prescriptive schools reconsidered

Prescription	Description
Top-down Planning Analytical Perfect rationality	Bottom-up Spontaneous Visionary Bounded rationality

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In the ‘entrepreneurial’ school, the environment is not a stable factor; it can be influenced and manipulated. Entrepreneurs are capable of bringing new innovative products and services onto the market, developed on the basis of idiosyncratic dynamics, quite detached from the existing ‘laws’ of the market. Baden-Fuller and Stopford (1994) show that the choice of the branch of industry only determines the profit expectations for a very small part, and that the ‘firm’ and not the branch of industry is a decisive measure of success. At the same time, these authors argue that successful enterprises like McDonalds, Benneton and Toyota do not opt for a ‘generic strategy’, but instead opt for a combination of ‘low cost’ and ‘differentiation.’ This does not lead to the ‘stuck in the middle’ effect feared by Porter, because the ‘positioning’ school does not take into consideration internal organizational factors such as culture and ideology. It is the entrepreneurs with a vision of the future who determine the environment and not vice versa. Strategic management viewed from this perspective cannot be traced back directly to a specific discipline, although the economist Schumpeter (1934) can be seen as its intellectual progenitor.

The next two schools of thought, the ‘cognitive’ and the ‘learning’ schools, have psychology as their root discipline. They consider the environment to be very demanding and/or difficult to comprehend. In the cognitive school the individual is the unit of analysis and strategy formation is based on ‘mental maps.’ March and Simon (1958) and Simon (1976) have made an important contribution to the cognitive school. In particular, the concept of ‘bounded rationality’ has been important. In these schools strategy will be not so much planned, but rather incremental and ‘emerging’. According to the supporters of the ‘learning’ school, whose pioneers were Lindblom, Quinn and Weick, a strategy unfolds. It was Lindblom (1959) who concluded that strategic management was not a linear process, but an incremental process of ‘muddling through’. This incremental vision was confirmed by Cyert and March (1963) and the article by Wrapp (1967) entitled ‘Good managers don’t make policy decisions’. Etzioni (1968: 282–309) took on an intermediate position, namely ‘mixed scanning’, whereby strategists must develop a long-term vision while approaching the short-term step by step. On the basis of nine longitudinal case studies in large enterprises confronted with changes, Quinn (1980a) concluded that incrementalism is logical because of the iterative character of strategic management processes and the need to adjust strategies continuously. According to this founder of the ‘learning’ school, strategic management is necessarily a fragmented process, whereby initiatives arise from different subsystems and top management defines strategies as broadly as possible and leaves options open as long as possible. On the other hand, Johnson (1988) and others propose, on the grounds of a longitudinal case study, that incrementalism is not logical but a result of cognitive schemes (Weick, 1979), cultural idea systems (Smircich and Stubbart, 1985) or political processes (Pettigrew, 1977). This ‘non-logical’ incrementalism forms the basis for the ‘cultural’ and the ‘political’ schools.

The contribution of the political school of thought to the strategic management field consists of concepts such as power and coalitions. Important studies that brought the factor power into strategic management literature were those of Allison (1971) and Perrow (1970). Strategic in this school means choosing your position and thinking in terms of move and counter-move. Making a distinction between power formation within an organization and between organizations is significant. The latter level of analysis is the meso level in which the environment is clearly malleable. Securing a position in order to be able to determine the rules of the game can be a great influence in the competitive position of an organization. As far as the micro level is concerned, it is often assumed that organizations have a single face, thus ignoring the large differences of opinion and the existence of a variety of power blocks within organizations. The importance of recognizing the different sorts of strategy formation and implementation and the development of these concepts in order to analyse them can be attributed to the political school of thought. It has been clearly demonstrated that this school of thought is strongly influenced by political science.

In contrast to the schools already discussed, influencing the environment has very little to do with the following schools of thought. In the cultural school of thought, developing a common perspective for the organization is the central issue. The contribution of this school lies particularly in the insights offered into the importance of a common company culture for the formulation, and particularly the implementation, of a strategy. A strategy can only be successful if it is deeply rooted in the company culture and, accordingly, the development of common values and insights is a central issue. Strategy formation here is not bottom-up or top-down but must be approached from a collective perspective. The conceptual breeding ground for this school of thought is anthropology, and Normann (1977) has made an important contribution to the development of the theory.

The last school of thought is the environmental school. This school has been strongly influenced by the work of ‘population-ecologists’, like Hannan and Freeman (1977). By analogy to biology they look at organizations with the aid of the variation–selection–retention model. Strategies are positions in the market and if the favourable conditions that gave rise to the growth of the firm change, the organization is doomed. This approach is exceedingly deterministic and the room available for management to formulate strategies is non-existent.

Each of the nine schools represents a specific angle or approach to strategy formulation (see Table 1.2). The separation of the discipline into clearly defined schools of thought furnishes us with insights into the backgrounds and the often implicit assumptions of a great number of trends in the field. Mintzberg, however, shows that each school of thought is concerned with a certain aspect of the total picture, ignoring the other aspects along the way. If the contributions, shortcomings, as...

Table of contents

• Cover Page
• Title
• Copyright
• Dedication
• Contents
• Notes on Contributors
• Preface
• PART I THEORY, SCHOOLS AND PRACTICE
• PART II INTEGRATION EFFORTS IN THE FIELD
• PART III THE BOUNDARY SCHOOL: STRATEGY AS A BOUNDARY DECISION
• PART IV THE DYNAMIC CAPABILITIES SCHOOL: STRATEGY AS A COLLECTIVE LEARNING PROCESS TO DEVELOP DISTINCTIVE COMPETENCES
• PART V THE CONFIGURATIONAL SCHOOL: STRATEGY AS A DECISION OF TRANSITION FROM ONE ARCHETYPE TO ANOTHER
• PART VI NEW DIRECTIONS IN STRATEGY: WAYS TO SYNTHESIZE
• References
• Index