Corporate strategic responses to foreign entry: insights from prospect theory

Purpose – The purpose of this paper is to address how firms adapt their product and geographic diversification as a response to foreign rivals penetrating their domestic market by adopting a behavioral perspective to understand firm-level strategic responses to foreign entry. Design/methodology/approach – The study proposes that strategic responses to foreign entry selected by domestic incumbents have both a framing component and a related, strategic choice component, with the latter including changes in product and geographic market diversification (though other more business strategy-related responses are also possible, e.g. in product pricing and marketing). This study tests a set of hypotheses building on panel data of large US firms. Findings – The study finds, in accordance with our predictions, that domestic incumbents reduce their product and geographic diversification when facing an increase in import penetration. However, when increased market penetration by foreign firms takes the form of FDI rather than imports, the corporate response appears to be an increase in product and geographic diversification, again in line with our predictions. Originality/value – The study develops a new conceptual framework that is grounded in prospect theory, but builds on recent insights from mainstream international strategic management studies (Bowen and Wiersema, 2005; Wiersema and Bowen, 2008).

The future of strategic management research: assessing the quality of theory borrowing

In many business schools, the field of strategic management has been elevated to the same status as more traditional subject areas such as finance, marketing and organizational behaviour. However, the field is rather unclearly delineated at present, as a result of the heavy usage of borrowed theories, a phenomenon we discuss in this article. For strategic management to become a legitimate subject area, truly at par with the more conventional fields taught in business schools, we recommend much stronger selectivity when borrowing theories from other areas of scholarly inquiry than management, as the foundation of empirical work. We propose a new model consisting of seven quality tests to assess whether proper selectivity is being applied when ‘importing’ concepts from other fields than management. Our perspective has major implications both for future, evidence-based strategic management research and for the field's key stakeholders such as strategy teachers, practitioners and policy makers – who rely on research outputs from strategy scholars.

Beyond belief : Strategic taboos and organizational identity in strategic agenda setting

A comprehensive strategic agenda matters for fundamental strategic change. Our study seeks to explore and theorize how organizational identity beliefs influence the judgment of strategic actors when setting an organization's strategic agenda. We offer the notion of "strategic taboo" as those strategic options initially disqualified and deemed inconsistent with the organizational identity beliefs of strategic actors. Our study is concerned with how strategic actors confront strategic taboos in the process of setting an organization's strategic agenda. Based on a revelatory inductive case study, we find that strategic actors engage in assessing the concordance of the strategic taboos with organizational identity beliefs and, more specifically, that they focus on key identity elements (philosophy; priorities; practices) when doing so. We develop a typology of three reinterpretation practices that are each concerned with a key identity element. While contextualizing assesses the potential concordance of a strategic taboo with an organization's overall philosophy and purpose, instrumentalizing assesses such concordance with respect to what actors deem an organization's priorities to be. Finally, normalizing explores concordance with respect to compatibility and fit with the organization's practices. We suggest that assessing concordance of a strategic taboo with identity elements consists in reinterpreting collective identity beliefs in ways that make them consistent with what organizational actors deem the right course of action. This article discusses the implications for theory and research on strategic agenda setting, strategic change, a practice-based perspective on strategy, and on organizational identity.

Microfoundations of strategic management: Toward micro–macro research in the resource-based theory

Over the last few years, a new stream of research has emerged in the field of strategic management which focuses on the analysis of its microfoundations. This line of research analyzes strategic topics examining their foundations rooted in individual actions and interactions. The main purpose of this paper is to examine this emerging literature of microfoundations, indicating its usefulness and main characteristics. Through a systematic literature review, this paper contributes to the field by identifying the main areas studied, the benefits and potential of this approach, and some limitations and criticisms. Moreover, the paper studies how the integration of micro and macro aspects in strategy research may be carried out, examining several works that use a multilevel approach. Some methodological approaches that may help to effect this integration are indicated. These aspects will be analyzed in relation to the resource-based theory.

Strategic target planning : bridging the gap between theory and practice /

Mode of access: Internet.

Centralised or decentralised? Strategic implications of resource allocation models

This paper examines the strategic implications of resource allocation models (RAMs). Four interrelated aspects of resource allocation are discussed: degree of centralisation, locus of strategic direction, cross-subsidy, and locus of control. The paper begins with a theoretical overview of these concepts, locating the study in the contexts of both strategic management literature and the university. The concepts are then examined empirically, drawing upon a longitudinal study of three UK universities, Warwick, London School of Economics and Political Science (LSE), and Oxford Brookes. Findings suggest that RAMs are historically and culturally situated within the context of each university and this is associated with different patterns of strategic direction and forms of strategic control. As such, the RAM in use may be less a matter of best practice than one of internal fit. The paper concludes with some implications for theory and practice by discussing the potential trajectories of each type of RAM.

Strategic practices:an activity theory perspective on continuity and change

This paper draws upon activity theory- to analyse an empirical investigation of the micro practices of strategy in three UK universities. Activity theory provides a framework of four interactive components from which strategy emerges; the collective structures of the organization, the primary actors, in this research conceptualized as the top management team (TMT), the practical activities in which they interact and the strategic practices through which interaction is conducted. Using this framework, the paper focuses specifically on the formal strategic practices involved in direction setting, resource allocation, and monitoring and control. These strategic practices arc associated with continuity of strategic activity in one case study but are involved in the reinterpretation and change of strategic activity in the other two cases. We model this finding into activity theory-based typologies of the cases that illustrate the way that practices either distribute shared interpretations or mediate between contested interpretations of strategic activity. The typologies explain the relationships between strategic practices and continuity and change of strategy as practice. The paper concludes by linking activity theory to wider change literatures to illustrate its potential as an integrative methodological framework for examining the subjective and emergent processes through which strategic activity is constructed. © Blackwell Publishing Ltd 2003.

Building theory at the intersection of ecological sustainability and strategic management

This article builds theory at the intersection of ecological sustainability and strategic management literature—specifically, in relation to dynamic capabilities literature. By combining industrial organization economics–based, resource-based, and dynamic capability–based views, it is possible to develop a better understanding of the strategies that businesses may follow, depending on their managers’ assumptions about ecological sustainability. To develop innovative strategies for ecological sustainability, the dynamic capabilities framework needs to be extended. In particular, the sensing–seizing–maintaining competitiveness framework should operate not only within the boundaries of a business ecosystem but in relation to global biophysical ecosystems; in addition, two more dynamic capabilities should be added, namely, remapping and reaping. This framework can explicate core managerial beliefs about ecological sustainability. Finally, this approach offers opportunities for managers and academics to identify, categorize, and exploit business strategies for ecological sustainability.