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The positioning approach to strategy has come under significant criticism since the 1980s. Typically the positioning school has been grouped with the earlier planning and design schools (Mintzberg 1990) and variously described as being ‘prescriptive’ (Mintzberg 1990), linear (Chaffee 1985) or economically rational (Knights and Morgan 1991). Similar comments have been made about the resource-based view (Conner 1991 and Oliver 1997). Often the perspective is then used as a ‘straw man’ against which to extol the virtues of an alternative approach.

Much o f the criticism relates to the adoption by both the positioning school and resource-based view o f ideas stemming from the planning school. In particular, the de­ coupling of strategy making from strategy implementation has been widely criticised, as has the notion that senior management, armed with the necessary information and analysis, rationally and deliberately select the appropriate strategy to pursue (Pettigrew 1985 and Mintzberg and Waters 1985).

However, critics have also raised two particular conceptual and empirical concerns that relate directly to the content of strategy Firstly, that research on strategy content focuses unduly on either firm or industry factors rather than taking a multi-level view (Mintzberg et al 1998 and Pettigrew 1985) Secondly, that both the positioning school and the resource-based view promote a static view of the firm and its environment (Jacobson 1992, Grimm and Smith 1997 and Mintzberg et al 1998) This static view is amplified by the research methods utilised

Chapter 2 - Toward a Dynamic View o f the Content o f Strategy

Single and Multi Levels of Analysis

Strategy content, for the positioning school, is a defensible position defined by competitive forces at the industry and strategic group level. In its quest to investigate industry structure and define generic strategies, this stream of research, as we have seen, has tended to ignore firm level and macro environment factors (Pettigrew 1985 and Mintzberg et al 1998).

The resource-based view is perhaps equally guilty o f taking a blinkered view Emphasis is heavily on firm level factors, often to the exclusion of industry effects and certainly macro environmental issues. While firm level differences contribute most significantly to performance, industry level factors are not without influence. With the rise of the resource-based view in the 1990s, the internal focus has become dominant. This has led some authors to suggest a more balanced view is needed (Mintzberg et al 1998). Through the work of Peteraf (1993), Mehra (1996) and others such a view has begun to emerge.

Static Views of Strategy Content

Central to neo classical economics and intrinsic to both the positioning school and the resource-based view o f the firm is the notion that a firm is in a state of equilibrium, i.e. the economic forces acting on it are exactly balanced. Small displacements away from this equilibrium are self corrected and a state o f balance restored (Bettis and Prahalad 1995). Hence, there is no tendency for the firm to change Different

defensible positions, generic strategies or bundles of resources reflect alternative equilibrium states.

The implicit assumption of much o f the strategy content research is that management rationally identifies a new and more attractive equilibrium position as a result of extensive analysis. The organisation will then be swiftly moved to this new position. This shift will be ‘step like’ or quantum.

Over the last decade the notion of long periods of environmental stability has been challenged (D’Aveni 1994 and Brown and Eisenhardt 1998). Increasing globalisation, deregulation and blurring industry boundaries have led many researchers to envisage continuously changing and chaotic markets (Kanter et al 1992, D’Aveni 1994, Brown and Eisenhardt 1998). In responding to the chaos, organisational change is seen as ‘continuous and never discrete, fragmented or broken’ (Sztompka 1993).

Strategy process researchers have responded to the demands o f this new environment by adopting more adaptive models that stress flexibility and change (Chaffee 1985 and D’Aveni 1994). However, it is apparent that thinking on strategy content has been slow to take a similar step (D’Aveni 1994 and Webb and Pettigrew 1999).

The static natures of the positioning school and the resource-based view have been the subject of extensive criticism (Pettigrew 1992, Mintzberg 1994 and Grimm and Smith 1997) The failure to address how organisations create and develop market positions or resources over time receives particular attention (Fiegenbaum et al 1990, Black and

Chapter 2 - Toward a Dynamic View o f the Content o f Strategy

Boal 1994, Peteraf and Shanley 1997 and Lieberman and Montgomery 1998). Recently, researchers from both schools have begun to recognise these concerns.

Developments in the Positioning School

A number o f writers from the positioning school have urged their colleagues to take more dynamic perspectives (Porter 1991, Bogner and Thomas 1993 and McGee et al

1995). However, very few researchers from this school have taken up this challenge

Fiegenbaum et al (1990) McGee et al (1995) do suggest a more dynamic view, proposing a punctuated equilibrium model o f strategic groups. Stable periods where the membership o f a group and the strategies pursued are invariant are interrupted by periods of disturbance during which there is change in both group membership and strategy. Fiegenbaum et al (1990) and McGee et al (1995) urge researchers to identify strategic groups during periods of stability and investigate subsequent change. They identify a small number of studies that take this approach

Developments in the Resource-based View

Researchers have begun to recognise that in a dynamic environment any advantage provided by an unchanging bundle of resources will be dissipated or bypassed as competitors imitate or find alternatives (Benasko et al 1996). Hence, firms must continuously adapt and renew their strategically valuable resources. This realisation has led a number of writers (Foss et al 1995, Levinthal 1995 and Chang 1996) to

suggest that evolutionary economics (Nelson and Winter 1982) could be used to provide a dynamic perspective of the resource-based view.

Foss et al (1995) suggests that such an amalgam was evident in Penrose’s work but was ignored by early resource-based view theorists An evolutionary view implies that a bundle of resources will evolve over time through a continuing process of variation, selection and retention within the firm (Levinthal 1995).

Teece et al (1997) also stress the importance of adapting to a changing environment They suggest that firms must have the ability - which they refer to as dynamic capability - to adapt, integrate and reconfigure skills and resources in response to change. A similar dynamic perspective is evident in Prahalad and Hamel’s (1990) construct o f core competencies. Here core competencies relate to both tangible assets and less tangible resources such as organisational learning and knowledge

The development o f an evolutionary approach to the resource-based view suggests that strategy content will comprise continually changing bundles of firm level resources Although this approach focuses narrowly on the firm, it does provide a highly dynamic view of strategy content However, it is in its infancy (Teece et al 1997) and little empirical testing has taken place

Empirical Limitations

The bias towards a static view of strategy content has been partly driven by the methodologies adopted. The use of cross sectional analysis at single points in time

Chapter 2 - Toward a Dynamic View o f the Content o f Strategy

dominates empirical work (Huber and Van de Ven 1995 and Rouse and Daellenbach 1999). Researchers aim to uncover statistical correlation between various sets of variables and imply generalisations o f causality.

While such an approach will have a place during stable conditions it will fail to detect change (Delacroix and Swaminathan 1991 and Tuma and Hannan 1984). This is a significant problem when continuous change in the firm and its environment is envisaged.

As criticism has grown of this static orientation, some researchers have begun to adopt longitudinal research methods. Typically, cross sectional analyses are repeated at several discrete points in time and the differences between each time point used to demonstrate change However, this approach may assume that equilibrium has been reached at the points at which variables were sampled. Quantum change between states o f equilibrium occurs sometime between the sample points (Meyer et al 1993 and Colemen 1981). Thus, a quantum or punctuated equilibrium model of change is implied by the method used, though not necessarily by the data.

Various researchers have suggested that methods that are more dynamic should be applied to strategy content research (Russo and Fouts 1997 and Rouse and Daellenbach 1999). Quantitative methods, such as event history analysis (Tuma and Hannan 1984), and qualitative approaches, including case studies and interview programs (Rouse and Daellenbach 1999) have been proposed. However, the application of such approaches to strategy content research is still rare (Van de Ven and Huber 1995).

Summary

Two critical themes of the research on the content of strategy have been discussed. The first highlights that both the positioning school and the resource-based view focus on a single level o f analysis.

From a positioning perspective strategy content is a defensible position within the structure o f the industry in which it operates While sub-structures are revealed through work on strategic groups, the emphasis is on industry level attributes often to the exclusion of firm and macro environmental factors

The central tenet of the resource-based view is that firm level factors determine performance. Industry and macro environmental factors have largely been ignored. However, there has been some attempt to introduce industry level effects into the resource-based view. Peteraf (1993) offers a model that includes both firm and industry level factors and various researchers have attempted to use firm level resources to define strategic groups (Mehra 1993 and Cool and Schendel 1988).

The second critical theme addresses the static nature of the positioning school and resource-based view. The static nature o f these constructs is inherited from the economic traditions upon which the two approaches are based. Central to neo-classical economics is the notion of stable equilibria, which implies little or no change. Consequently, little attention is paid to how strategies emerge and develop over time

Assumptions of economic rationality and a linear view o f the strategy process imply that a firm’s management identify new and attractive markets or resource positions

Chapter 2 - Toward a Dynamic View o f the Content o f Strategy

and then quickly shift the organisation to a new position Change, if it occurs, is quantum or ‘step like’ and possibly unproblematic

Authors in both content schools (Porter 1991 and Foss et al 1995) have called for the development of more dynamic perspectives. Within the positioning school, there has been some response from strategic group researchers by way of the adoption o f a punctuated equilibrium model (Fiegenbaum et al 1990, McGee et al 1995).

A dynamic view o f strategy has recently emerged in the resource-based view Evolutionary or adaptive views are taken o f a firm and its resources to develop concepts such as core competencies (Prahalad and Hamel 1990) or dynamic capabilities (Teece et al 1997). Despite the growing popularity o f these concepts, they are still in their infancy and empirical work is limited

The adoption o f more dynamic research has been hindered by the research methods commonly utilised. Cross sectional methods with data collected from a single point in time dominate research on strategy content. These methodologies are biased towards a static perspective.

The main areas o f strategy content research together with recent developments have been mapped in relation to the two critical themes (Figure 1). This schematic representation o f the literature demonstrates the lack o f research that takes a dynamic view, particularly at the industry level. The diagram also highlights the lack o f multi­ level research; i.e. that covers both firm and industry factors.

Ch a p te r 2 - T o w a rd a D yna m ic V ie w o f t h e C o n te n t o f St F ig u re 2 .1 : C on cep ts o f S tr a te g y C o n te n t: D o m in a n t P er sp ec ti v es a n d R ec en t D ev elo p m en ts

Chapter 2 - Toward a Dynamic View o f the Content o f Strategy