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Competition and Business Strategy in Historical Perspective

Published online by Cambridge University Press:  13 December 2011

Pankaj Ghemawat
Pankaj Ghemawat
Affiliation:
PANKAJ GHEMAWAT is the Jaime and Josefina Chua Tiampo Professor of Business Administration atHarvard Business School.
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A review of theories of competition and business strategy over the last half-century reveals a fairly linear development of early work by academics and consultants into efforts to understand the determinants of industry profitability and competitive position and, more recently, to add a time or historical dimension to the analysis. The possible implications of the emergence of a market for such ideas are also discussed.

Type
Articles
Information
Business History Review , Volume 76 , Issue 1 , Spring 2002 , pp. 37 - 74
Copyright
Copyright © The President and Fellows of Harvard College 2002

References

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57 This is based on my experience working at BCG in the late 1970s.

58 Walter Kiechel III, “The Decline of the Experience Curve,” Fortune (5 Oct. 1981).

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70 The first economic citation of the “Red Queen” effect is generally attributed to L. Van Valen. See Van Valen, L., “A New Evolutionary Law,” Evolutionary Theory 1 (1973): 1–30Google Scholar. The literary reference is to Lewis Carroll's Alice's Adventures in Wonderland and Through the Looking Glass (New York, 1981Google Scholar; first published 1865–71), in which the Red Queen tells Alice: “here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast…” (p. 127).

71 George Stalk Jr., “Time–The Next Source of Competitive Advantage,” Harvard Business Review (July/Aug. 1988).

72 Stalk and Hout, Competing Against Time, 179.

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77 Ibid.

78 There is also a branch of game theory that provides upper bounds on players' payoffs if freewheeling interactions between them are allowed. See Brandenburger and Nalebuff's Coopetition for applications of this idea to business.

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81 Ibid., 127.

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83 For a detailed critique, see Richard P. Rumelt, Dan Schendel, and David J. Teece, “Strategic Management and Economics,” Strategic Management Journal (Winter 1991): 5–29. For further discussion, see Ghemawat, Games Businesses Play, chap. 1.

84 For a discussion of the original models (by Ghemawat and Nalebuff) and the supporting empirical evidence, consult Ghemawat, Games Businesses Play, ch. 5.

85 In the same year, Richard Rumelt also noted that the strategic firm “is characterized by a bundle of linked and idiosyncratic resources and resource conversion activities.” See his chapter, “Towards a Strategic Theory of the Firm,” in Lamb, R. B., ed., Competitive Strategic Management (Englewood Cliffs, N.J., 1984), 561Google Scholar.

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89 David J. Teece, Gary Pisano, and Amy Shuen, “Dynamic Capabilities and Strategic Management,” mimeo (June 1992): 12–13.

90 Teece, David and Pisano, Gary, “The Dynamic Capabilities of Firms: An Introduction,” Industrial and Corporate Change 3 (1994): 540–1CrossRefGoogle Scholar. The idea of “routines” as a unit of analysis was pioneered by Nelson, Richard R. and Winter, Sidney G., An Evolutionary Theory of Economic Change (Cambridge, Mass., 1982)Google Scholar.

91 Teece, Pisano, and Shuen, “Dynamic Capabilities and Strategic Management,” 2.

92 Dorothy Leonard-Barton, “Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development,” Strategic Management Journal (1992): 111–25.

93 For a book-length discussion of commitments, see Ghemawat, Pankaj, Commitment (New York, 1991)Google Scholar. For connections to the other modes of dynamic analysis discussed in this section, see chs. 4 and 5 of Ghemawat, Pankaj, Strategy and the Business Landscape (Reading, Mass., 1999)Google Scholar.

94 Townsend, Robert, Up the Organization (New York, 1970)Google Scholar.

95 See, for instance, Baumol, William J., Panzar, John C., and Willig, Robert D., Contestable Markets and the Theory of Industry Structure (New York, 1982)Google Scholar for an analysis of the economic implications of zero commitment; and Richard E. Caves, “Economic Analysis and the Quest for Competitive Advantage,” American Economic Review (May 1984): 127–32, for comments on the implications for business strategy.

96 For a more extended discussion of the ideas in this postscript, see Pankaj Ghemawat, “Competition among Management Paradigms: An Economic Analysis,” Harvard Business School Working Paper (2000).

97 For additional discussion of the methodology employed, consult Pascale, Richard T., Managing on the Edge (New York, 1990), 18–20Google Scholar.

98 For some evidence that management ideas have become shorter-lived, see Paula P. Carson, Patricia A. Lanier, Kerry D. Carson, and Brandi N. Guidry, “Clearing a Path through the Management Fashion Jungle: Some Preliminary Trailblazing,” Academy of Management Journal (December 2000).

99 Richard D'Aveni, among many others, asserts unprecedented levels of environmental change in Hypercompetition: Managing the Dynamics of Strategic Maneuvering (New York, 1994)Google Scholar. William Lee and Gary Skarke discuss apparently transient ideas that are permanently valuable in “Value-Added Fads: From Passing Fancy to Eternal Truths,” Journal of Management Consulting (1996): 10–15. Robert G. Eccles and Nitin Nohria emphasize the rhetorical uses of changing the wrappers on a limited number of timeless truths about management in Beyond the Hype: Rediscovering the Essence of Management (Boston, 1992)Google Scholar.

100 See Hammer, Michael and Champy, James, Reengineering the Corporation (New York, 1993)Google Scholar See also Micklethwait, John and Wooldridge, Adrian, The Witch Doctors (New York, 1996)Google Scholar. Micklethwait and Wooldridge devote a chapter to CSC Index.

101 Michael Hammer, “Reengineering Work: Don't Automate, Obliterate,” Harvard Business Review (July/Aug. 1990): 104.

102 Micklethwait and Wooldridge, The Witch Doctors, 29.

103 See O'Shea, James and Madigan, Charles, Dangerous Company: The Consulting Powerhouses and the Businesses They Save and Ruin (New York, 1997)Google Scholar.

104 For a general discussion, see Frank, Robert H. and Cook, Philip J., The Winner-Take-All Society (New York, 1995)Google Scholar; for formal modeling and a discussion specific to the management idea business, see Ghemawat, “Competition among Management Paradigms.”

105 See, for example, Anton, James J. and Yao, Dennis A., “The Sale of Ideas: Strategic Disclosure, Property Rights, and Incomplete Contracts,” unpublished working paper, Fuqua School of Business, Duke University (1998)Google Scholar.

106 See Sushil Bikhchandani, David Hirshleifer, and Ivo Welch, “Learning from the Behavior of Others: Conformity, Fads and Informational Cascades,” Journal of Economic Perspectives (1998): 15–70.

107 See Daniel L. McFadden and Kenneth E. Train, “Consumers' Evaluation of New Products: Learning from Self and Others,” Journal of Political Economy (Aug. 1996): 683–703.

108 These models derive some of their real-world appeal from the use of relative performance measures to evaluate managers. See Robert Gibbons and Kevin J. Murphy, “Relative Performance Evaluation of Chief Executive Officers,” Industrial and Labor Relations Review (Feb. 1990): 30S–51S.