Towards a dynamic theory of strategy

TLDR

The cross‑sectional problem is logically prior to dynamics and better understood. This paper reviews the progress of the strategy field toward developing a truly dynamic theory of strategy. The authors separate strategy theory into cross‑sectional causes of superior performance and longitudinal processes that create competitive positions, and review three promising research streams addressing the longitudinal problem. The reviewed streams still fall short of exposing the true origins of competitive success, with only the local environment described, leaving many questions unanswered and prompting future research challenges.

Abstract

This paper reviews the progress of the strategy field towards developing a truly dynamic theory of strategy. It separates the theory of strategy into the causes of superior performance at a given period in time (termed the cross-sectional problem) and the dynamic process by which competitive positions are created (termed the longitudinal problem). The cross-sectional problem is logically prior to a consideration of dynamics, and better understood. The paper then reviews three promising streams of research that address the longitudinal problem. These still fall short of exposing the true origins of competitive success. One important category of these origins, the local environment in which a firm is based, is described. Many questions remain unanswered, however, and the paper concludes with challenges for future research.