Theoretical Developments in Strategic Management:

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Theoretical Developments in Strategic
Management  Opportunities for Research
ContributionsMichael A. Hitt Texas AM
UniversityFebruary 26, 2009Sponsored by
theAgribusiness Economics and Management Section
of theAgricultural Applied Economics
Association Starting at 1200 p.m. EST
TodayTechnical and promotional assistance for
this event provided by the Center for Food and
Agricultural Business, Purdue University.
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Michael A. Hitt

• Distinguished Professor of Management, Joe B.
  Foster Chair in Business Leadership, Mays
  Business School of Texas AM University
• His research actively incorporates and tests
  dimensions of the Resource Based View (RBV) of
  the firm, institutional theory and organizational
  learning theory
• He is the author or co-author of over 200 journal
  articles and 26 books
• Former editor of the Academy of Management
  Journal. He is currently the co-editor of the
  Strategic Entrepreneurship Journal
• In 2001, he received the Irwin Outstanding
  Educator Award and the Distinguished Service
  Award from the Academy of Management

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New Theoretical Developments in Strategic
Management Opportunities for Research
Contributions
Michael A. Hitt Texas AM University
Webinar Agribusiness Economics Management AAEA
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Introduction Premises and Assumptions
Strategic Management Focuses on Firm-level
Behavior
The Primary Research Question Is Why Do Some
Firms Perform Better than Others?
Thus, Strategic Management Assumes Heterogeneity
among Firms
Yet, there Are Forces for Homogeneity

• Industry
• Institutions

The Goal Is to Create a Competitive
AdvantageProviding Superior Value to Customers
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The Resource Based View of the Firm
Historical Bases of the RBV

• Distinctive Competencies (Hrebiniak Snow, 1982
  Hitt Ireland, 1985, 1986)
• Ricardian Economics (Ricardo, 1817)
• Penrosian Economics (Penrose, 1959)

Penrose
Understand the Firm as

• Administrative Framework Coordinating Activities
  of Individuals and Groups
• Bundle of Productive Resources

Growth Opportunities Are a Function of the
Administrative Framework and Use of the Resources
Firms Are Heterogeneous within Industries
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Integration of RBV in Strategic Management
Wernerfelt (1984)
Competitive Advantage based on Resources that a
Firm Develops or Acquires to Implement its
Product Market Strategy
Rumelt (1984)
Strategic Theory of the Firm
Barney (1986)
Strategic Factor Markets
Resources a Firm Controls Are more likely Sources
of Economic Rents than the Resources it Acquires
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Seminal Base of the RBV
Barney (1991, 2001)
Resources Are the Tangible and Intangible Assets
that Firms Use to Conceive and Implement their
Strategies
Strategy is a Firms Theory of How it Can Gain
Superior Performance in the Markets in which it
Operates (Barney Arikan, 2001)
Resources Are Immobile
Resources Can Vary in Scarcity, Substitutability,
Value and Imitability
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Barney (1991)
Resources
Valuable
Capabilities that either help a firm to exploit
opportunities to create value for customers or to
neutralize threats in the environment
Rare
Capabilities that are possessed by few, if any,
current or potential competitors
Difficult to Imitate
Capabilities that other firms cannot develop
easily, usually due to unique historical
conditions, causal ambiguity or social complexity
Non-Substitutable
Capabilities that do not have strategic
equivalents, such as firm-specific knowledge or
trust-based relationships
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Resources
Tangible Intangible
Capabilities Bundles of Resources to Accomplish
Tasks (e.g., RD) (Hitt, Ireland Hoskisson,
1995)
Core Competencies Capabilities that Firms
Perform Especially Well (e.g., Creating
InnovationApple) (Prahalad Hamel, 1990)
Temporary Advantage Sustainability
Socially Complex Causal Ambiguity Inimitable
Dynamic Capabilities (Teece, Pisano Shuen, 1997)
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Managing Resources
Human Capital as a Source of Firm Strategy and
Value Creation (Hitt, Bierman, Shimizu Kochhar,
2001 Hitt, Bierman, Uhlenbruck Shimizu, 2006)
Barney and Arikan (2001) Suggest that Earlier
Work Took a Remarkably Naïve View of
Implementation Issues
For the Value to be Realized, Resources Have to
be Managed Effectively (Bundled and Leveraged)
(Sirmon, Hitt Ireland, 2007)
Sirmon, Gove and Hitt (2008) Isolated Managerial
Effects on the Outcomes of Dyadic Competitive
Contests

• Some Resources Are More Flexible
• Resource Acquisition Is Critical for Inflexible
  Resources
• Managerial Bundling Actions with Flexible
  Resources Are Critical to Competitive Success

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Managing Resources (contd)
Adner Helfat (2003)
Dynamic Managerial Resources Asset Orchestration
Sirmon Hitt (2009)
Asset Orchestration Integrating Resource
Investments with Resource Deployments (Strategy)
Firm Performance Suffers when Managers Resource
Investment Decisions Vary from the Norms of Rivals
However, When the Resource Investments Support
the Strategy Chosen, Deviation from Rivals
Enhance Firm Performance
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Institutional Theory
Three Bases of Formal and Informal Institutions
(Scott, 1995 2005)
Rules (Regulative) Norms (Normative) Culture
(Cognitive)
Meyer and Rowan (1977) Suggest that Institutions
Establish the Rules of the Game for
Organizations (Firms)
North (1990) Suggests that Institutions Influence
Economic Exchange. Laws and Regulations Direct
Economic Transactions
Others Argue that Physical Infrastructure, Human
Capital and Economic Development Influence Firm
Actions (Dunning, 1988 Porter, 1990 Ghemawat,
2001)
So, When Firms Enter New Markets, They Search for
and Try to Achieve Legitimacy (Dowling Pfeffer,
1975 Tolbert Zucker, 1983)
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Institutional Environments
Institutions Are Structures of Formal Rules and
Informal Constraints that Govern Exchanges They
Create Order and Reduce Uncertainty in the
Exchanges (North, 1991, 1994)
Institutions Generally Reduce Transaction and
Information Costs by Decreasing Uncertainty and
Providing a Structure for Interactions
(Hoskisson, Eden, Lau Wright, 2000 Berrone
Gomez-Mejia, 2009 Heugens Lander, 2009)
The Varied Nature of Firm Strategies around the
World Arise in Part from the Many Influences
Acting on them. Among the Important Ones Are
Institutional Forces (Hitt, Ahlstrom, Dacin,
Levitas Svobodina, 2004 Ahlstrom, Levitas,
Hitt, Dacin Zhu, 2009)
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Institutional Environments
Regulatory InstitutionsLaws and Policies to
Govern Behavior of Social Actors (Boddewyn, 1988
Dunning, 1994)
Economic InstitutionsAffect Supply and Demand
for Capital Resources thereby Influencing Firm
Behavior and Performance (Burdekin Weidenmier,
2001 Orphanides, 2002 Lucas, 2003)
Political InstitutionsDiscretion and Power a
Government Maintains over Citizens (Matten
Crane, 2005)
Institutional InfrastructureLevel and Quality of
Physical Support Systems to Facilitate Business
Communications and Movement of Goods and Services
in the Economy (Khanna Palepu, 1997, 1999)
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Effects of Institutional Environments
One of the Most Profound Business Phenomena of
the 20th Century Was the International Expansion
of Business Activities (Sapienza, Autio, George
Zahra, 2006)
Arregle, Miller, Hitt and Beamish (2009)Found
that Country and Regions Institutional
Environments Affect the Amount and Type of
Foreign Direct Investments Made by Firms
Zhu, Hitt, Eden and Tihanyi (2009)Found that a
Countrys Formal Institutions Affect the
Performance of Cross-Border Acquisitions
Miller, Hitt, Webb, Batjargal and Tsui
(2009)Found that a Countrys Formal Institutions
Influence the Type of Social Networks Developed
by Entrepreneurial Firms and the Extent to which
they Achieve Growth
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Other Theories
Transaction Costs
Hennart (2008) Transaction Costs Perspectives on
Inter-Organizational Relations
Brouthers and Hennart (2007) Boundaries of the
Firm and Insights from International Entry Mode
Research
Organizational Learning
Knowledge Is a Source of Competitive
Advantage March (1991) Exploratory and
Exploitative Learning
MAs as a Source of Learning New Capabilities
(Barkema Schijven, 2008)
Internationalization as a Source of
Organizational Learning (Hitt, Hoskisson Kim,
1997 Zahra, Ireland Hitt, 2000)
Internationalization, Exploratory Learning and
Innovation (Miller Hitt, 2009)
Strategic Entrepreneurship
Ireland, Hitt Sirmon (2003) Strategic
Entrepreneurship Journal
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