Summary Papers Business Level Strategy
2023/2024
Papers and mini-cases
,Table of contents
Week 1:...................................................................................................................................................3
Porter - TOWARDS A DYNAMIC THEORY OF STRATEGY.......................................................................3
Week 2: Analysis of External Environment: Competitive Dynamics........................................................6
Boyd and Bresser (2008): Performance Implications of Delayed Competitive Responses..................6
Nadkarni, Chen, and Chen (2016): The clock is ticking! Executive temporal depth, industry velocity,
and competitive aggressiveness.........................................................................................................8
Mini case 1........................................................................................................................................10
Week 3: Internal Environment..............................................................................................................11
Sirmon, Arregle & Campbell (2010): The dynamic interplay of capability strengths and weaknesses:
investigating the bases of temporary competitive advantage..........................................................11
Schilke (2000): On the Contingent Value of Dynamic Capabilities for Competitive Advantage: The
Nonlinear Moderating Effect of Environmental Dynamism..............................................................15
Mini case 2: Nestle............................................................................................................................18
Flammer (2013) - Corporate social responsibility and shareholder reaction: The environmental
awareness of investors.....................................................................................................................19
Hawn and Ionnou (2016): Mind the Gap: The Interplay between External and Internal Actions in
the Case of Coroprate Social Responsibility......................................................................................22
Mini case 3: Danone.........................................................................................................................25
Week 5..................................................................................................................................................26
Hatch and Dyer (2004) – Human capital and learning as a source of sustainable competitive
advantage.........................................................................................................................................26
Riley et al., 2017 - Human capital matters: Market valuation of firm investments in training and the
role of complementary assets..........................................................................................................30
Mini case 5........................................................................................................................................33
Week 6..................................................................................................................................................34
Cassiman & Veugelers (2006) - In Search of Complementarity in Innovation Strategy: Internal R&D
and External Knowledge Acquisition.................................................................................................34
Klingebiel & Joseph (2016) Entry timing and Innovation Strategy in feature phones.......................36
,Week 1:
Porter - TOWARDS A DYNAMIC THEORY OF STRATEGY
Chain of causality: Causes of superior firm performance at a given point in time, which I term the
cross-sectional problem.
The dynamic process: How positions are created, which I term the longitudinal problem
- How advantage is created and sustained, however, this research still falls short of exposing
the true origins of advantage
- Three recent streams of research that begin to address it:
1. Game theoretic models
2. Models of commitment under uncertainty
3. Resource-based view of the firm
The ‘local’ environment of a firm: We observe striking concentrations of successful firms in a
particular industry in particular locations something about these locations is fundamental to
creating and sustaining advantage
Determinants of firm success: The early answers
Early literature on strategy defined three essential conditions for success:
1. Develop and implement an internally consistent set of goals and functional policies that
collectively defined its position in the market
2. This internally consistent set of goals and policies aligns the firm’s strengths and weaknesses
with the external (industry) opportunities and threats.
3. A firm’s strategy has to be centrally concerned with the creation and exploitation of its so-
called ‘distinctive competences’.’ These are the unique strengths that are central to
competitive success.
The early strategy literature contained only broad principles governing firm success:
1. Their orientation was to inform business practice: A theory that sought to explain part of a
phenomena, but which left out important elements that precluded the offering of credible
guidance for individual companies, was seen as inadequate to the task.
2. The recognition, indeed the preoccupation, with the fact that competition was complex and
highly situation-specific
Four principal issues in creating a theory of strategy
1. Approach to theory building
a. Models: situations specific and limited complexity models with a few key variables for
subgroups of firms. Highly sensitive to the assumptions
For logical consistency and exploring the subtle interactions involving a limited
number of variables
b. Frameworks: many variables and seeks to capture much of the complexity of actual
competition (5 forces). Equilibrium concept is imprecise and all the interactions
cannot be drawn.
2. Chain of causality: It is hard to say why a firm is successful
3. Time horizon: time period over which to measure and understand competitive success.
Moreover environments are changing over time
4. Empirical testing: How to test theories of strategy empirically? Complex interactions
, TOWARDS A THEORY OF STRATEGY
To explain the competitive success of firms, we need a theory of strategy which links environmental
circumstances and firm behaviour to market outcomes.
1. Firm success function of:
o Attractiveness of the industry (5 forces)
o Relative position in that industry: gained this
position with a competitive advantage
2. Competitive advantages can be:
o Lower cost than rivals
o Ability to differentiate
3. Activities (Porter’s value chain)
4. Drivers: Why are some firms able to perform particular
activities at lower cost or in ways that create superior
value than others?
Drivers are: These are structural determinants of
differences among competitors in the cost or buyer of
activities or group of activities. (scale, cumulative learning
in the activity, linkages between the activity and others,
the ability to share the activity)
THE ORIGINS OF COMPETITIVE ADVANTAGE
How does a firm get a competitive advantage
1. managerial choices: lead to the assembly or creation of the particular skills and resources
required to carry out the new strategy.
2. Initial conditions: Firms may have pre-existing reputations, skills, and in-place activities as a
result of their history (earlier managerial choices)
Towards a dynamic theory: three types of research
1. Game theoretical models: understand the equilibrium consequences of patterns of choices by
competitors over a variety of strategic variables
2. Commitment and uncertainty: a strategy is manifested in a relatively few investment
decisions that are hard to reverse, and which tend to define choices in other areas of the
firm. These commitments must be made under uncertainty.
3. The resource-based view: the origins of competitive advantage are valuable resources (or
competences) that firms possess. (immobile and often intangible)
To understand why firms choose and successfully implement the right strategies, and why their
internal activities and assets are what they are, at least four important issues must be addressed.
1. Theory must deal simultaneously with both the firm itself as well as the industry and broader
environment in which it operates.
2. Theory must allow for exogenous change, in areas such as buyer needs, technology, and input
markets
3. Theory must provide latitude to the firm not only to choose among well-defined options but
to create new ones.
4. The role of historical accident or chance. ‘There is a growing belief that historical accidents
influence competitive outcomes
2023/2024
Papers and mini-cases
,Table of contents
Week 1:...................................................................................................................................................3
Porter - TOWARDS A DYNAMIC THEORY OF STRATEGY.......................................................................3
Week 2: Analysis of External Environment: Competitive Dynamics........................................................6
Boyd and Bresser (2008): Performance Implications of Delayed Competitive Responses..................6
Nadkarni, Chen, and Chen (2016): The clock is ticking! Executive temporal depth, industry velocity,
and competitive aggressiveness.........................................................................................................8
Mini case 1........................................................................................................................................10
Week 3: Internal Environment..............................................................................................................11
Sirmon, Arregle & Campbell (2010): The dynamic interplay of capability strengths and weaknesses:
investigating the bases of temporary competitive advantage..........................................................11
Schilke (2000): On the Contingent Value of Dynamic Capabilities for Competitive Advantage: The
Nonlinear Moderating Effect of Environmental Dynamism..............................................................15
Mini case 2: Nestle............................................................................................................................18
Flammer (2013) - Corporate social responsibility and shareholder reaction: The environmental
awareness of investors.....................................................................................................................19
Hawn and Ionnou (2016): Mind the Gap: The Interplay between External and Internal Actions in
the Case of Coroprate Social Responsibility......................................................................................22
Mini case 3: Danone.........................................................................................................................25
Week 5..................................................................................................................................................26
Hatch and Dyer (2004) – Human capital and learning as a source of sustainable competitive
advantage.........................................................................................................................................26
Riley et al., 2017 - Human capital matters: Market valuation of firm investments in training and the
role of complementary assets..........................................................................................................30
Mini case 5........................................................................................................................................33
Week 6..................................................................................................................................................34
Cassiman & Veugelers (2006) - In Search of Complementarity in Innovation Strategy: Internal R&D
and External Knowledge Acquisition.................................................................................................34
Klingebiel & Joseph (2016) Entry timing and Innovation Strategy in feature phones.......................36
,Week 1:
Porter - TOWARDS A DYNAMIC THEORY OF STRATEGY
Chain of causality: Causes of superior firm performance at a given point in time, which I term the
cross-sectional problem.
The dynamic process: How positions are created, which I term the longitudinal problem
- How advantage is created and sustained, however, this research still falls short of exposing
the true origins of advantage
- Three recent streams of research that begin to address it:
1. Game theoretic models
2. Models of commitment under uncertainty
3. Resource-based view of the firm
The ‘local’ environment of a firm: We observe striking concentrations of successful firms in a
particular industry in particular locations something about these locations is fundamental to
creating and sustaining advantage
Determinants of firm success: The early answers
Early literature on strategy defined three essential conditions for success:
1. Develop and implement an internally consistent set of goals and functional policies that
collectively defined its position in the market
2. This internally consistent set of goals and policies aligns the firm’s strengths and weaknesses
with the external (industry) opportunities and threats.
3. A firm’s strategy has to be centrally concerned with the creation and exploitation of its so-
called ‘distinctive competences’.’ These are the unique strengths that are central to
competitive success.
The early strategy literature contained only broad principles governing firm success:
1. Their orientation was to inform business practice: A theory that sought to explain part of a
phenomena, but which left out important elements that precluded the offering of credible
guidance for individual companies, was seen as inadequate to the task.
2. The recognition, indeed the preoccupation, with the fact that competition was complex and
highly situation-specific
Four principal issues in creating a theory of strategy
1. Approach to theory building
a. Models: situations specific and limited complexity models with a few key variables for
subgroups of firms. Highly sensitive to the assumptions
For logical consistency and exploring the subtle interactions involving a limited
number of variables
b. Frameworks: many variables and seeks to capture much of the complexity of actual
competition (5 forces). Equilibrium concept is imprecise and all the interactions
cannot be drawn.
2. Chain of causality: It is hard to say why a firm is successful
3. Time horizon: time period over which to measure and understand competitive success.
Moreover environments are changing over time
4. Empirical testing: How to test theories of strategy empirically? Complex interactions
, TOWARDS A THEORY OF STRATEGY
To explain the competitive success of firms, we need a theory of strategy which links environmental
circumstances and firm behaviour to market outcomes.
1. Firm success function of:
o Attractiveness of the industry (5 forces)
o Relative position in that industry: gained this
position with a competitive advantage
2. Competitive advantages can be:
o Lower cost than rivals
o Ability to differentiate
3. Activities (Porter’s value chain)
4. Drivers: Why are some firms able to perform particular
activities at lower cost or in ways that create superior
value than others?
Drivers are: These are structural determinants of
differences among competitors in the cost or buyer of
activities or group of activities. (scale, cumulative learning
in the activity, linkages between the activity and others,
the ability to share the activity)
THE ORIGINS OF COMPETITIVE ADVANTAGE
How does a firm get a competitive advantage
1. managerial choices: lead to the assembly or creation of the particular skills and resources
required to carry out the new strategy.
2. Initial conditions: Firms may have pre-existing reputations, skills, and in-place activities as a
result of their history (earlier managerial choices)
Towards a dynamic theory: three types of research
1. Game theoretical models: understand the equilibrium consequences of patterns of choices by
competitors over a variety of strategic variables
2. Commitment and uncertainty: a strategy is manifested in a relatively few investment
decisions that are hard to reverse, and which tend to define choices in other areas of the
firm. These commitments must be made under uncertainty.
3. The resource-based view: the origins of competitive advantage are valuable resources (or
competences) that firms possess. (immobile and often intangible)
To understand why firms choose and successfully implement the right strategies, and why their
internal activities and assets are what they are, at least four important issues must be addressed.
1. Theory must deal simultaneously with both the firm itself as well as the industry and broader
environment in which it operates.
2. Theory must allow for exogenous change, in areas such as buyer needs, technology, and input
markets
3. Theory must provide latitude to the firm not only to choose among well-defined options but
to create new ones.
4. The role of historical accident or chance. ‘There is a growing belief that historical accidents
influence competitive outcomes
