Strategy Creation in the Periphery: Inductive vs. Deductive Strategy Making

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Journal of Management Studies 4 0; 1 J anuary 2003


Strategy Creation in the Periphery:
Inductive Versus Deductive Strategy Making*

Patrick Regner
Institute of International Business, Stockholm School of Economics

ABSTRACT Although Strategy process research has provided careful and in-depth descriptions and examinations of strategy, micro-level processes and activities have been less commonly evaluated, especially as regards strategy creation and development. This paper examines how managers create and develop strategy in practice, A dual longitudinal case methodology, including a single in-depth study combined with a multiple retrospective study is used, involving four multinational companies. T he findings show a twofold character of strategy creation, including fundamental different strategy activities in the periphery and centre, reflecting their diverse location and social embeddedness. Strategy making in the periphery was inductive, including externally oriented and exploratory strategy activities like trial and error, informal noticing, experiments and the use of heuristics. In contrast, strategy making in the centre was more deductive involving an industry and exploitation focus, and activities like planning, analysis, formal intelligence and the use of standard routines.

How do managers create and develop strategy? This simple question seems to be fundamental for strategic management, but there are still surprisingly few answers in strategy research. Strategy process research (e.g. Johnson, 1987; Johnson and Huff, 1988; Mintzberg, 1978; Mintzberg and Waters, 1985; Pettigrew, 1985; Quinn, 1980) has provided rich and systematic descriptions showing that strategy making comprises a variety of actors and contextual influences. However, it seems as if we still have an imperfect understanding of the particulars of these since less attention has been devoted to the micro-level, including the actual activities.

Address for reprints: Patrick Regner, Institute of International Business, Stockholm School of Economics, PO Box 6501, 11383 Stockholm, Sweden (patrick,regner@hlis,se), © Blackwell Publishing Ltd 2003. Published by Blackwell Publishing, 9600 Garsington Road, Oxford, OX4 2DQ_, UK and 350 Main Street, Maiden, MA 02148, USA.


P. Regner

practices and actors involved in strategy making (Johnson and HufT, 1998; Whittington, 1996, 2002). This also raises the question of how different types of managerial activities and actors influence macro strategic change and in the end shape strategy content.

The specifics of managerial activities and actors seem particularly vaguely defined regarding the development of entirely new strategies, in strategy creation, where traditional planning and analysis practices and top management might play a less significant role. It appears as if 'what managers really do' in terms of strategy creation and development remains as a residue. If the question is addressed, the answer is frequently ascribed to artistic, intuitive or vague leadership competencies (e.g. managers as 'architects' (Andrews, 1980); formulating strategy as a 'creative act' (Christensen et al., 1982); managers as 'craftsmen' (Mintzberg, 1975); or strategy creation as 'craft thought and action' (Mintzberg, 1989)), or it is categorized into broad typologies (e.g. rational - comprehensive vs. political - incremental strategy making, Fredrickson, 1983). A detailed investigation of diflerent types of actors and activities and their specific role in strategy creation and development could contribute to our understanding of how strategy actually is made and how it relates to macro strategic change. The uncovering of this also seem imperative for delineating the embedded, hard to imitate and often tacit activities and behaviors that might generate competitive advantage (Barney, 1986, 1994; Reed and De Filippi, 1990).

This study examines diverse categories of micro-level...
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