Towards a dynamic theory of strategy
Strategic Management Journal, Vol. 12, 95-1 I7 ( I 991)
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TOWARDS A DYNAMIC THEORY OF STRATEGY
MICHAEL E. PORTER
T--
Graduate School of Business Administration, Harvard Universitv, Boston, Massachusetts, U.S.A.
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 crosssectional 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 f o r future research.
INTRODUCTION
The reason why firms succeed or fail is perhaps the central question in strategy. It has preoccupied the strategy field since its inception four decades ago. The causes of firm success or failure encompass all the other questions that have been raised in this collection of essays. It is inextricably bound up in questions such as why firms differ, how they behave, how they choose strategies, and how they are managed. While much of the work in the field has been implicitly domestic, it has become increasingly apparent that any search for the causes of firm success must confront the reality of international competition, and the striking differences in the performance of firms in a given industry based in different nations.
Yet, the question of why firms succeed or fail raises a still broader question. Any effort to understand success must rest on an underlying
Key words:
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TOWARDS A DYNAMIC THEORY OF STRATEGY
MICHAEL E. PORTER
T--
Graduate School of Business Administration, Harvard Universitv, Boston, Massachusetts, U.S.A.
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 crosssectional 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 f o r future research.
INTRODUCTION
The reason why firms succeed or fail is perhaps the central question in strategy. It has preoccupied the strategy field since its inception four decades ago. The causes of firm success or failure encompass all the other questions that have been raised in this collection of essays. It is inextricably bound up in questions such as why firms differ, how they behave, how they choose strategies, and how they are managed. While much of the work in the field has been implicitly domestic, it has become increasingly apparent that any search for the causes of firm success must confront the reality of international competition, and the striking differences in the performance of firms in a given industry based in different nations.
Yet, the question of why firms succeed or fail raises a still broader question. Any effort to understand success must rest on an underlying
Key words:
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