Strategy content research

The initial view of strategy made by Porter (Reference Porter1980), based on the industrial organisation school of thought, dealt with how firms should position themselves within an industry to earn superior profit. Since the studies based on this view rely on external factors there is a common ground (the industry context which is independent of a firm’s specific situations) for all of the firms within an industry for strategy formulation.

This characteristic has led this stream of research towards using quantitative methods which look for global variables and universal relationships. The studies based on the positioning school of thought are mostly focussed on verifying the relationships among some organisational-level constructs. Therefore, these studies are based on quantitative studies and statistical analysis of large sample sizes. The validity of such studies’ findings is generally based on quantitatively aggregating responses for the purpose of theory testing based on establishing the inferences of common trends (Armstrong & Shimizu, Reference Armstrong and Shimizu2007). Accordingly, because of the importance of the generalisability of findings of these studies this type of research falls into investigating a small number of variables and relationships which are global and have universal characteristics.

Although the traditional view of the strategy content and positioning school has discovered important concepts and insights for theory as well as practice this view, in the words of Johnson, Melin, and Whittington, ‘has trapped itself into a cul-de-sac of high abstraction, broad categories and lifeless concepts’ (Reference Johnson, Melin and Whittington2003: 6). This limitation, which comes from the preoccupation of the field with quantitative studies, seriously narrows the insights into strategy research. Later, scholars of the resource-based view regarded this limitation and the tendency for quantitative studies as resulting in ignorance of microaspects and internal factors at the expense of relying on macroaspects and external factors.

Problems of strategy content research

Scholars following traditional approaches confess that the field of strategic management’s progression is not simply based on manipulating the theories at the existing level of abstraction; however, advances in the field can be achieved by delving into the complexities of building competitive advantage (Eden & Ackermann, Reference Eden and Ackermann2013). Since competitive advantage comes from distinctive resources scholars search for evidence of idiosyncratic and context-specific characteristics of resource accumulation (Rouse & Daellenbach, Reference Rouse and Daellenbach1999). However, quantitative methods often involve the use of proxy variables which may only capture tangible and visible aspects of a phenomenon.

The dynamic capability view is a perspective which looks to explain how companies achieve distinctive resources. So far research in this field has focussed on how resources are created or extended (Eisenhardt & Martin, Reference Eisenhardt and Martin2000; Winter, Reference Winter2003); the underlying firm-specific characteristics which can make such resources distinctive are still understudied. To explain context-specific attributes of resources, research needs finer-grained studies based on qualitative data from the contexts under question (Godfrey & Hill, Reference Godfrey and Hill1995; Rouse & Daellenbach, Reference Rouse and Daellenbach1999; Nordqvist, Reference Nordqvist2012).

The logical progression in research initiates from theory building, then testing the built theories based on verification of propositions and finally developing practical applications based on empirically tested results. This is why Danneels stressed that ‘notwithstanding its current popularity, the notion of dynamic capabilities as “abstract and intractable” may remain true if we are unable to increase the number of qualitative field investigations’ (Reference Danneels2008: 536). Hence, based on the stage of theory development regarding building competitive advantage and distinctive resources, it is worth sacrificing the generalisation power of quantitative studies in order to gain more qualitative evidence of underlying mechanisms (Lockett & Thompson, Reference Lockett and Thompson2001).

Strategy process research

Although the resource-based view has overcome the inefficiencies found in the positioning view this view itself still requires more in-depth development. Based on the resource-based view a firm’s distinctive resources and capabilities are sources of competitive advantage. However, there has been less attention towards how these resources and capabilities are developed and accumulated over time (Dierickx & Cool, Reference Dierickx and Cool1989).

A firm’s specific processes for organisational capability and resource development are actually processes for building competitive advantage (Jarzabkowski, Spee, & Smets, Reference Jarzabkowski, Spee and Smets2013). On the other hand, the dynamic view of strategy (Porter, Reference Porter1991) also looks for dynamic processes, which over a long time build the competitive advantage of firms. Accordingly, the dynamic view of strategy is a theoretical lens which can give the resource-based view more depth and enhance its traditional approach. This approach is concerned with long-term processes that create competitive advantage, rather than the causes of the process at a given point of time (Porter, Reference Porter1991). Hence, this view can be distinguished from traditional alternatives based on having a process orientation rather than a content orientation.

In brief, applying the dynamic view of strategy to the resource-based view can advance this field in terms of finding the processes through which strategic resources and capabilities are built over time. Therefore, progress in the resource-based view ultimately needs to undertake a dynamic view of strategy and integrate strategy content research with strategy process research.

Problems in strategy process research

It is also recommended that in order to gain a fine-grained understanding of resource and capability dynamics and managerial actions close fieldwork and ‘thick description’ are needed (Rouse & Daellenbach, Reference Rouse and Daellenbach1999; Vaara & Whittington, Reference Van de Ven and Huber2012). Research methods taken so far for strategy process research have primarily been longitudinal case studies full of descriptions; however, the type of research needed to take a microperspective and based on an activity-based view of strategy requires an extra step taken into the depth of cases. Resource-based theories so far have proposed grounds for competitive advantage (Barney, Reference Barney1991) and there are in-depth, detailed descriptions of strategy development (Pettigrew, Reference Pettigrew1997; Johnson, Reference Johnson2007); however, there are limited accounts of the dynamics involved in the build-up, development and change of organisational assets (i.e., resources and capabilities) that provide competitive advantage (Cockburn, Henderson, & Stern, Reference Cockburn, Henderson and Stern2000). Aligned with this argument, Johnson, Melin, and Whittington (Reference Johnson, Melin and Whittington2003) have argued that case studies have provided rich descriptions, but largely left to the reader the hard work of interpreting these into practice. These process case studies may be good for reflection, but the fare has been pretty indigestible (Jarzabkowski, Kaplan, Seidl, & Whittington, 2016). The challenge for an activity-based view will be to transform descriptive contributions into more helpful models of managing.

Integrating the content and process of strategy research

Chakravarthy and Doz (Reference Chakravarthy and Doz1992) distinguished strategy content research from strategy process research, arguing that strategy content research is about what strategic position brings the highest level of performance and that strategy process research is more focussed on how a firm’s processes build its strategic position. So far, strategy content research and strategy process research have been treated as being separate from each other. Pettigrew (Reference Pettigrew1990) argued that the sharp edges between content and process research need to be blurred, perhaps even eliminated. Schendel also (Reference Schendel1992: 2) rejected a dichotomy between strategy content and process and argued that these two views need to be integrated. He stressed that: ‘What has played a strong role in revealing this is the development of the so-called resource based view of the firm. In this view, creative assets are seen as the source of competitive advantage. The creation of assets is recognized as an important aspect of managerial choice and as something more than an assemblage of mere physical assets, or individual human capital’.

In this regard, Van de Ven and Huber (Reference Vaara and Whittington1990) defined strategy process research as being concerned with understanding how things develop over time and why they develop this way. In their definition they emphasised events as the main unit of analysis. Langley (Reference Langley1999) argued that the boundary between variables and events in process research is not as clear. She found it important to consider the impacts of events on the state of a variable or the impact of a variable on the development of events. Therefore, she concluded that ‘although temporal phenomena remain one of their distinguishing features, process data are not composed only of descriptions of discrete events. They also incorporate a variety of other types of qualitative and quantitative information’ (Langley, Reference Langley1999: 693).

In studying effects of events on the state of process variables, as Langley (Reference Langley1999) indicated, there is always a trade-off in temporal embeddedness of events. Pettigrew criticised some studies on organisational change to be ‘ahistorical, aprocessual, and acontextual in character’ (Reference Pettigrew1990: 269). He argued that these studies treat change as a unit of analysis and consider events as episodes of change rather than going into events in depth and finding out about the effects of factors specific to each event on the overall process of change. In dealing with this trade-off, Langley (Reference Langley1999) recommended that researchers can balance both intentions by using retrospective data versus using real-time data. While retrospective data gives more information about memorial moments and general trends real-time data delivers richer and finer-grained insights.

Necessity for a microperspective to integrate the content and process of strategy

The advances in the resource-based view not only require research to consider the processes involved in building distinctive resources and capabilities, but also require further in-depth studies in process research. The current stage of resource-based theory, in searching for processes underlying the building of distinctive resources and capabilities, looks for the emergence of such resources and capabilities out of continuous processes (Thomas & Ambrosini, Reference Thomas and Ambrosini2015). This is consistent with Brown and Eisenhardt’s (Reference Brown and Eisenhardt1997) argument recommending continuous processes for structural change of contemporary business in dealing with today’s hypercompetitive environment.

Based on this line of thought, Eisenhardt and Santos (Reference Eisenhardt and Santos2002) presented a knowledge-based interpretation of the resource-based view which calls for a turn away from making theories of ‘knowledge’ to making theories of ‘knowing’. In fact, they argued that instead of theorising about the distinctiveness of resources we should study the gradual emergence of this distinctiveness over time. This argument is aligned with a general movement in organisational change research and changing the focus of research from ‘nouns’ to ‘verbs’ as recommended by Weick (Reference Weick1979). In fact, instead of looking for ‘being’ we should study ‘becoming’, or rather than looking for an ‘organisation’ our focus should be on ‘organising’.

Sminia (Reference Sminia2009) referred to such a movement in research as replacing ‘how’ questions with ‘how to’ questions in strategy process research. He explained that, in research involving a resource-based view, instead of studying the characteristics of distinctive resources and capabilities and their relationships with performance, research should theorise about how these characteristics are achieved over time. He added that by studying ‘continuity’ and ‘change’ in such variables a researcher can find out about an underlying mechanism which has produced the continuity and change in these variables. Pettigrew (Reference Pettigrew1990) referred to this underlying mechanism, which is the engine of continuous change processes, as a ‘generative mechanism’.

Pettigrew (Reference Pettigrew1990) argued that such generative mechanisms are influenced by specific situations faced during each event and influence change or continuity in process variables. Consequently, strategy process studies of such intentions need to get very close to the specificities of the events making up a strategy. This is why the recent trend in strategy research calls for taking microprocesses into account. The microperspective in strategy research is able to identify challenges and study actions at the periphery levels, not only the actions at the centre level (Rouleau, Reference Rouleau2005; Jarzabkowski & Kaplan, Reference Jarzabkowski and Kaplan2015). This approach – called the activity-based view of strategy (Johnson, Melin, & Whittington, Reference Johnson, Melin and Whittington2003) – investigates the impacts of microprocesses and activities on organisational-level outcomes. Thus, the activity-based view is concerned with the consequential details of organisational work and practice (Whittington, Reference Whittington2006). In brief, based on a microperspective it has been argued that studying the process for developing macrostrategy variables (such as organisational capabilities) necessitates studying building generative mechanisms based on organisational activities and microprocesses.

Conceptualisation of capability development

The theoretical analysis of literature in Part A suggested that we need to combine ambidexterity and dynamic capability views to integrate the content and process of capability development and better understand capability development. To integrate ambidexterity and dynamic capability views we use our findings from Part B, which point to the critical role of microprocesses. The microperspective is concerned with how and why some concrete microprocesses could be linked to strategic outcomes (Johnson, Melin, & Whittington, Reference Johnson, Melin and Whittington2003; Jarzabkowski, Balogun, & Seidl, Reference Jarzabkowski, Balogun and Seidl2007; Johnson, Reference Johnson2007). By taking such a microapproach one might be able to obtain some concrete evidence of what dynamic capabilities look like in organisations, how they are deployed and how context may impact upon them. So, by looking at the detail of such strategic dynamics and how microprocesses can lead to macrostrategic outcomes, the mentioned deficiencies of the capability-based and competence-based views in explaining organisational capability development can be overcome (see for evidence, Lee & Chu, Reference Lee and Chu2013; Kashan & Mohannak, Reference Kashan and Mohannak2015). By adopting microperspective ‘episodic change’ in the traditional view of strategy process is replaced by ‘continuous change’ (Brown & Eisenhardt, Reference Brown and Eisenhardt1997). Accordingly, first, gradual emergence of strategy outcomes is informed by dynamics of microprocesses; second, the creation of episodes of change is explained based on underlying mechanisms called ‘generative mechanisms’. Based on these generative mechanisms capability development can be conceptualised as a process of emergence of new capabilities at the organisational level based on the dynamics in the microprocesses within organisations.

Consequently, we argue that by revealing the generative mechanisms by employing a microperspective to explain the organisational capability development process we will be able to combine the competence and capability-based views. As suggested by Kashan and Mohannak (Reference Kashan and Mohannak2014), knowledge processes and innovation processes are among the critical microprocesses of capability development. In this regard, the literature on organisational capability development points to the influence of the innovation context on the integration of resource and capability development with environmental requirements. Floyd and Lane (Reference Floyd and Lane2000) referred, for example, to product innovation as the engine for capability renewal. Furthermore, Danneels (Reference Danneels2002) stressed that product innovation is informed by environmental requirements. Hence, as suggested in previous literature, organisational capability development through innovation processes can be aligned with environmental requirements.

Moreover, the literature highlights the role of knowledge processes in integrating external and internal assets (Grant, Reference Grant1996; Spender, Reference Spender1996; Lin, Tsai, Tarn, & Hsu, Reference Lin, Tsai, Tarn and Hsu2014). Indeed, dynamics of knowledge processes can be managed in a way that a final organisational capability can be developed as a result of multiple periods of organisational capability development. Furthermore, Grant (Reference Grant1996) argued that such knowledge processes are dynamic (emphasising efficiency, flexibility or scope of knowledge integration) and are based on environmental requirements across multiple periods of time and can develop organisational capabilities.

Such arguments are consistent with Zajac et al. (2000), who believed that an integrative view of fit follows a dynamic view of strategy and explains how strategic processes (based on a static view and at a point of time) vary across multiple periods of time. Indeed, integrating external fit and internal fit in the context of organisational capability development boils down to using different knowledge processes and innovation processes to develop organisational capabilities (Figure 2). Ambrosini and Bowman (Reference Ambrosini and Bowman2009) added to this view and argued that this variation of strategic process across different periods of time leads, at a higher order, to developing what is actually called ‘strategy’. He referred to strategy of firms at a point of time as what firms ‘have’ (e.g., certain capabilities required by the environment) and the strategic processes as what firms ‘do’ (e.g., employing dynamically different knowledge processes and innovation processes).

Figure 2 The role of knowledge and innovation processes in integrative view of capability development

On the other hand, as discussed, an integrated view of strategic fit defines strategic fit as ‘matching’ or ‘aligning’ organisational resources with environmental opportunities and threats (Venkatraman & Camillus, Reference Venkatraman and Camillus1984). Taken altogether, an integrated view of strategic fit is consistent with the dynamic view of strategy and we can conclude that fitting organisational capability with environmental requirements includes the gradual emergence of new organisational capabilities out of existing organisational capabilities by dynamically employing different knowledge and innovation processes. Apart from the static views of the positioning school and resource-based view, essentially the dynamic view of strategy points to the creation of a firm’s current position in an industry and distinctive competences as the main source of competitive advantage (Porter, Reference Porter1991). Ambrosini and Bowman (Reference Ambrosini and Bowman2009) also explained that the resources and capabilities which are sources of competitive advantage are accumulated across multiple periods of time and through strategy dynamics.

Hence, evolution of organisational capabilities based on knowledge integration processes across explorative and exploitative innovation leads to developing new organisational capabilities which are sources of competitive advantage. Accordingly, managing knowledge and innovation processes leads to developing competitive capability. Therefore, based on the above discussions, the following proposal can be suggested:

Methodological positioning for empirical research

While ontological assumption is about ‘nature of reality’, epistemological assumption concerns ‘knowledge of reality’ and how the reality can be known. Different epistemological and ontological assumptions locate between objectivism and subjectivism (Crotty, Reference Crotty1998). Based on such a variety of ontological and epistemological positions different research paradigms have been formed, including positivism versus social constructivism. While the positivist position is based on ‘an objective reality out there’ waiting to be ‘collected’ (Boland & Tenkasi, Reference Boland and Tenkasi1995), social constructivism includes the assumption that reality is context specific and multiple realities can coexist (Creswell, Reference Creswell2012).

Research methods based on objectivism look for causes and effects, and explanation, while the methods with subjectivism rely more on language, consciousness, shared meanings, documents, tools and other artefacts (Klein & Myers, Reference Klein and Myers1999). Within subjectivism understanding can be gained through reconstruction of the self-understanding of people who have dealt with that reality, and hence, some actions or actors of a specific context although could be taken as natural and obvious but they are actually artefacts of that particular contexts (Crotty, Reference Crotty1998).

The findings about methodological approaches from earlier stages of research in this field have so far indicated that, to contribute to this field at the current stage of theory development, researchers should focus on microprocesses, which gradually build competitive advantage. Analysing this trend shows that by changing the focus of research from finding the resource characteristics to finding the processes underlying such resource characteristics, the research paradigm has changed from taking a positivist stance towards an interpretive stance. Indeed, while earlier studies on strategic management were based on ‘objective’ ontological and epistemological positions later research has followed ‘subjective’ ontology and epistemology. This argument is consistent with that of Sminia (Reference Sminia2009), who argued that strategy formation research has been informed by different streams of research based on different ontological and epistemological assumptions. He concluded that at the current stage, research needs to link and create new ontological and epistemological assumptions. In this regard, he proposed a middle-ground position on the objective–subjective continuum. This suggestion follows the theory-oriented explanation approach of Hall (Reference Hall2006) based on matching empirical evidence with theoretically derived process patterns. This approach is also consistent with Langley (Reference Langley1999), who suggested linking the stories from process data to process variables. She further argued that through this approach a researcher can relate the process theory to variance theory (Mohr, 1982) and that external validity of this research is at a moderate level because the number of cases is limited.

Indeed, the variance variables that emerge from the analysis of process data (based on theoretically driven patterns) are specific to the company in which they are found; they are manifestations of global variables and not the original global variables (generalisable variables). Yin (Reference Yin2003) suggested ‘analytic generalisation’ for such situations instead of generalisable findings. Accordingly, while the outcome variables themselves are not generalisable the logic through which they are achieved is applicable to other cases. In other words, in this form of research, while the ultimate ‘reality’ under investigation is not global the approach to such a reality is generalisable. Consequently, adopting a ‘subjective’ ontological assumption is associated with taking ‘objective’ epistemological assumptions. These ontological and epistemological positions fit ‘critical realism’, where the researcher is a ‘mediativist’, seeing social circumstances as mediating between reality and accounts of reality but not eliminating the effects of reality (Sminia, Reference Sminia2009).

In brief, since the current stage of theory building in strategic management and capability development necessitates integration of both the content and process of strategy it can be concluded that the methodological stance for such research may follow the ‘critical realism’ paradigm. This argument is consistent with Edmondson and McManus (Reference Edmondson and McManus2007), who argued that in the field of management research the methodology should fit the stage of theory development. Based on such an argument, a microperspective in strategy formation research may lead to better results by employing methodologies based on the critical realism stance. In this regard, this paper suggests that future studies intending to elaborate on analysis of capability development will be more likely to be positioned within a ‘critical realism’ methodological stance, aligned with the emerging trend of microperspective research in strategy formation.