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The Philosophy of Strategy (Strategic Management)

The Philosophy of Strategy (Strategic Management)

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Published by renold fernandes
Andalas University
Andalas University

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Published by: renold fernandes on Oct 18, 2009
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Strategic Management Journal
Strat. Mgmt. J.
: 873–880 (2002)Published online 30 May 2002 in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/smj.254
AustralianGraduateSchoolofManagement,UniversityofNewSouthWales,Sydney,New South Wales, Australia
Therecent increaseinphilosophyofsciencearticlesinstrategicmanagementreflectsresearchers’rising concerns with understanding and securing the field’s intellectual foundations. This arti-cle argues for a proactive approach to the philosophy of strategy, and for the rejection of conventional, ‘off-the-shelf’ philosophies that neither contemplated, nor can assimilate, the epis-temological messiness and action-connectedness of strategic management. The article respondsto Rodolphe Durand’s critique, revisits the logic of competitive advantage, and makes the case for a pragmatist philosophy of strategy.
2002 John Wiley & Sons, Ltd.
My earlier article (Powell, 2001) explored the epis-temological and ontological foundations of strat-egy research. The task was necessarily analyti-cal and critical, but the message was redemptive.The philosophical foundations of strategy researchare not, in my view, either radical or conven-tional—they are neither objectivist nor subjec-tivist, rationalist nor empiricist, positivist nor post-modern. The paper told two stories: one of whystrategy research cannot rely on conventional log-ical and philosophical justifications, and anothershowing the redemptive promise of pragmatistepistemology.The article elicited a number of responses. Someof them, like Durand’s, did not agree with its
Key words: philosophy; logic; competitive advantage;pragmatism
*Correspondence to: Thomas C. Powell, Australian GraduateSchool of Management, University of New South Wales, Gate11, Botany Street, Sydney, NSW 2052 Australia.
conclusions, but they agreed unanimously on theimportance of understanding the field’s intellec-tual foundations. The recent upsurge of philosophyarticles is encouraging, and attests to the will-ingness of strategy researchers to engage in thisdebate (e.g., Priem and Butler, 2001a, 2001b; Bar-ney, 2001; Mir and Watson, 2000, 2001; Spanosand Lioukas, 2001; Brønn, 1998; Kwan and Tsang,2001).Durand raises four objections, and I thank the
Strategic Management Journal
editors for thisopportunity to respond. The objections are:1.
Logic and competitive advantage
—that it ispossible to show that competitive advantagescause sustained superior performance by usingthe ‘INUS’ logic of non-deterministic necessaryand sufficient conditions.2.
Competitive disadvantage
that competitivedisadvantage is not a useful construct whenreframed using non-negative propositions.
2002 John Wiley & Sons, Ltd.
Received 17 February 2002
T. C. Powell
Firm heterogeneity and tautology
—that, underKantian reasoning, the assumption of firmheterogeneity is not tautologous.4.
Strategy andpragmatist philosophy
—that prag-matism is relativistic and postmodern, reducingstrategy research to semantic debates and sub- jectivity.The following sections address these objectionsin order, and the final section adds further obser-vations on philosophy and strategy research.
Durand argues that strategy researchers can, withcertainty and without tautology, identify sustain-able competitive advantages as the known causesof sustained superior performance. To demonstratethe point, he invokes the ‘INUS’ condition, i.e., anecessary but non-sufficient condition for a non-necessary but sufficient cause. He then appliesINUS logic to the concept of competitive disadvan-tage, arguing that this concept amounts to nothingmore than a negative restatement of the concept of competitive advantage.These conclusions are, in my view, unjustified.In brief, if Durand’s argument is intended as apurely logical one, then it reduces to a mere
(that competitive advantages cause superiorperformance), and is trivial; but if, as seems likely,it is intended as a set of empirical propositions(e.g., that every alternative cause has been identi-fied and eliminated with certainty), then the argu-ment falls victim to a host of empirical fallacies(including the fallacy of induction), and reducesultimately to the Bayesian formulation presentedin my earlier article.The issues are complex and potentially con-fusing, and the formal syntax used in my articleand Durand’s response do not abate the confusion.In what follows, I restate my original argumentusing Venn diagrams, and then show why I believeDurand’s objections do not succeed.In the original article, I did not argue that sus-tainable competitive advantages do not cause sus-tained superior performance. They may, in fact, doso, even to the extent of constituting necessary andsufficient conditions. What I did argue is that wecannot merely
that sustainable competitiveadvantages cause sustained superior performance,and then rely on that assertion as proof.Consider a simple example. If Mary claims to goto the cinema whenever it rains, and only when itrains, then this claim is as shown in Figure 1(a). Inlogical parlance, the events ‘rain’ and ‘Mary goesto the cinema’ are
functionally equivalent 
. Clearly,raining and going to the cinema are differentevents, so that the events ‘rain’ and ‘Mary goes tothe cinema’ are not
definitionally equivalent 
(tau-tological). Moreover, we could test Mary’s claimsimply by observing her cinema-going behavior,and alternative hypotheses readily suggest them-selves (see Figure 1(b)). If our tests corroborateMary’s claim (Figure 1(a)), then the hypothesis of functional equivalence is not disconfirmed, and wetentatively accept that the events ‘rain’ and ‘Marygoes to the cinema’ are
empirically equivalent 
.By analogy, Joe claims that the events ‘firm
has competitive advantages’ and ‘firm
hassuperior performance’ are functionally equiva-lent (Figure 2(a)). Clearly, competitive advantages(locations, technologies, product features, etc.) arenot the same thing as superior performance (marketshare, profit, share price, etc.), so Joe’s events arenot definitionally equivalent.
It should be possi-ble, by observation of firms, to determine whethercompetitive advantages and performance are alsoempirically equivalent.To conduct empirical work on competitive ad-vantage, we develop null hypotheses. Figure 2(b),for example, parallels Mary’s Figure 1(b), andallows four possibilities: (1) firm
has competitiveadvantages but not superior performance; (2) firm
has superior performance but not competitiveadvantages; (3) firm
has both; and (4) firm
has neither.Figure 2(b) is not the only alternative model,but it is interesting for two reasons: (1) it is logi-cally possible, and (2) it has never been tested, oreven proposed, in strategy research. Researchersoccasionally refer to underperformance in spiteof competitive advantages—area 1 (e.g., Coff,1999; Coyne, 1986)—but area 2 never arises asan empirical possibility. In Mary’s case, we would
As noted in Powell (2001), ‘competitive advantage’ is some-times
as superior performance—e.g., ‘the ability of thefirm to outperform rivals on the key performance goal’ (Grant,1998). This usage is clearly tautological. What I show above isthat the relation between performance and ‘competitive advan-tage(s)’ (often in the plural) need not be tautological, but is, inthe logic of strategy research, reduced to tautology.
2002 John Wiley & Sons, Ltd.
Strat. Mgmt. J.
: 873–880 (2002)
 Research Notes and Commentaries
Figure 1. (a) The functional equivalence hypothesis. (b) An alternative hypothesisFigure 2. (a) The functional equivalence hypothesis. (b) An alternative hypothesis
2002 John Wiley & Sons, Ltd.
Strat. Mgmt. J.
: 873–880 (2002)

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