Abstract
Are sources of economic rent, as defined by the prevalent business strategy paradigm, sufficient to attain and maintain superior returns? The perspective developed within the conceptual framework of the Institutional Theory may offer managers a contribution towards understanding the strategy process and its potentialities, particularly by stressing the leading role played by legitimacy, the influence of many institutional spheres, the isomorphic pressures, ceremonial behavior and decoupling, among other elements, that mainstream business strategy fails to address directly, but which may have a significant effect on firm performance. We advance that these elements must be accounted for in the pursuit and acquisition of economic rents, even if the ability to articulate them purposefully is constrained by rationality, agency conditions and the manager's social embeddedness.
Highlights
In traditional economics, as well as in a large portion of Business Strategy theory, the main purpose of a firm is to maximize profit
The prevalent thinking in the field of Business Strategy lies in assumptions that may be questionable from the perspective of Organizations Theory in general and Institutional Theory in particular
In an attempt to organize a discussion of the diversity of the field of Business Strategy, Whittington (1993) presents four generic perspectives of strategy: classical, evolutionary, processual and systemic, which differ in terms of results and processes
Summary
As well as in a large portion of Business Strategy theory, the main purpose of a firm is to maximize profit. Most Business Strategy studies emphasize achieving economic rents through the pursuit of efficiency, dealing with the constraints imposed by the technical environment. Such studies usually understand that agents have a broad ability to apprehend the social context in which they operate, and are endowed with high capacity to intervene in social reality and to control their interventions. The purpose of this paper is to show that a combined understanding of the technical and institutional facets of the environment and of organizations, as well as of the condition and possibilities of agency, is pertinent and relevant to those that would formulate and implement business strategies, thereby confirming the need for a strong theoretical connection between the fields of Organizations Theory and Strategy. Several texts exist on strategic choice and institutional pressures, few articulate institutionalist arguments vis-à-vis the different theoretical schools of Business Strategy, regarding strategy formulation and execution
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