Pure Versus Hybrid Strategies: On Exploring the Limits of Adaptability Using an Agent-Based Model

Abstract

In this study we re-visit the pure versus hybrid strategy debate. Pure strategy advocates argue that competitive advantage is a direct function of efficiency and focus. Hybrid strategy advocates, in contrast, emphasize the importance of adaptability and flexibility for achieving advantage. The empirical evidence for the superiority of either strategy is however inconclusive. We argue that this inconclusive evidence is a function of a theoretical and methodological approach that views them as mutually exclusive strategic options. Instead, they should be viewed as variations on a continuum with efficiency and focus on one end and flexibility on the other. By reframing hybrid strategies as deviations from pure strategy ideal types, we shift the focus from questioning whether firms should introduce variations to when and to what extent they should incorporate adaptability in their strategies. We argue that while such deviations increase the firm’s adaptability, there is a limit to such adaptability. This limit to adaptability is a function of two critical factors: resource fungibility and the competitive context. We develop an agent-based model to test these arguments. We find robust support for our arguments under different conditions of resource fungibility and the competitive context. We introduce the concept of adaptability frontier, defined as the limits of the market space within which a firm remains competitive vis-à-vis the competition and conditions of resource fungibility. We thus develop a middle-range view of organizational action and strategy, rejecting the absolutist rigidity of “pure” strategy advocates as well as the unbridled expansiveness of “hybrid” advocates.