Viewing global strategy through a microfoundations lens

Abstract

Research Summary: The emerging microfoundations literature asserts that macro concepts and macro‐outcomes, such as firm‐level capabilities, performance and strategies, need to be understood in terms of the underlying actions, interactions and characteristics of micro‐level entities, such as individual actors and managers. This literature has specific implications for the understanding of cross‐level explanatory mechanisms; notably, it asserts that all relations between macro variables are mechanisms that involve micro variables. While the microfoundations literature has been influential in the general strategy literature, global strategy has been less impacted by it. This is paradoxical because the research challenges pointed to by the literature are often magnified in the multinational corporation and in a global strategy context, and this context may introduce novel challenges. For example, Google's strategic decision in 2018 to reenter the Chinese market (macro‐level analysis) is best understood through the thinking of decision‐makers in the company, as well as opposition to the move from over 1,000 of its employees. We characterize microfoundations, discuss their relevance to the global strategy, and show how the papers in this special issue fill important microfoundational gaps in the global strategy literature.Managerial Summary: For too long, studies of corporate strategies have focused on the firm as a unit of analysis, as if the firm could decide or think on its own, neglecting the fact that it is managers who think. The underlying motivations, interactions and characteristics of individual managers of companies have often been missing in explanations of global strategy formulation. This can especially be a lacuna in closely‐held companies in emerging countries where decision‐making is more concentrated in the minds of owners, top managers and family members.The microfoundations literature specifically tries to connect the thinking and backgrounds of individual managers with strategic decisions their firm makes. While the microfoundations literature has made some headway in the general strategy literature, the analysis of global strategy has been less impacted by it. This is paradoxical because the research challenges pointed to by the literature are often magnified in the multinational corporation and in a global strategy context. This introductory paper first refines and enunciates microfoundations theory, in its application to global business. It then also shows how the papers in this special issue fill important microfoundational gaps in the global strategy literature.