Download Now – Research Paper by Teppo Felin & Todd R. Zenger
This paper outlines the theory-based view of strategy and markets. The authors argue that novel or “great” strategies come from theories. Entrepreneurs and managers originate theories and hypotheses about which activities they should engage in, which assets they might buy, and how they will create value. A firm’s strategy, then, represents a set of contrarian beliefs and a theory—a unique, firm-specific point of view—about what problems to solve, and how to organize and govern the overall process of value creation. The authors outline the cognitive and perceptual, organizational, and economic foundations of the theory based view of strategy. The authors also discuss the essential attributes needed for a firm-level theory of strategy. Throughout the paper the authors offer informal examples of our argument, by briefly discussing the strategies of companies like Apple, Uber, Disney, Wal-Mart, and Airbnb. The theory-based view of strategy and markets also offers important insights for how firms govern themselves (including ownership, boards, and organization design) and how firms interact with capital markets and external evaluators and stakeholders. The authors conclude with a discussion of the practical and managerial applications of the theory-based view.