This book explores the extent to which economic theory is able to provide the theoretical foundations of strategic management. To this end it draws on the philosophy of science; microeconomic theory; and different approaches to strategic management. The work shows that many of the propositions of strategic management are deducible from the economic theories considered. It argues that these propositions should be made open to empirical testing and that a unified theory of strategic management should be developed. Thus the book addresses a current major concern of theorists - that strategy remains ’atheoretical’ and that this reduces the predictive power of the subject and hampers further theory development. The essential contribution made is that economic theory should be systematically explored in order to establish the foundations of business strategy.
Contents: Introduction: does strategic management theory need economics? Setting Criteria to Appraise and Judge Economic Theories: What are the problem area and hard core assumptions of strategic management theory? Market Theories: Neoclassical perfect competition; Theories of industrial organisation; Austrian school of economics; Evolutionary school of economics. Firm Theories: Neoclassical theory of the firm; New institutional economics: transaction cost theory and agency theory; The theory of the growth of the firm; Behavioural theory of the firm; Conclusions: potential of economics for its foundational service to strategic management theory; Bibliography; Index.