1st Edition

Economic Foundations of Strategic Management

By Mehmet Barca Copyright 2003

    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.


    Mehmet Barca

    'Strategic management has generally developed outside of mainstream economic analysis. There have been a number of notable exceptions such as the work of Porter, Teece and Grant. This book builds upon these pioneering attempts to ground our understanding of the logical foundations of strategic management by relating it to recent economic analysis. As such it is a welcome addition for both students and teachers.' Professor P. M. Jackson, University of Leicester, UK 'The book takes its point of departure in the relatively scattered debates on the legitimate uses of economic reasoning in the field of strategic management that have appeared in the 1980s and 1990s in journals such as Strategic Management Journal, Journal of Management Studies, and Organization Science, as well as in various book chapters. The main contribution of this book appears to be that it pulls together these debates in a unified exposition and using a methodological approach that has not been applied by the various participants to the debates.' Professor Nicolai J. Foss, Copenhagen Business School, Denmark 'The book provides a lucid discussion of the key issues surrounding the economic foundations of strategic management. The author covers a wide range of literatures, and discusses each with subtlety. The book will be of considerable use to both those who teach strategic management and managerial economics and those who research these areas. I think this is a wonderful book. More, I learned a lot from what Barca had to say.' Dr. Sigmund Wagner-Tsukamoto, University of Leicester, UK 'The book makes a contribution in the following areas: 1. It provides a detailed account of the linkages and inter-connections between economics and strategic management. 2. It identifies those areas of economic theory most useful for the analysis of corporate strategy and intra-industry profit differentials. 3. It presents a framework upon which theories of strategic management can be furthered developed.' Dr David Law, University of Wales, Swansea, UK