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Towards an Organic Perspective on Strategy

Author(s): Moshe Farjoun

Source: Strategic Management Journal, Vol. 23, No. 7 (Jul., 2002), pp. 561-594
Published by: John Wiley & Sons
Stable URL: http://www.jstor.org/stable/3094444
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Strategic ManagementJournal
Strat. Mgmt. J., 23: 561-594 (2002)
Published online 28 March 2002 in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/smj.239

Leon Recanati Graduate School of Business Administration, Tel Aviv University,
Ramat Aviv, TelAviv, Israel

The strategyfield's core issues the concept of strategy,causal models relatingstrategy

to other constructs,and modelsof strategicmanagementand choice have been previousla,y
addressedby two key progressions.The mechanistic perspective based on disciplinary-based
theories,the designmodel,and a viewof strategyas a plannedposture,has provideda unified
view, but a narrowand increasinglyless pertinentone. The adventof organic developments
that includedstrategyprocess research,evolutionarxand processmodels,and interactiveand
integrativeviews, has providedrichnessand pertinence,but not a unifiedperspective.These
two progressionsmarkedan epistemologicalshiftfrom mechanisticto organicassumptions:
from discreteto incessanttime,from directionalto interactiveflow, and from diffierentiated
to integratedconstructsand models.Buildingon this shift, this paper proposesan organic
perspective thatcombinestheinsightsandcoherenceof themechanistic perspectivewiththemore
relevantorganicideas. It makesaxseof the organicassaxmptionsto advancea view of strategv
as an adaptivecoordination,introducethe Organization-Environment-Strategy-Performance
(OESP) integrativetheoreticalmodel,and presentan organic modelof strategicmanagement.
Theorganicperspectiveprovidesa basisfor an upgraded,moreunified,andbetter-attuned view
on strategy'score issues.Copyright t 2002 John Wiley & Sons, Ltd.

INTRODUCTION Rumelt, 1991). Strategy itself has been mainly

viewed as a postureand a plan. The design model
What is strategy? What is strategy related to, and the SWOT(strengths,weaknesses,opportuni-
and how? How is strategy selected and man- ties, and threats)(Andrews, 1971; Barney, 1997)
aged? How should it be? These core questions modelhavebeenusedas the mainmodelsof strate-
have been addressedby two broad progressions, gic managementandstrategicchoice, respectively.
distinguishedmore by epistemologicaldifferences We call this first developmentthe mechanistic
than by chronologicalorder. The first develop- perspective,for it provides a set of conceptual,
ment consisted of several disciplinary-basedand explanatory,and prescriptivemodels that are uni-
stand-alonemiddle-rangetheories,mainlythe SCP fied by the Newtonianmechanisticlogic as their
(Structure-Conduct-Performance),SSP (Strat- sharedepistemologicalbasis.
egy-Structure-Performance) andRBV (Resource- The mechanisticperspective remains vital to
Based View). These theorieswere used to explain the developmentof strategy research, teaching,
variations in strategy and performance (e.g., and practice. It has establishedthe centralityof
key constructs, questions, and theoretical rela-
Key words: concept of strategy; strategic management; tionships, and its prescriptiveorientationreflects
strategy research; synthesis; process the field's commitmentto help firms improve
*Correspondence to: Moshe Farjoun, Leon Recanati Graduate
School of Business Administration,Tel Aviv University, Ramat theirfunctioningand performance,and to address
Aviv, Tel Aviv 69978, Israel. managerialconcerns.Most significantly,aided by

Copyright t 2002 John Wiley & Sons, Ltd. Received 14 September 1999
Final revision received 25 October 2001
562 M. Farjoun

shared assumptions,its concepts, theories, and iteratedsequences,and entities are createdrather

models have mutuallyreinforcedone another,and than given.' Second, the mechanisticperspective
facilitatedbetter communication,generation,and contrastswith organicideas in its directionalview
exchangeof ideas. Yet, despite its many contribu- of flow. It often presentsa linear and sequential
tions andachievements,the tenetsof the mechanis- view of events and causality,andhighlightsdeter-
tic perspectivehave been increasinglyquestioned. ministiccauses of behavior(Bourgeois,1984). By
Its simpleassumptions,bettersuitedto a relatively implication,it pays less attentionto interaction,
stableandpredictableworldandto the earlystages feedbackand to multiple,reciprocal,and endoge-
of the field's development,seem to be at odds nous influences.Lastly, althoughearly concepts
with the more complex and constantlychanging of strategyemphasizedits integrativenature(e.g.,
observedbehaviorof individuals,firms,and mar- Andrews, 1971), the mechanisticperspectiveis
kets. Furthermore, criticshave describedit as static characterizedby internaldifferentiation:the con-
(e.g., Pettigrew,1992), linear(e.g., Hendersonand structsin bothexplanatoryandprescriptivemodels
Mitchell, 1997), and fragmented(e.g., Schendel, are more developedand betterspecifiedthan the
1994). relationshipsthathold them together.By contrast,
Promptedby the limitationsof the mechanis- organicideas emphasizeintegrated(i.e., problem-
tic perspective, and inspired by the advent of centered,multileveland relational)views of strat-
new ideas in the social and naturalsciences, the egy phenomenaand concepts.
field's second broad progressionsaw the emer- The move to organic epistemologicalassump-
gence and spread of organic developments.Key tions offers several advantagesto the field of
developmentsincluded researchon strategyfor- strategy.First, it reflects a growing appreciation
mation and implementation(e.g., Quinn, 1980; of the complexity and interdisciplinarynatureof
Mintzbergand Waters, 1985), evolutionaryideas strategy.Second, it maintainscontinuitysince it
and process models (e.g., Nelson and Winter, builds on, ratherthan rejects, lower-level mech-
1982; Van de Ven, 1992; Barnettand Burgelman, anistic conceptions(Boulding, 1956). Finally, as
1996), the recognitionof reciprocaland interac- changes, conflict, and interdependenceare the
tive relationshipsbetween strategyand othercon- chief concernsof modernfirmsand strategyitself,
structs(e.g., Tirole,1989;HendersonandMitchell, organicassumptionsseem to hold a naturalappeal.
1997), and integrativeresearch(e.g., Baden-Fuller Nonetheless,organicdevelopmentshavebeenonly
and Stopford,1994). These researchstreamshave partiallyassimilatedinto the mainstreamof the
introducedmore dynamic and eclectic views of strategyfield. Furthermore,the field has experi-
key constructs,offerednew views of strategyfor- enceda growingseparationbetweenprevalentana-
mation, highlighted the importanceof strategy lytic andprescriptivemodelsandthe new concepts
processes especially againstrationalunitaryactor and descriptiveideas.
models, and portrayeda more complex view of Against this backdrop,and to capitalizeon the
causality. Moreover,they have shifted the focus relative strengthsof the two progressions,this
fromstrategicchoice to strategicchange,andgiven paper outlines an organic perspective on strat-
much more recognitionto 'soft' variablesand to egy core issues.2Being organic,the new perspec-
the messy side of reality. tive derives its internalconsistencyfrom organic
Collectively, the organic developmentsrepre- epistemologicalassumptionson time, flow, and
sentedan importantshift in the underlyingepiste- construct coupling. Paralleling the mechanistic
mologicalassumptionsof the mechanisticperspec-
tive concerningtime, flow, and coupling within
' A continuousview of timeaccommodates bothcontinuousand
and across models. First, the view of time in the discontinuousnotionsof change.
mechanisticperspectiveis discrete or synchronic: 2Burns and Stalker(1961) originallyused the terms mecha-
it focuses on a single occurrenceof a set of givens nistic andorganicto distinguishbetweendifferentorganization
at a particulartime. As a result, it is essentially structuresand managementstyles requiredto cope with differ-
ent environments.We borrowthe termsto suggestthatdifferent
timeless:it pays little attentionto past and future, contextscall for differentclustersof conceptual,explanatory,
process,lags andduration,andthe creationof new prescriptive,
andmethodological models.Wetoo view the terms
entities.By contrast,organicideas adoptan inces- as describingpointson a continuumratherthana dichotomy
of puretypes.We findthe termorganicparticularly suitableto
sant and diachronicconceptof time:conceptsand our purposessince it combinesnotionsof process,unity,and
relationshipsare partof continuousprocessesand vitality.
Copyright t 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
Towardsan Organic Perspective on Strategy 563

perspective,it providesa unifiedset of conceptual, ideas and applications.Once the organic set of
explanatory,and prescriptiveelements. Particu- assumptionson time, flow, andcouplinghavebeen
larly,it introducesa conceptof strategyas an adap- isolatedfrom their originalcontributionsthey can
tive coordinationof goals and actions. It presents be appliedand recombinedin ways otherthanthe
the Organization-Environment-Strategy-Petfor- one describedhere.5
mance (OESP) model, an integrativetheoretical We begin by describing the mechanisticper-
structurethat links different middle-rangetheo- spective on strategy.We then introduceorganic
ries andsynthesizesmechanisticandorganicideas. thinkingby discussing the developmentof perti-
Lastly, it includesan organic model of the strate- nent researchstreams.The bulk of the paper is
gic managementprocessin whichthe iterativeand devotedto buildingon these two developmentsto
integrativequalities of the process are stressed. proposea three-pillaredfoundationfor an organic
These three parts of the organic perspectiveare perspectiveon strategy.In conclusion, we sum-
internallycompatible,representthe field's con- marizethe contributionsandpotentialimplications
tinuity and progress, and are better suited to a of the new perspective,and proposeavenues for
morecomplex,interconnected,uncertainandever- futurework.
The developmentof an organicperspectivecan
contributeto the field in several respects.4First, THE MECHANISTICPERSPECTIVE
withoutsacrificingkey insights and contributions
of the mechanisticperspectiveand its attentionto The mechanisticperspective consists of a con-
prescription,an organicperspectivecanhelp renew cept of strategy,relatedexplanatorymodels, and
mechanisticconceptsandmodelsby aligningthem managerialframeworks.Thesethreeelementshave
with organicthemes. Second, an organicperspec- commonepistemologicalassumptions.
tive can integratevarious research streams that
share its epistemologicalorientation,and foster
cross-fertilizationof conceptual,theoretical,and A concept of strategy
analyticmodels. Lastly,beyondrenewaland inte- In the mechanisticperspective,strategyis mainly
grationthe organicperspectivecan stimulatenew viewed as a posture a relatively stable config-
uration a fit or alignment between mutually
3Wesee globalstrategicmanagement as a distinctivebutintegral supportingorganizationalelements,such as activi-
partof strategyandstrategicmanagement. Therefore,theorganic
perspectivealso pertainsto globalizationandrelatedissues. ties and organizationalstructure,and environmen-
40ur work follows the trail of priorworks that stressedthe tal elements,such as a customergroup.Two main
importanceof dynamics,process,integration, andmutualdeter- types of strategyposturesareposition (e.g., differ-
mination(e.g., Bourgeois,1984;HaspeslaghandJemison,1991; entiationstrategy)andscope (e.g., verticalintegra-
Porter, 1991), or that infused prescriptiveframeworkswith
descriptiveideas(e.g., Quinn,1980;BowmanandHurrey,1993; tion) (Chandler,1962;Rumelt, 1974, 1984;Porter
MacIntoshandMacLean,1999).In addition,it is bothcomple- 1980, 199l; Wernerfelt,1984). Strategypostures
mentaryandorthogonalto panoramicviews of the fieldof strat- have been the traditionalfocus of research on
egy (Rumelt,Schendel,andTeece, 1994;Mintzberg,Ahlstrand,
andLampel,1998;Ghemawat,1999).Wedifferfromtheseprior strategicgroups (e.g., Cool and Schendel, 1988),
contributions in thatwe do not simplyprovidea review,explain diversification(e.g., Montgomery,1982),andstrat-
a particularphenomenon(e.g., acquisitions),developa singular egy-structure (e.g., White, 1986). In addition,
model,or advocatea particular theoreticalviewpoint(e.g., com-
plexitytheory).Rather,we makesense of the field's evolution early treatmentsof strategy, rooted in strategic
by using epistemologicalas opposedto chronological,theoreti- planningmodels, have viewed it primarilyas a
cal or conceptuallenses,focus on developmentandnot merely rationalplan. In this view, which still guidesmuch
advocacy,providea perspectiveon broadissues, and highlight
bothtimeandintegration. Moreover,thoughwe providea broad of the thoughtin the strategyfield, action is pur-
reviewof the field, it is not meantto be exhaustiveand fully posive and prospective,and strategiesare realized
representative,butratherto presentcertaindevelopmentswe see as planned (Mintzberg,Ahlstrand,and Lampel,
as central,and serve as a logical step for developingthe new
perspective.We do not intendto proposea fully developednew 1998).
theoryof strategyor strategyphenomenaeither.Rather,we aim
to illustrateone way in whichthe consistentuse of a smallset of
epistemological assumptionscanaidin developingmorecompat- 5Van de Ven and Poole (1995) presentanotherapproachto
ible andrelevantconceptsandmodelsfor strategyresearchand modelbuildingthatbearssomesimilaritiesto ours.Theyextract
practice.To thisend we sketcha preliminary, yet self-contained, four processmodelsfrom existingstudiesand show how they
structureuponwhichfutureextensionscan be made. can be usedto generatenew applications.

t 2002JohnWiley& Sons,Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
564 M. Farjoun

Explanatory models of strategy attributesthataffectstrategyandperformance.The

RBV sees certainresourceattributes,such as inim-
Two concerns of mainstreamstrategy research itability, uniqueness,and flexibility, as enabling
are to explain what determinesfirm performance, certainstrategies(e.g., cost leadership),and con-
and to identify what affects firm strategy.Three tributingto sustainedcompetitiveadvantage(Pen-
research programshave been particularlyinflu- rose, 1959;Wernerfelt,1984;Barney,1991;Teece
ential in addressingthese questions. The Struc- etal., 1997).6
ture-Conduct-Performance (SCP)paradigm(e.g., Collectively,thesedifferentmodelsof the mech-
Bain, 1956) and its derivative,the industrystruc- anisticperspectivesee firmperformanceas affected
ture model (Porter,1980), view the externalenvi- by the environmentand by firmstrategyandother
ronmentas a key determinantof strategyand per- internalattributes,such as resourcesand organi-
formance.In the SCP model, the main causality zationalstructure.Strategyitself is influencedby
flows from industry structuralvariables to firm internal firm attributesand by attnbutes of the
conduct(i.e., strategy)and then to firmand indus- environment.Thisbasiccausalmodeldescribesthe
try performance.Porter'smodel retainedthe basic main relationshipsbetween central constructsin
flow of the SCP but, ratherthan focusing on the strategyresearch:organizationalresources,envi-
industry,used the model to discuss the strategies ronment, strategy, organizationalstructure,and
open to the firm (e.g., positioning strategies)to performance.It also informscorrespondingmodels
improveits performance. of strategicmanagementand choice.
The Strategy-Structure-Peormance(SSP)
paradigm highlights the significance of factors
complementaryto strategy,such as organizational The design approach to strategic management
structure, to firm performance.Originating in and choice
Chandler's (1962) classic study of the growth What implicitlyprovidedthe glue for integrating
of large American firms, the model proposes different causal models of strategy was the
that different growth strategies are driven by design model, a prescriptiveframeworkwidely
the accumulation and deployment of internal used as a guide for practice and teaching
resources,and are matched by differentinternal (Andrews,1971;Porter,1980;Barney,1997).The
structuralarrangementssuch as the functional frameworkdescribes the strategic management
and multidivisional organizational structures. process- the actual steps and subprocessesof a
Chandler'stheoreticalmodel particularlyimplied firm'sstrategythatneedto be managedto maintain
that the match between strategy and structure or improvethe firm'sperformance.In the standard
results in better performance.This proposition design model, the strategicmanagementprocess
has guided subsequent studies (e.g., Stopford generally consists of two main subprocesses:
and Wells, 1972; Rumelt, 1974; Franko, 1976; strategyformulationand strategyimplementation.
Miles and Snow, 1978), has been integrated The strategw} formulationsubprocessis concerned
into contingencyresearchin organizationaltheory with analyses of the external and internal
(e.g., Galbraithand Nathanson, 1978), and has environmentand the choice of strategy at the
been extendedby configurationtheoriststo other corporate,business,andfunctionallevels. Strategy
organizationalprocesses(e.g., Miller and Friesen, implementationcomprises a series of primarily
1978). This literatureprovides a causal model administrative activitiesandincludesthe designof
that relates strategy,organizationalstructure(and organizationalstructureand processes (Chandler,
processes),and performance. 1962), and the absorption of policy into the
A related and more recently embracedmodel organization's social structure(Selznick, 1957:
is the Resource-BasedView (RBV). Anticipating 91-107).
Chandler'swork, early work in RBV delineated
a process theory of the role of resourcesin firm
Another importantstream of researchis TransactionCost
growth(Penrose,1959). Severalmorerecentvari- 6Economics (TCE)(e.g., Williamson,1975).Althoughthe theory
ants of the model have been proposed(e.g., Wer- is not consideredas one of the foundingmodelsof strategyin
nerfelt, 1984;Teece, Pisano,and Shuen, 1997), all lookingat a firm'sresources,boundaries,and structure,it has
significantlycontributedto each of the threestreamsdiscussed
of whichcomplementthe externalview of the SCP here. More recentwork has attempted to apply the theoryto
by their mirroremphasison internalfirm-specific morecentralconcernsof the field (e.g., Williamson,1999).
Copyright (C)2002 John Wiley & Sons. Ltd. Strat. Mgmt. J., 23: 561-594(2002
Towardsan OrganicPerspectiveon Strategy 565

Each of the main researchprogramsreviewed (e.g., Porter, 1980) and of internal resources (e.g.,
has contributedto the design model. Derived Barney, 1991). A prime reason for this coher-
from the SCP are the five forces model and ence is the shared but largely implicit views on
its dynamic counterpart-the industrylife cycle time, flow, and coupling. These were influenced
model -which became the dominantmodels for to a large extent by Newtonian mechanics and its
analyzingthe externalenvironment(Porter,1980). application to microeconomics, and by the ideas
The SSP has provided a theoretical basis for prevailing in the behavioral and economic disci-
the formulation-implementation link in the design plines when the formal study of business strategy
model. In addition,by focusing on internalfirm began.
attributes,the RBV model,togetherwith the value
chain model of firm workflow activities (Porter,
1985, 1996), has become a standardtool for ana- Conceptof time:discrete
lyzing the internal(i.e., organizational)side in the
In the mechanistic perspective firm strategy, the
design model (Barney,1997). environment, and the firm's stock of resources,
The SWOTmodel is often used to prescribethe structure, and work flow technology are often
strategicchoice (i.e., strategyformulation)partof treated as given discrete categories or states that
the design model. In this model, strategy needs coalesce to create static efficiency (e.g., economies
to match the firm's internalresources and dis- of scale), fit, and configuration (e.g., Galunic and
tinctive competencieswith environmentaloppor- Eisenhardt, 1994). Strategic management is viewed
tunities and threats,so as to better meet overall as a one-time sequence of formulating and imple-
goals and objectives (Andrews, 1971). The deci- menting a single choice rather than a continuous
sion rule used is to choose a strategythat capital-process. Strategy-making mechanisms are assumed
izes on the firm's strengths,fixes its weaknesses, to be in place, and learning, history, and processes
exploits its opportunities,and defends or neu- are downplayed. Strategy formulation and imple-
tralizes threats(Barney, 1997). Strategyneeds to mentation activities are condensed in time and their
exhibitexternal consistency firmresourcesneed duration is inconsequential. The choice part of the
to be matchedwith environmentalopportunities, model often involves once-and-for-all choices for
and internal consistency- a fit between strategywhich past and subsequent choices are not con-
and organizationalelements. In addition,strategy sidered, and where there is no distinction between
needs to be in line with managerialvalues and initiation of a new alternative and the continuation
with societalexpectations(Andrews,1971;Porter, of an existing one (March and Simon, 1958).
1980). The differentresearchprogramsreviewed The discrete view of time is also evident in
have also provided support for these different the research models being used. Most mechanis-
forms of fit (e.g., Chandler,1962). tic studies use variance models, cross-sectional
in design. Variance models are concerned mainly
with what the relative explanatory power of differ-
Common epistemologicalunderpinnings
ent determinants of abstract entities (i.e., strategy
Despite differences in content and emphasis, and performance) are ratherthan how these entities
the field's main issues- the nature of strategy, are formed (Mohr, 1982). Although process expla-
its relations, and the ways it is managed and nations featuring the role of history and learning
selected- are addressedin the mechanisticper- were central in the founding of the main theo-
spective in a consistentand mutuallyreinforcing ries (e.g., Selznick, 1957; Penrose, 1959; Chandler,
manner.A view of strategyas a positionor posture 1962), they have been largely neglected by subse-
implies that strategicchoice is mostly a selection quent research.
amongstaticconfigurations.Furthermore, the view Underlying this particular view of time and the
of strategy as mainly determinedby the indus- focus on variance models is the idea of eXcient
try environment,implicit in the SCP, is paral- historicalprocess an evolutionary process that
leled in the design model by the relativeneglect moves rapidly to a unique steady-state equilibrium
of strategies that change the environment(e.g., solution, conditional on current environment con-
Child, 1972). Finally,the SWOTmodel of strate- ditions, and thus independent of the historical path.
gic choice is now characteristicallyaccompanied A static alignment at a given time is the product of
by explanatorymodelsof the externalenvironment a rapid optimizing process. The process is assumed
Copyright (C)2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
566 M. Farjoun

to lead to improvementof fit and ultimatelyto the and reciprocal causality between these distinct
one most suitable(March,1994). elements(Hendersonand Mitchell, 1997).
This fragmentationhas close parallels in the
designmodel.Despitethe recognitionthatstrategy
Concept offlow:
directional formulationand implementationare interrelated
In early versionsof the main underlyingresearch (Andrews, 1971), the design model describes
programscausalityran from environmentto strat- them as separate activities (Mintzberg et al.,
egy and performance(in the SCP model), from 1998). Strategyimplementationhas been viewed
strategyto structure(and performance)in the SSP as administrativerather than analytic activity
model, and from resources to strategy and per- involvingchoice,andexternalaspectsof managing
formancein the RBV model. Moreover,as pos- change (e.g., Chen, 1996) have been treated
tures,strategiesaremainlyresponsesto given con- separatelyfrom internalones (e.g., Quinn, 1980).
straintsratherthan means to influence them or Panel A of Table 1 summarizesthe underlying
createnew environments(Porter,1980).Addition- influencesand contextof the mechanisticperspec-
ally, at its core, positioninganalysisoften assumes tive. It then focuses on the mechanisticepistemo-
no responses from competitorsand other play- logical assumptionsand theirimprintson the way
ers (Ghemawat,1991), and value chain analysis the perspectiveapproacheseach of the field's main
largelyrepresentssequentialinterdependence (Sta-concerns.
bell and Fjeldstad,1998). The sequentialflow of
the design model and the view of strategicchoice TOWARDSAN ORGANIC
also illustratedirectionality.Feedbackloops are PERSPECTIVE:PRIOR ORGANIC
either implicit, as from implementationto for- DEVELOPMENTS
mulation, or absent, as in the case of perfor-
mance influenceson other elements.Choice con- Alongsidethe progressmadein the fieldin particu-
stitutesa constrainedoptimizationproblemwhere lar contentareasgrew severalstreamsof ideasthat
the choice set is exogenous and given (Porter, questioned,complemented,and partiallyadapted
1991). the prevailingapproachesat a more fundamen-
tal level. Particularlychallengingandextendingin
Coupling within and across models: diffierentiated theirimpacton the core assumptionsof the mecha-
nistic perspectiveon time, flow, and coupling,and
Because of their disciplinaryand historicalroots, its predominatelyrationaland prescriptivetone,
the main models have been developed from the were researchon strategyprocesses,evolutionary
ground up as fragmentedmiddle-rangetheories and process models, models highlightinginterac-
ratherthan as lower-leveltheoriesstemmingfrom tion, and integrativeresearch.
an integratedoverviewof strategy.Moreover,each
of the researchprogramshas focused on a dif-
ferent element of the strategy picture: environ- Strategy processes
ment,resources,and organizationalstructure.This Complementingthe focus of mechanisticmodels
division of labor between programsof research on strategyas a fully blown andperfectlyrealized
has facilitatedscientific progress- but at a price 'product',grew streamsof researchthatfocusedon
(Schendel,1994). The SCP and the industrystruc- the processesof strategyformationand implemen-
ture model have been criticizedfor lackinga the- tation.These topics were by and large studiedby
ory of the firm's organization(Teece, 1984) and behavioraland organizationaltheory researchers
as generally ignoring the inner context of strat- and had a more descriptive and dynamic tone
egy (Pettigrew, 1987). The SSP has been criti- (Hirsch, Friedman,and Koza, 1990; Schendel,
cized for not payingattentionto competition(Gal- 1994;Mintzberget al., 1998). Complementingthe
braithand Nathanson,1978), andresearchin RBV SSP model,studiesof strategyimplementation and
has only recently begun to explore the mutual strategicchange have focused on the administra-
dependenceof internalresourcesand competition tive actions and processes involved in initiating,
(Levinthal and Myatt, 1994; Priem and Butler, developing,and institutionalizingstrategy-related
2001). By and large,theoreticaldifferentiationhas changes. Joining earlier organizationaldevelop-
considerablyhamperedthe recognitionof multiple ment approachesto managementof change (e.g.,
Copyright (C)2002 John Wiley & Sonst Ltd. Strat. Mgmt. J., 23: 561-594 (2Q02)

Table 1: Contrastingthe mechanistic and organic perspectives

s Epistemological assumptions provide unity within each perspective and distinct views on the strategy field's core issu

8 Panel A Panel B

perspective Organic
Context: stable and predictable environment, early stages of the field's Context: dynamic and uncertainenvironment, advan
development development
Key influences: Newtonian mechanics logic and ideas prevailing in the Key influences: new ideas in naturaland social scien
behavioral and economic disciplines at the field's formation (strategy process research, evolutionary and proces
r research) and selected key mechanistic ideas

Unifying epistemological assumptions Unifying epi

Discrete Directional Differentiated Incessant time: Int

time: flow: constructs: Diachronic-focus
Synchronic-a Linear, deterministic Narrowly defined on sequences, Re
single and sequential view and poorly history, evolution, int
occurrence of of events and integrated voluntarismand the fee
Strategy's Main
glvens at a causality constructs creation of new
Concerns: point in time entities

What is strategy? A plan and a Static alignment A response to Restricted view Co-aligning planned Continuous Adap
posture constraints or actual co-alignment and infl
coordination of dynamic balance. env
goals and actions Includes states and

Explanatory SCP, SSP, RBV Static constructs. Linear flow. Single Disciplinary-based Organization- History and Multi
(causal) models Reductionism. causes and middle-range Environment- (co)evolution. Self- Co
Variance determinism theories. Key Strategy-Perfor- influences. Paths. Str
models (why concepts narrowly mance (OESP) Process models. How env
questions). defined and poorly and why questions. Per
Efficient history connected Imperfect adaptation ind
Ce Model of the Design model; Static constructs. Sequential activities of Separationof The organic model Continuous process. Feedb
:N strategic SWOT; One-time formulation and formulation and of strategic Process needs to be str
management Rational choice. Static implementation. implementation. management created and facilitated Dia
process Unitary alignment. A Internaland (i.e., recurrentmode). for

Actor given process external aspects of Highlights learning rea

managing change and duration fac
. .
are unlinked Beh

568 M. Farjoun

Lewin, 1951), works such as Quinn (1980), Pet- A relatedbranchof strategyinquiryhas high-
tigrew (1985), and Baden-Fullerand Stopford lighted the significantrole of strategicleadership
(1994) have dealt with the political, cultural,and in the strategicmanagementprocess (e.g., Ham-
psychologicalaspects of strategictransformation. brick and Mason, 1984). This streamof research
These and related studies have highlighted the has highlightedthe role of the CEO, board, and
difficultiesof realizing intentions,the interactive top managementin formulatingand implement-
natureof internalchange, and the importanceof ing strategies(e.g., McNultyandPettigrew,l999).
realistic and people-sensitivestrategic initiatives It served as a counterpartto the mechanisticand
(Ansoff, 1984). rationalviews of strategy making by highlight-
A more direct challenge to mechanisticideas ing humanengagementandmultiparty(e.g., board,
came from studiesof strategicchoice and strategy consultants)interactionin these processes,andthe
formation.Most researchunderlyingthe mecha- critical role of strategicleaders in mediatingthe
nistic view is guidedby the conceptof a decision- firm's internaland externalcontexts.
making process based on a plannedand rational A final and most significantdevelopmentalong
unitaryactormodel (Rumelt,Schendel,andTeece, these lines suggests that realized strategies can
1994). In this model, decision-makingprocesses be a result of prior plans but can also be an
are viewed as black boxes that have no conse- emergentstreamof actions recognizedas a pat-
quencesfor the decision itself (Simon, 1986). The tern after the fact (Mintzbergand Waters,1985).
choice is guided by the comparisonof discrete Ratherthenbeing distinctprocessesas depictedin
alternatives(Pettigrew,1992; March, 1994; Dosi the design approach,formulationand action (i.e.,
implementation)are better viewed as constantly
et al., 1997). By contrast,strategicdecision mak-
coevolving: following and affecting each other
ing and cognitive research(e.g., Mintzberg,Rais-
througha process of strategiclearningand con-
inghani,andTheoret,1976;RegerandHuff, 1993)
trol.Good strategiescan be formedanddiscovered
have suggested that the decision-makingprocess
by experimentingandobservingthe organization's
mattersto the plansanddecisionsreached(Simon, actionsratherthanby conductingformalanalyses
1986). Sociopoliticalinfluences such as negotia- of strengthsand opportunities(Mintzbergetal.,
tion and proceduraljustice, learning, and other 1998). In contextswhere plans provedinadequate
informationprocessing activities can affect the at times, such as in an increasinglyturbulentenvi-
kinds of strategiesand plans selected, and con- ronment,the conceptof emergentstrategyoffered
sequentlyalso affect performanceoutcomes(e.g., a viable alternative.
Hart and Banbury, 1994). Choices are viewed Ultimately,these various contributionsuncov-
as nested (e.g., March, 1994) and multistaged ered a persistenttension in the field: strategyis
(Brehmer,1992) ratherthan discrete, and choice an attemptto constructa rationaland predictable
sets can be modifiedendogenously(Kleindorfer, world in the face of a reality that quite often
Kunreuther,and Schoemaker,1993). resists it.
Otherstudieshave highlightedthe role of vision
and cognition, and of other cultural,social, and
political influences in strategy folllwation(e.g., Process approaches and models
Chakravarthyand Doz, 1992; Pettigrew, 1985). A secondorganicdevelopmentstems not so much
They emphasizedthe incrementalnatureof deci- from dealing with topics largely ignored by the
sion making,initiallyas a disjointedprocess(Lind- mechanisticapproaches,but ratherfrom a differ-
blom, 1959), and subsequentlyas a more inte- ent orientationto process and time. It particularly
gratedone (Quinn, 1980). Quinn's (1980) model includes the rise of new evolutionarymodels of
particularlyblendeddescriptiveideas of an incre- the strategyprocess, and the growing interestin
mental and nonlinear process with the logical viewing strategy in dynamic and process terms
and prescriptive marks of more rational mod- (Porter,1991; Melin, 1992; Academyof Manage-
els. Bower (1970) and Burgelman(1983) added ment, 1997). Inherentto models of evolutionary
a view of strategyformationas dialectic involv- processes is the idea that 'historymatters' (Nel-
ing rationalizationand structuringby top manage- son and Winter,1982; North, 1991; March,1994;
mentand strategicinitiativesof lower levels in the Arthur,1995). Some of these models suggest that
organization(Noda and Bower, 1996). particularpathsmay influenceoutcomesexamined
Copyright (D 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
Towardsan OrganicPerspectiveon Strategy 569

at a particulartime, and that history does not loops havebeen addedin eachof the mainresearch
necessarilywork efficiently to producethe opti- programsof the mechanistic perspective. They
mal configurationsand alignmentssuggested by accounted for firm conduct and firm structure
the mechanisticviews. In contrastto the traditional effects on industrystructure(Caves etal., 1980;
modelof the environment(e.g., industrystructure), Caves, 1980;Porter,1991), highlightedthe effects
more attentionis given to marketprocesses(Nel- of organizationstructureon strategy (Hall and
son and Winter, 1982; Dosi etal., 1997). Static Saias, 1980), and recognizedthe effects of strat-
conceptionsof resourceshave been augmentedby egy and environmenton resources(Porter,1991;
models that highlight process and learning(e.g., Rumelt et al., 1994). These latter new linkages
McGrath,MacMillan, and Venkataraman,1995; in particularhave pointed to new connections
Teece et al., 1997). Similarly,studiesof organiza- across the original models. The focus on strate-
tional structurehave shiftedthe focus to its evolu- gic (external) interactionis also the main fea-
tionarynature(e.g., GalunicandEisenhardt,1995), ture of the game theoreticalmodels in the new
andto organizing the processualqualityof orga- Industrial-Organization (I-O) economics (Tirole,
nizationalsystems and participants(e.g., Weick, 1989; Brandenburger and Nalebuff, 1996). Mod-
1969; Pettigrewand Fenton,2001). els admittinginteractionview capabilities,com-
A relateddevelopmentis the adventof action- petition, and performanceas both affecting and
based notions of strategy.In the new evolution- being affectedby strategy,and are less concerned
ary and process models, strategy involves more with the differential contributionsof resources
than a static position in the marketplace(Inkpen and environmentto performance(e.g., Hender-
andChoudhury,1995), andincludespaths,moves, son and Mitchell, 1997). Differences between
and actions (Pettigrew, 1992). Models of strate- firms are traceablenot only to their contempo-
gic interaction(Chen, 1996), real options (e.g., raryconditions,but also to the historyof interac-
Bowman and Hurrey, 1993), commitment(Ghe- tions betweenthem and with otheractors(March,
mawat, 1991), and dynamic capabilities (Teece 1994).
et al., 1997) still see strategyas being subjectto Reciprocal causality has also penetratedthe
planning,but highlight its continuousand path- design model of the strategic managementpro-
dependentnature. By highlightingthe idea that cess. It is implicit in the notion of dynamic fit
firms need to conduct experimentsand not only (Itamiand Roehl, 1987). It is also evident in the
analysisandplanning,recentapproacheshave fur- dialectic view of formulationand implementation
ther promoted a more active view of strategy (Burgelman,1983; Mintzbergand Waters,1985).
(e.g., Miller and Chen, 1996; Brown and Eisen- Finally,it is representedin the renewedinterestin
hardt,1998). internalfirmattributes,such as organizationstruc-
Process models and designs have moved the ture, culture,and decisionprocesses,as important
focus from what determinesstrategyand perfor- influenceson, ratherthan derivativesof, strategy
mance to how they are determined(Mohr, 1982). formulation(Barneyand Zajac, 1994).
The new models do not necessarilyrejectthe idea
of steady states and strategicpositions but rather
seek to explain firm success and failureby look- Integrative works
ing at historicaldevelopments,and observingthe A final set of organicdevelopmentshas helped to
pace and path of change (Hodgson, 1993; Bar- counteractthe growingproliferationof alternative
nett and Burgelman,1996). They examine how views and approachesto strategy,and to emulate
initialconditions,timing,managerialchoices,deci- earlier works that provided a more holistic pic-
sive moments,learning,and path-dependentpro- tureof strategy(e.g., Chandler,1962). In addition
cesses enable and constraincurrentstates and in to the integrationgainedby the increasedrecogni-
turn provide platforms for future developments tion of reciprocalcausation,integrativeworkshave
(Doz, 1996;Mitchell, 1989;LiebermanandMont- offeredmore eclectic views of concepts and phe-
gomery, 1998). nomena,linkedpreviouslydisconnectedconstructs
and levels of analysis,andattemptedto furtherthe
Interaction bridgingof fragmentedmodels.
With the growing appreciationof interactionand Examples of such integrative work are the
reciprocalcausation of key constructs,feedback developmentof comprehensivemodelsof business
Copyright (D 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J.. 23: 561-594 (2002)
570 M. Farjoun

phenomenasuch as acquisitions(Haspeslaghand TOWARI)SAN ORGANIC

Jemison, 1991) or turnaround(Baden-Fullerand PERSPECTIVE:THREE PILLARS
Stopford,1994). Also includedis the workof con-
figurationtheorists(e.g., MillerandFriesen,1978), If the mechanisticperspectiveprovideda shared
which extended earlier notions of alignmentto epistemologicalbase, the advent of the organic
show how environment,strategy, structure,and developmentshas broughtthe field muchmorerel-
other organizationalattributescoalesce into dis- evant and enrichedapproachesto its core issues.
tinctandepisodicallychangingarchetypes.Finally, Despite the growing recognitionin the field of
several works have explorednew ways to merge the relevanceand utilityof the organicideas, they
behavioraland economic approaches(Barneyand have not managedto changethe mechanisticper-
Ouchi, 1986), to bridge across multiple levels spective's more secure yet increasinglyfractured
of analysis (Pettigrew, 1985), and to integrate 'deep structure'.Consequently,the field's transi-
prescriptiveand descriptive models (e.g., Bow- tion away fromfragmentation, stasis, and linearity
man and Hurrey,1993; MacIntoshand MacLean, has remainedincompleteand uneven.
1999). For example, Porter's (1996, 1997) reflection
on the conceptof strategy,which includesseveral
dynamicextensions, still retains a view of strat-
Common epistemological underpinnings egy as a plannedand stableposition,and suggests
a linear causal flow running from environment
Although some of these organic developments to position(i.e., strategy)to internalorganization.
came from within the field, others were influ- Similarly,SWOT analysis, rooted in mechanistic
enced by advancesin the naturalsciences,particu- ideas, still remainsa primaryconsultingtool (Hill
larly in modernphysics (McKelvey, 1997; Mac- and Westbrook,1997) and serves as an organiz-
Intosh and MacLean, 1999), and in the social ing frameworkfor researchand teaching(Barney,
sciences (e.g., Adam, 1990; Sztompka,1993) as 1997). Organicideas have made more mark on
exemplified by evolutionaryideas in economics the mechanisticperspective'sconcept of strategy
(Hodgson, 1993), and by the move in organiza- andtheoreticalmodelsthanon its analyticmodels.
tional theory from rational to naturalviews on Moreover,the independentand disciplinaryroots
organizations(Scott, 1995) and towards process of the mainmechanisticmodelshave left linkages
models (Van de Ven and Poole, 1995). Com- across models less specified. Against this back-
mon to these diversedevelopmentsin the organic drop, an organic perspectivecan furtherexploit
wave is a shift in the underlyingepistemologi- the generativepower of the organicassumptions
cal assumptionsrelated to time, flow, and cou- to facilitate the transitionto more dynamic and
pling found in the mechanisticperspective.The integratedapproachesto the field's core issues.
new ideas have emphasizedtime as incessant and We proceed by developing three related build-
diachronic:concepts and relationshipsare partof ing blocks that parallelthe main elementsof the
continuous processes and dynamic phenomena, mechanisticperspective:a conceptof strategy,an
and entities are not fixed but are rathercreated integrativetheoreticalmodel, and a model of the
and changed. History matters in the sense that strategicmanagementprocess.
prior events and developmentscondition current
choices, and action, human agency, and social
processes are central. In the organic view inter- A concept of strategy
action and multiple and mutual influences are A natural starting point and a linchpin to the
highlighted;there is more room for actors' dis- other two pillarsof the organicperspectiveis the
cretionandfor endogenousdevelopments.Finally, concept of strategy.Extendingearlierdefinitions
the new ideasemphasizeinterdisciplinary andinte- (Chandler, 1962; Andrews, 1971; Porter, 1980;
grated views of strategy phenomenaand con- Quinn, 1980; Mintzbergand Waters,1985; Itami
cepts, particularlydepicting and explainingphe- and Roehl, 1987; Bowman and Hurrey, 1993;
nomena,while being sensitiveto theirinterdepen- Brown and Eisenhardt,1998), we define a firm's
dent social, economic, and informationalaspects, strategyas the pZannedor actual coordinationof
and highlightinglinkageswithin and acrosslevels the firm's major goals and actions, in time and
of analysis. space, that continuouslyco-align thefirm with its
Copynght (C)2002 John Wiley & Sons. Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
Towardsan OrganicPerspectiveon Strategy 571

environment.The firm's strategyco-aligns it with chain, higher levels in the hierarchychange less
the environmentby building on and modifying frequently.Theyprovidedirection,integration,and
the firm'sinternalattributesand forces to respond consistencyfor lowerlevels, whichconstitutemore
to, and influence, environmentalconditions and detailedmeansand actionsfor reachingends. Yet,
developments.In short, strategyis co-aligningor despite this hierarchy,the relationshipbetween
adaptivecoordination.This definitionestablishes strategyand tactics is dialecticalratherthan lin-
three interrelatedpoints: strategyemphasizesthe ear: availablemeans constrainstrategy(Harkabi,
firm'sbehaviorover time andincludesmajorgoals 1997) and lower-level managerialinitiativescan
and actions;it includescoordinationin space and converge into and shape higher-level strategies
time, of which planned coordinationis just one (Bower, 1970; Burgelman,1983).8
special case; and it deals with adaptation,which
includes both respondingto and influencingthe Plannedand actual coordination
environment.Each of these points is elaborated
below. Coordinationis a term used to distinguishstrat-
egy from random behaviors and completely
autonomousactions(e.g., Quinn, 1980;MacCrim-
Goals and actions mon, 1993). Strategycoordinatesgoals andmeans,
Strategyincludes both goals and actions (Chan- internal resources and administrativeinfrastruc-
dler, 1962; Andrews, 1971; Porter, 1980). Goals ture, specific courses of actions, and internaland
'state what is to be achieved and when results external aspects of managing change. A firm's
are to be accomplished,but do not state how coordinatedaction (i.e., realized strategy) can
the results are to be achieved' (Quinn, 1980). be based on a mix of coordinatingmechanisms
Actions are a general label for bundles, sets, (Thompson,1967). It can be recognizedretrospec-
or sequencesof resourcedeployments,initiatives, tively as a patternin a streamof actions(Andrews,
responses,moves, deals, investments,and devel- 1971; Quinn, 1980; Mintzbergand Waters,1985).
opments.They include firm 'conduct'or external Coordinatedaction can be guided by a plan (i.e.,
actions as viewed in the intendedstrategy)in which long-termgoals, inten-
(i.e., interorganizational)
SCP and in the new industrialorganizationlit- tions, and means are specifiedpriorto actions. It
erature(e.g., Shapiro, 1989), political and legal can be centralizedand stem from core manage-
actions,and majorinternaladministrativeactions. rial values or from a guiding sense of purpose.
This part of the definitionemphasizes what the Alternatively,it can be based on improvisation,
firmdoes over time: its actionsand behaviors. mutualadjustmentto internaland externaldevel-
Goalsandactionscorrespondto threetraditional opments, or the (unexpected)interactionof agents
elementsof strategycontent(i.e., strategicchoice): (e.g., individuals) respondingto simple rules.9
goals (e.g., vision), postures (e.g., scope or com- Strategy also includes both the firm's loca-
petitiveposition),andmoves (e.g., joint ventures). tion and direction within the environment.Spa-
These elements constitutea means-ends hierar- tial coordination, or strategy states, and tempo-
ral coordination, or strategy paths, are therefore
chy (Simon, 1976), in which posturesare inter-
complementaryfacets. Strategystates (i.e., pos-
mediate goals coordinatedby higher-levelgoals
tures) representa view of the firm's coordinated
(e.g., profitability)and major policies that affect
the firm's overall directionand viability (Quinn,
1980). Postures,in turn, guide lower-level poli- us to view strategyalso in relationto otherpotentiallyrelated
cies and actions, such as new productdevelop- 8 We see the idea that goals alwaysdictateeverythingelse as
ment and human resource management(Porter, misguided.Rather,in some circumstances,intentionscan be
1980). Specific moves are meansto achieve goals more malleablethanresourcestocks or environmentalcontin-
we view goalsnot only as constraintson
directly or indirectlythroughthe creation,suste- gencies.
subsequentdecisionsandstrategiesbutalso as variables.
nance,and changeof postures,or throughchanges 9 Wepreferto emphasizecoordinationandintegrationratherthan
in the firm's resourcemix.7 In this means-ends patternas a distinguishingcharacteristicof strategy.Patterns
in action can generally result from three sources: random
action,accumulation path-dependent,
of incremental, andlocally
7The hierarchicalandrecursivenatureof strategyimpliesthata adaptiveindividualsteps(suchas experiments),or granddesign.
strategycan be viewedas a partof anotherstrategy,as a stand- In our view, a patterncreatedby randomactions,even one that
aloneconcept,or as includingotherstrategies.Thismayrequire helpsthe firmadapt,does not constitutea strategy.

Copyright (C)2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
572 M. Farjoun

resource deploymentsand its state of alignment content (goals and actions), mode of behavior
with the environmentfrozen at a point in time. (coordinated), and context (adaptation).Goals
Strategypaths andtrajectoriesrepresentthe devel- and actions define what is included in strategy.
opmentover time of coordinatedactionsequences Coordinationdistinguishes strategy from other
or moves. Both states (e.g., a firm's international
noncoordinatedbehaviors even those that are
diversityposture)and paths(e.g., a firm'sinterna-adaptive yet allows for multiple forms of
tionalizationpath) are a confluenceof the firm's coordinationto be included. Lastly, adaptation
designedand emergentstrategies. suggests that not all coordinatedbehaviors are
included (Meyer, 1991). It therefore provides
Continuousco-alignment external anchoring to otherwise closed-system
forms of coordination.
The firm'sinternallycoordinatedgoals andactions The definition also blends mechanistic and
are anchored in its continuous co-alignment organicideas. It includesmechanisticconceptions
with its environment(Thompson, 1967; Porter, of strategy as postures, states, and plans.
1991). Co-alignmentis viewed both as a process However, by integrating organic ideas, such
and as a relatively constant and superordinate as emergent strategy, it portrays strategy as
goal, coordinatingother intermediategoals and less rigid, linear, static, individualistic, and
lower-level actions, but not necessarily as an prospective.The definitionfurtherutilizesthethree
outcome obtained. Co-alignment is sustained definingcharacteristicsof the organicperspective.
through actions aimed at creating, (re)defining Particularly,it emphasizes incessant adaptation
and integratingthe firm's domains, throughthe and temporal and emergent coordination;it is
firm's navigationand (re)positioningwithin each interactive and emphasizesmutual and dialectic
domain, and through changes in the firm's influences;and it integrates externaland internal
resource mix, which supports,and is influenced actions,multiplecoordinationmodes and multiple
by, the firm's domain and navigationstrategies. strategylevels.l°
In contrast to steady-state alignment, the co-
alignment process is ongoing and dynamic and
consistsof a seriesof ever-changinggames(Porter, The OESP explanatory model
Key to the notion of co-alignmentis the idea The second pillar of the organicperspective,and
of mutual influence.The firm both adaptsto its parallelto the mechanisticperspective's maintheo-
context, and at times adapts the context to it reticalmodels,is the Organization-Environment-
(Pfeffer and Salancick, 1978; Bourgeois, 1984; Strategy-Performance(OESP) model, a meta-
Itami and Roehl, 1987; Porter, 1991). The firm theoreticalframework.The purposeof the model
needs to manage that is selectively identify, is to organizeandsynthesizeexistingmiddle-range
respond to, and influence, internaland external theoretical models and to stimulate the devel-
constraints historical,organizational,and envi- opment of new ones. In addition, the model,
ronmentalactors, attributes,forces, and develop- describedin Figure 1, aims to inform and rein-
ments which define and limit for a meaningful force analyticmodelsof strategicmanagementand
period of time what it can successfully achieve choice. We next describethe majorconstructsin
(Pettigrew, 1987; Ghemawat, 1991). It needs to the OESP model, their key relationships,and the
strikea dynamicbalance in allocatingits resources main implicationsof the model.
between responsive and defensive actions, and
more entrepreneurialones such as innovating,
influencingsources of uncertainty(e.g., govern- Major constructs in the OESPmodel
ment regulations),and changing the rules of the In additionto the already-defined conceptof strat-
game (Brandenburger and Nalebuff, 1996). egy, the othermajorconstructsin the OESP model

Summaryand contributionof the definition 10Our concept is generallyconsistentwith other frequently

used definitionsof strategysuch as Mintzberg'sposition,ploy
The three elements of the definition clearly (includedas a move in our terminology),perspective,plan,and
establish strategyat the intersectionof a specific pattern(5 P's), andaddspathas a sixthP strategy.
Copyright (C)2002 John Wiley & Sons. Ltd. StscAt. Mgt?lt. J.. 23:561-594(2002
. ructure:9
,hlp, *9 Quality
Info of *short-and
iz ;/ long- ... .. ** **- .t and
' perfor

5 . Firm Strategy .
. XI .
g The FIrm'scoordinated _ .
majorgoals and actions, in w :
FirmOrganization * time and space, that *' *
t h) * continuouslyco-align the ^ t
r HIrm wlth ItSenvlronment er!
Resources(and technology): < 9 *9999999999999999999999FJ
o resources,relationships,worl
k-flow _ v .
technology. X. X w
L Administrativeand social St
processes (strategymaking, \ FirmPerformance* 4 g
*- tor r_alinrormt bv k)

_______________ KeContributions
l | _________________ 4 _____ ________________________________________s___________ |

Relationshipshighlightedin j Keyorganicdevelopments: j Broader,mu

themechanisticperspective: j > > (self-influences) j Extensiono
' *' ' to less resea
Model Representation ' Model Representation Model Representation '
in OESP ' j Emphasiso
' SCP(New linkages) S-E, P-E Managementof S-O, O-S '
SCP E-S-P j internalchange** ! Accom
| l Highlightin
SSP S-O-P | SSP(New linkages) O(structure)-S Strategic(external) E(strategies)-S-Pj relationship
@ interaction** S-E(.strategies)-P' strategy-en
RBV O-S-P ' RBV (New linkages) S-O(resources) @
j P-O(resources) Self-influences** o O SS EE ' Descrlbing
. . ' ' ' multiplecausal
ce | (as m evolutlonary P-P ,
j Cross-modellinkages O (structure, andoptions models , Accommod
z resources)-E, and in emergent !
i P-S strategy). Arrowslinking differentconstruc
' Strategicdecision making varianceandprocess models
i & formation(e.g. O (process)-S * Constructsin the OESP includ
.strategicleadership)** representationsand indicateboth
. .

Process models

D Figure 1. The Organization-Environment-Strategy-Performance(OESP) mode! Key contributionsof the mechanistic and or
- s

- /
574 M. Farjoun

are firm organization,firm environment,and firm structure)andinformal(e.g., culture,politics,con-

performance.11 trol) mechanisms and organizing activities for
allocating,coordinating,and mobilizing decision
Firmorganization. Firm organizationincludes authority,resources,and rewards(Penrose, 1959;
the actual and potential internalmeans, mecha- Chandler,1962; Galbraithand Nathanson,1978;
nisms, institutions,developments,and forces that Miles and Snow, 1978). In particular,we stress
induce, enable, modify, and carry out the firm's the processes, such as formulation,and emer-
strategy. These elements are not simply viewed gence, by which strategiesare created,realized,
as tools but also as part of an open system that and managed,and the processes by which infor-
has organic qualities such as emergence, infor- mationis created,acquired,developed,maintained,
mal relationships,and indeterminacy.Firm orga- organized,disseminated,transmitted,and commu-
nizationparticularlyincludes the states and paths nicated (e.g., Huber, 1991). Also included are
(i.e., history) of (a) resources (and technology), the nature, attributes,connections, core values,
and (b) administrativeand social structure.These beliefs, ideology, and behaviorof strategiclead-
two categoriesare viewed as mutuallysupporting ers and key decision-makersin the organization
and as distinctfrom strategy,whose main role is (Selznick, 1957; Porter,1980; Collins and Porras,
to mediate and guide firm-environmentinterac- 1994).
tions. Each of the categoriesis viewed as an open These two categoriesof firm organizationare
subsystemthat interactswith relatedelements in consistent with and extendthe view of the firmas
the environmentthroughresourceexchange,com- a pool of resources embeddedin an administrative
munication,and other relationshipsand boundary framework (Penrose, 1959;Chandler,1962).They
. .


reflect the respective emphasesof behavioraland

Resources(andtechnology) we includeunder economic models, and include their common
this general heading internal means and devel- aspects, such as technology and information,as
opments that can be drawn upon to accomplish well as their distinctive technologicaVeconomic
the firm's goals, and especially those uniquefea- vs. social contributions.The categorieschosen
tures called the firm's distinctivecompetencies may have some conceptual overlap, yet they
(Selznick, 1957). We break down the general broadlyrepresentthe richnessand complexityof
headinginto the following: resources the finan- organizationswith their formaland informal(i.e.,
cial, physical, informational,and organizational sociopolitical), human, technological,economic,
resources,and the humanresourcessuch as expe- informational,and relationalaspects.
rience, skills, motivation, and behaviors associ-
ated with individualsin the organization(Penrose, Firm environment(s). Although at times the
1959; Barney, 1991); relationships the formal physical environmentcan be an importantcon-
and informalrelationships,such as contracts,trust, siderationfor the firm, it is useful to view the
loyalty, legal rights, and social capital that bind environmentas consistingprimarilyof otheractual
the firmwith variousactorsand stakeholders;and and potentialactorsand theiractions(Bain, 1956;
workfow technology the variousactivitiesand PfefferandSalancik,1978;Porter,1980;Branden-
operationsin which resourcesare employed,and burgerand Nalebuff, 1996). Actors can represent
the way work is done (Porter,1985). differentlevels of analysis.They can includeindi-
Administrative and social structurerepresents viduals, groups, organizations,or a set of indi-
the ways in which means are administeredand viduals and organizations(i.e., ecology) such as
relationshipsare regulatedamong the firm's par- a strategic group (Caves and Porter, 1977), an
ticipants.These include the organization's struc- industry(Porter, 1980), a field (Scott, 1992), a
tureandprocesses the formal(e.g., governance distributionchannel(Sternand El-Ansary,1988),
a network(Thorelli,1986), an ecosystem(Moore,
1993),or a valuenet (Brandenburger andNalebuff,
IIFirm strategyas definedbefore includesboth plannedand political, eco-
actualcoordinatedgoals and actions (realizedstrategy).Con- 1996). The environment includes
sistentwith mostexplanatorymodelsandempiricalresearchin nomic, social, institutional,inforrnational,techno-
the field, strategyis definedin the OESP model as a firm's logical, and demographicaspects,conditions,and
realized strategy.In our subsequentdiscussionof the strategic
management process,plannedandrealizedstrategiesaretreated developments. The firm'senvironmentparticularly
separately. includesactors'resources,technologies,strategies,
Copyright (D 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
Towardsan OrganicPerspectiveon Strategy 575

relationshipsand interactions,and performances, such as goals and strategyhave been consolidated

and external developments, forces, events, and into fourbroader,higher-level,logical counterparts
discontinuitiesthat may affect them and the focal (e.g., strategy),and their dynamic and unfolding
firm. Finally, environmentincludes past and cur- naturehas been highlighted.In addition,relation-
rent environments,and future environmentsin ships between key constructswere consolidated
which the firm may potentiallyoperateeither as into more coarse-grainedlinkages,and definedso
a result of its own initiativesor the result of the as to emphasize temporallinkages and process
in1t1at1vesof otheractors.
. . .

themes and questions. Each of the constructsis

As with the otherconstructs,the environmentis also describedby its state (e.g., initialconditions)
viewed both as a state and a path. This reflects, andevolutionarypath.It also influencesitself over
for example,the complementarynotionsof indus- time:being influencedby its previoushistory,and
try structureand industryevolution, the current influencingits futurepathandstate(Monge,1990).
compositionof actorsandtheirexit and entrypat- Furthermore, to providecompatibilityof its parts
terns,the currentposturesof differentactors,and and be consistent with underlyingresearchpro-
the ways these postureshave been formed.Addi- grams,the modeldeliberatelyremainsat a general
tionally,the environmentis viewed as influencing level of abstraction.Yet, reciprocalinfluencesalso
its own path. This view of environmentincludes operatewithineach of the main constructs.l2
dynamic features, integrates various behavioral Each constructin the model can affect each of
and economic conceptionsof its compositionand the othersin spaceandtime,bothdirectlyandindi-
character,andattendsto multiplelevels of analysis. rectly,throughorjointly with otherconstructs,and
can serve as a startingpoint for causal sequences.
Firmperformance. Firmperformanceindicates Constructsare not requiredto evolve at the same
the qualityof the firm's continuousco-alignment rate,andtheirreciprocalrelationshipsdo not imply
with the environment(Chakravarthy,1986). This equalmagnitudeor simultaneityof influence.This
parametercan be representedby growth, prof- quality enables the understandingof partsof the
itability, survival, and other standardindicators, model withoutnecessarilystudyingall constructs
and by nonfinancialindicators.Dependingon the at the same time. Particularly,the model can be
context, firm performancemay include indica- used to examine specific dyadic relationshipsas
tors in multiple levels of analysis (e.g., business well as more complex causal relationshipssuch
unit). Althoughit is often describedin reference as positive and negative feedbackloops (Arthur,
to a particularpoint in time (Dosi et al., 1997), 1995).
it also needs to capturedevelopmentand change To simplify, Figure 1 describes the model as
over time and reflectdifferenttime scales. Partic- fully endogenous. Although the model is inter-
ularly,static efficiencycan lead to maladjustment nally determined,history and environmentcan
in the long run (Ghemawatand Ricart i Costa, be defined in such a way as to make parts of
1993;Miller, 1990), and short-termmisfitmay be them exogenous.Moreover,some interactionsare
neededto attainlong-termdynamicfit (Itamiand assumedto be the resultof randomprocessesand
Roehl, 1987). Therefore,firm performancemay chance events. Furthermore,the strengthof the
particularlyneed to attend to conflicting short- relationshipsbetweenconstructs,such as the rela-
term and long-termalignments.It needs to reflect tive influenceof environmenton performance,may
both the qualityof the firm's exploitationof cur- vary in differentsettings.
rent resources and its capacity to generate new
ones (LevittandMarch,1988;SanchezandHeene,
1997). 12 The modelis not a theoryin the usualsensebutrather
a frame
to link lower-levelmodelsandtheories.To keep it general,we
deliberatelyavoidedthe use of morespecificconstructssuchas
Flowandrelationships in theOESPmodel sustainedcompetitiveadvantage,industry,and capability(e.g.,
Teeceet al., 1997),or overlystrongandrestrictiveassumptions
In the OESP model, which is described in the and views (such as a fine-grainedtheoryof the firm).Nor do
upper part of Figure 1, firm organization,firm we formallystate specific propositions.The focus on higher-
environment,firm strategy,and firm performance level constructsand relationshipssacrificessome specificity
but is necessaryto accommodatediverse models, levels of
arecausallyrelatedone to another.In the transition strategy,and disciplinaryorientations,and to fit more fine-
from priorwork to the currentmodel, constructs grainedconstructsandrelationships intoone whole.

Copyright t 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
576 M. Farjoun

The model assigns particularimportance to firmperformanceis thus influencedby the quality

history in the way it defines constructs and of otheractors'co-alignmentefforts.
relationships.History influences but does not
determine currentand future states of each of Implicationsand contributionsof the OESPmodel
the variables.Systems are distinguishednot only
from events outside them but also from events The lower part of Figure 1 summarizesthe key
occurringprior to them and subsequentto them contributionsof the mechanisticandorganicmod-
(Fuller, 1982). Therefore,context is definedboth els on which the model is built and which it
in space and in time. The model also assumesthat extends. At its most rudimentarylevel the OESP
agentsintendto choose and act rationallyand that model includes and unifies the main constructs,
theiractions are for the most partprospectiveand relationships,and models of the mechanisticper-
purposive.Yet it recognizesdeviationsfromratio- spective.It still maintainssome of the mainmech-
nal behaviorsuch as those stemmingfrom agents' anisticideas thatare centralto traditionalthinking
cognitive limits, the means-ends uncertaintyin in strategy,such as notions of steady states and
the informationenvironment(Marchand Simon, strategypositions.Forexample,even if one rejects
1958),andotherconstraintson efficientadjustment equilibriumas an empirical phenomenonthese
(e.g., inertia).More generally the model extends notionsremainusefulfor theoreticalandempirical
the idea of rational planned action by opening research,and for simplified planning and com-
the 'blackbox' to admitothercognitive,affective, munication(Ghemawat,1991; Porter,1991). The
social, and politicalinfluences.l3 figureparticularlyshows the mechanisticperspec-
In the OESP model the interactionbetweenthe tive's broad agreementon key constructs,high-
constructscan be designed, evolving, or random, lights its predominantlylinear flow (from orga-
but it is best capturedby the notionof continuous nizationand environmentto strategyand perfor-
co-alignment.As suggested by the definitionof mance),the centralityof the strategy-performance
strategyas adaptivecoordination,two facetsof this link (appearingin all main mechanisticmodels),
process are particularlyimportant.In its external and the fragmentednatureof its main models.
interactionsthe firm, guided by its strategy,both Organic ideas in turn extend familiar con-
respondsto and shapes the state and path of its structs and relationshipsthroughtheir emphasis
environment.Internalinteractionsariseas strategy on dynamic notions of constructsand relation-
is derivedand enabledby organizationalelements ships, reciprocalcausation and interaction,and
and in turnshapestheircompositionand develop- integrationacross and within constructs.Particu-
ment.Both externalandinternalinteractionsaffect larly emphasizedare the processes and historical
the firm's performanceand in turnare influenced paths linking differentconstructs,self-loops, and
by it. Firmstrategybothmediatesbetweeninternal causalrelationshipsbetweenseveralconstructsand
and externalforces and in itself serves as a force across time. Additionally,each of the different
that influencesthese other forces. It respondsto linkagesin the model can be used to addressvari-
changes and createschanges. ance and processquestions.Therefore,the central
This co-alignmentprocess can also be appre- questions of the field are viewed in the model
ciated from the viewpoint of other actors. The as dealing with both how firm strategyand firm
firm co-aligns itself with the ecology of other performanceare determinedand with what the
co-adaptingindividualsand organizations(March, determinantsare.
1994). Other actors exchange resourceswith the The OESP modelgoes beyondmerelyrenewing
focal firm, and interactwith its strategy,organi- existing key mechanisticand integratingorganic
zation, and performance.Because the focal firm models and emphases.By isolating and applying
places constraintsupon otheractors,they too may key organic assumptionson time, flow and cou-
respondto and influencethese constraints.Actual pling, the OESP modeloffers severaldistinctcon-
tributions.First, it highlightsseveraldyadic rela-
tionshipsthathave been ratheroverlookedor only
'RAlthough we use such abstractionsas firm, environment, partiallyresearched.For example,ratherthan the
strategy,coordination,action,andadaptationto describemacro traditionalfocus on firmperformance as the field's
structuresand processes, we fully recognizethat ultimately
they includeand are carriedout by humanbeings and micro ultimatedependentvariable,in the OESP model
processes. it is viewed as a means (independentvariable)
Copyright t 2002 John Wiley & Sons, Ltd. Slral. Mgmt. J.. 23: 561-594 (2002)
Towardsan OrganicPerspectiveon Strategy
for achieving a constantly changing dependent self-influences in each construct's development
variable long-termperformance.Furthermore, path. It specifically considers firm performance
the model suggests that performancecan affect effects on its own development (Barnett and
each of the other constructs.It can affect firm Hansen, 1996), such as when currentcustomers
organization,for example, by changing internal help generatenew customers(Arthur,1995) and
political processes or cause-effect beliefs. It can currentsuccesses lead to future failures (Miller,
affect environment,as by changingresourcedis- 1990). Additionally, it includes the effects of
tributions,signaling growth and profit potential, strategyupon itself such as when early choices
allowing comparison,and otherwiseaffectingac- constrain or enable future ones (e.g., Nelson
tors' behavior (e.g., March and Sutton, 1997). and Winter, 1982; Bowman and Hurrey, 1993;
Finally,it can affectstrategyon a continuousbasis, Ghemawat,1991).
or throughuniquehistoricaleventssuch as a firm's A third distinctfeatureof the OESP model is
near-deathexperience. in extendingdyadicrelationshipsto describea net-
Another acknowledgedbut mostly overlooked workof potentialrelationshipsandmultiplecausal
relationshiphighlightedin the model is the effect influences. One example of this feature of the
of strategyon environment(and indirectlyon per- model is the existence of multiple causal influ-
formance). Hardly treated by any of the origi- ences on firm performance.The notion of strat-
nal mechanisticmodels, but highly complemen- egy is invoked to explain systematicdifferences
tary to them, this set of relationshipshas to some in performancethat are based on the firmcoordi-
extent been examinedby the new industrialorga- nated (i.e., systemic) adaptiveaction. The effects
nization research (e.g., Tirole, 1989). Although of strategyon performancecan be director indirect
the environmentis generallyexpected to exert a throughchanges in organization,such as changes
strongerinfluenceon firmsthan in reverse,firms in resourcemix, andchangesin environment,such
still have considerableand often overlookedlati- as the reactionof competitors.At the same time
tude. In line with the organicconceptof strategy, firm performancecan be affected by factors not
this latitude includes strategies that create new necessarily mediatedby strategy, such as supe-
industries,establish technologicalstandards,and rior resources,unfavorableenvironment,history,
otherwisegenerate'creativedestruction'(Schum- and unintendedor uncoordinatedactions outside
peter, 1942). of strategy(suchas luck).Consequently,the model
Additionally, the OESP model specifies the clearly separatesbetween firmresourcesand firm
existence of direct casual flows between firm strategyas two relatedbut differentformsof firm-
organization and environment (and their sub- specific effects on performance.Firm resources
constructs).Theselinkagesrepresentthe basic idea and structuremay affect performancedirectlyand
that firms and their attributesare parts of the not only throughthe specific positions and paths
environment,and are linked to it by exchanges or as a resultof managerialdesign.l4
of resources and information and by various Another example of the network of relations
relationshipsand institutions.For example, firm exposed by the OESP model is the integration
resourcesaffect and are affected by competitors, of organization(i.e., resourcesand administrative
customers,and local environment(Levinthaland and social structure) the traditionalfocus of the
Myatt, 1994; Porter,1991), organizationstructure resource-basedview with the main constructs
can affect competitors' behavior and industry
structure (e.g., Caves, 1980), and perceptions '4Prior to the emergence of the strategy field, theories in indus-
of key individuals within the firm affect the trial organization economics, such as the SCP, ascribed firm
environment viewed by the firm directly, or performancemainly to attributesof the environment. A common
distinction made in this literatureis between structuralvariables
indirectlythroughorganizationalstructure(March that can have independent effects on performance, and strate-
and Simon, 1958). These linkagesare particularly gic variables. For example, in entry barriers,structuralvariables
relevant given the advent of relationalviews of are resources such as scale of production, reputation,and know-
how, and strategic variables are actions taken by incumbents
competitiveadvantageand the greaterrecognition such as entry-deterringstrategies. Similarly, organizationtheory
that key firm resources may reside in a firm's models, such as early contingency research, have viewed per-
externalnetwork(e.g., Dyer and Singh, 1998). formance as being affected directly by organizational attributes
such as organizational structure.These direct linkages between
A second distinctive feature of the OESP organization,or environment, and performanceare relevant both
model is that it stresses the too often ignored to the strategy field and to the disciplines.

Copyright (C)2002 John Wiley & Sons, Ltd. Slral. Mgml. J., 23: 561-594 (2002
578 M. Farjoun

of the SCP model (E, S, and P in our model). triggerresponsesfrom other actorsthat affect the
Takenalone, the SCP mainly focuses on a single firm's performanceand are themselves products
industryandthereforeon business-levelstrategies. of historical and contextual influences and tra-
By contrast,the inclusion of organizationin the jectories. Moreover, to a large extent the real-
model helps view firm-specificresources as not ized strategiesof Chandler'sfourfocal firmswere
only alternativesources of business unit perfor- uniquein their respectiveindustriesand potential
mance but also as potential means to affect the sources of unique competitivecapabilities.Nev-
choice of potential environments.Consequently, ertheless,therewere differenttrajectoriesthat led
by accommodatingmultipleproductor geographic to a similarstructuralsolution,and once in place
markets (i.e., environments)the model can also imitationpotentiallyerodedthe benefitsof distinc-
deal with corporate-level issues, such as location tiveness. The OESP model's synthesisand exten-
choices and global coordination. sion of individualorganicdevelopmentsportraysa
A fourthandrelatedfeatureof the OESPmodel more complex and rich pictureof strategyand its
is its accommodationof interactions.The model relationshipswith organization,environmentand
suggests that performancecan be influencedby performance,and enables the generationof new
interactionsbetween strategy, environment,and relationshipsand insights.
organizationthat are remote from performance
in time and in the causal chain (e.g., Henderson
and Mitchell, 1997). For example, the firm's The organic model of the strategic
current strategy may be a result of its past management process
performance,which in turn was determinedby
past statesandpathsof the firm'sorganizationand The thirdand final pillar of the organicperspec-
environment,which in turn co-determinedeach tive is an organicmodel of strategicmanagement.
otherin the past (e.g., Webband Pettigrew,1999). Based on our concept of strategyand the OESP
Alternatively, past strategy may have created model, the organic model revisits and extends
a favorable environment that enables current the traditionaldesign model.l5Strategicmanage-
strategies. ment is defined here as the superordinateand
To furtherillustratethe applicabilityanddistinc- continuousorganizationalprocessfor maintaining
tiveness of the OESP model, we chose Chand- and improvingthefirm's performanceby manag-
ler's ( 1962) 'Strategy and Structure'study and ing, that is, enabling,formulating,and realizing,
some of the subsequentstudies it inspired(e.g., its strategies.In this definition,strategicmanage-
Amburgeyand Dacin, 1994). The original study
ment is viewed as a process,a progression,which
is important,widely recognizedand containsrich
includesthe sequenceof events andactivitiesover
evidence. However,the main reasonfor its selec-
time (Pettigrew, 1992; Van de Ven and Poole,
tion is that the dominantview expressedthrough-
1995). We view strategicmanagementas consist-
out the study, as well the commonway in which
it has been subsequentlyinterpreted,are in the ing of a one-timemode dealing with a particu-
spirit of the mechanisticperspective.Highlight- lar strategyor a single strategicdecision and a
ing the less familiarorganicaspectsof the study, recurrentmode dealingwith a continuousstream
containedin the originalnarrativeand theoretical of strategiesand decisions. It is inherentlypre-
propositionsand in subsequentstudies, serves to scriptive:it deals with those aspects that can be
providedifferentand complementarylenses. Sup- shaped by managerialinitiatives. Figure2 pro-
plementingFigure 1, the Appendixlists the main vides a summaryform of the elements and flow
aspects of the mechanisticperspectivestressedin of the model. Figure3 de-aggregatesthe organic
the study and provides illustrationsfor each of modelof strategicmanagementandlists its distinct
the distinctive features of the OESPmodel. As emphases.
the Appendixshows, the OESPprovidesa more
dynamic,integrated,and interactiveview thanthe
one drawn from a mechanisticperspective.For '5Althoughwe describea generalmodel, we recognizethat
example, it drives home the point that firm coor- differentorganizational,national,and industrialcontextsmay
call for differentkindsof strategicmanagement processesand
dinated actions (e.g., structuraladjustment)are thereforemaychangetherelativeweightof someof theelements
not instantaneouslyand flawlessly achieved;they (e.g., plannedvs. emergentstrategy).
Copyright (C)2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23:561-594(2002
Towardsan OrganicPerspectiveon Strategy 579

* Strategyincludes goals,
postures and moves

Figure 2. An organic model of the strategic management process: a summary form

Elementsof the strategicmanagementprocess suggests the need to evaluate the adequacy of

strategyas well as new alternatives;and
Strategyformulation. This subprocessis most it highlightsthe need to conduct implementation
closely associated with the traditionalnotion of planning when such planning is deemed possi-
strategycontentandformulation(Andrews,1971), ble. Moreover,because of the 'wicked' natureof
and with coordinationby plan (Thompson,1967). strategicissues (e.g., Mason and Mitroff, 1981),
It thereforeincludesthe familiarelementsof scan- formulationincludesnotjust analysisandsynthesis
ning, problem finding, analysis and evaluation, but also invention,intuition,persuasion,andnego-
interpretation,and choice. Our model extends tiationand does not necessarilyfollow a predeter-
the traditionalview in several ways. It specifi- mined sequenceof steps.
cally emphasizesthe planningof alternativestrate- With the appropriateadjustmentsthese main
gic trajectories, such as in new market entry activities of strategy formulation need to be
(e.g., Bogner, Thomas, and McGee, 1996); it consideredregardlessof strategylevel (a goal, a
Copyright t 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
580 M. Farjoun

discreteposturesuch as a genericstrategy,a single throughits effects on organizational(e.g., orga-

move or a sequenceof moves), and regardlessof nizationalstructure)and environmentalelements
organizationallevel (e.g., corporate).Specifically,(e.g., industrystructure).Second, an alternative
choice and implementationplanning are viewed and complementarypath to strategyrealizationis
as naturalcomplementarypartsof the same inte- an emergentstrategythat can be interwovenwith
grated whole the strategic plan or logic. This the formulationprocess or bypass it altogether.
means,for example,thatthe selectionof a 'related' Emergentstrategycan be basedon othercoordinat-
diversificationstrategy(Rumelt, 1974) is incom- ing mechanismssuchas core values,simple 'rules'
plete if structuralcoordinatingmechanisms,link- and the like, and on the interactionbetween top
ages between activities, sequencing of internal management'sperspectiveand lower-level man-
and externalchanges, and other steps needed to agement'sfeasibilityassessment.Realizedstrategy
implementthe selection, are not consideredtoo. takesits finalform-a particularmix of coordinat-
Similarly, multipointcompetitionhas a potential ing measures throughreal-time mutual adjust-
performanceeffect only if it is complemented ment to organizationaland environmentalforces
by the requisite cross-unit communicationand and performancesignals. Third, the flow cycles
integration. backin thatperformanceinfluencesorganizational
and environmentalelements and realized strat-
Strategyrealization/implementation. This sub- egy, and joins them as new informationalinputs
processdeals with the realizationof selectedgoals, to strategyformulation.In the one-time mode of
posturesand moves, and complementarychoices strategy,both performanceand realized strategy
(such as organizationalstructure).When it is shapefuturechoices throughlearningandthe pro-
ot lnputs stemmlngtrom emerglng strat-

. , . . ,

guided by a plan (and hence viewed as imple-

mentation),it includes the execution of strategy, egy or strategyexperiments.In the cycle, thought
its refinementto lower-levelsteps, and the execu- and action continuouslyandreciprocallyfeed each
tion of organizationalchoices thatextendthe cho- other. 16

sen strategy.The notionof realizationparticularly The recurrentmode of strategicmanagement

suggeststhatstrategymay not be a resultof delib- reflects the idea that strategicmanagementis not
erateplanningbutcan also emerge(Mintzbergand a given process but one that needs to be ini-
Waters,1985). Strategyrealization/implementation tiated, cultivated and occasionally modified,and
also includes more traditionalaspects of man- is ongoing: its uses are not confined to a sin-
aging internal change such as communication gle cycle or a particularstrategy.Three tasks of
and supportbuilding. However, it also includes strategicmanagementare particularlypertinentto
the action-interactionsequencesof managingthe its continuousnature.First, facilitating theformu-
external context of strategic change, especially lation of strategies, for example, by establishing
the realization of strategic trajectoriesand the marketand competitiveintelligencedevices or
absorptionof strategyinto the firm'sexternalcon- managing the formulation process itself: staffing,
text. hiring externalconsultants,dividing responsibili-
ties between managementand board, and estab-
lishing the desired degree of decision conflict.
One-timeand recurrentmodesof the strategic Second, facilitating the emergenceof strategies,
managementprocess for example, by encouragingbottom-upcontri-
The strategicmanagementprocess consists of an butions,cultivatingsupportiveorganizationalcul-
ongoing cycle of activities, which are reciprocal ture, rewardingrich communicationflows, and
and in reality may temporallyoverlapand not be the like. Third, enhancing the implementability
clearly demarcated.
As described in Figure3 the one-time mode 16 Strategic leaders play an importantbut not unlimited role in
of the process, dealing with a specific strat- the strategic management as process. In contrast to their depiction
in the mechanistic view rational analyzers, we view their
egy or decision, is adequatelycapturedin the role as combining social and analytical facets and particularly
flow of the traditionaldesign model. Added in as subject to constraintson rationalityand adjustment.Moreover,
behaviors, such as using externalconsultants
the organic view are several emphases. First, leaders' actions andfeasibility
to test the political of potential directions, or creating a
the chosen strategy guides strategy execution, sense of confidence through symbolic actions, often accompany
which affectsperformancedirectly,and indirectly, or precede analysis.
Copyright (O2002 John Wiley & Sons Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
- Other: - - * ............ .... >

influencesupon f22
and during

V) strategythat
upon realization
r provldesa
and environment

and influences
upon and during
(implementation _
and emergence)
Strategicmanagementas a
capabilityand as facilitating
and improvingtheformulation,
implementabilityof strategies

Linkagesemphasizedin the design model Addedempha.sesin the organic model 8 Strategyincludesgoals, posturesand m

Primary: * * tD

g Figure3. An organicmodelof the strategicmanagement

582 M. Farjoun

of strategies, throughdelegating responsibilities, suggests that strategy formulationbroadly deals

encouragingparticipation,and strengtheningthe with the sensing, evaluating, and planning of
firm's capacity for change, for example. These externaland internalchangeratherthanmorenar-
three tasks influence the first-order,more fre- rowly with making choices. Strategyrealization
quentlyrepeatedactivitiesof formulationandreal- then deals with the realizationof change,planned
ization. They can also be revisited under special or emergent.Finally, the role of recurrentstrate-
circumstances.For example,the firmmay need to gic managementis to facilitate the emergence,
take action throughdouble-looplearning(Argyris planning,and realizationof change,as well as to
andSchon, 1978)uponlearningof consistentprob- evaluate and integratethese facets of managing
lems in a major aspect of its strategicmanage- change.
ment: the firm's response may be too slow due Second, the idea that strategyaffects its own
nputs (1.e., organ1zat1onand env1ronment)may
. . . . .

to a lengthyimplementationprocessor it may not

have the right mechanismsto encouragecreative suggest that the process and effects of strategy
strategies. realization need to be recognized at formula-
tion: strategyneeds to be plannedwith its effects
Implicationsof the organicmodelof strategic in mind. Particularly,during strategyexecution,
management additionalchanges may take place, and strategy
itself may affect these changes in part.Since the
Rooted in organicnotionsof time, interactionand firm's actions change the natureof the problem
integration,and as shown in Figure3, the organic it faces, the firm needs to select a realizable
modelof strategicmanagementemphasizesseveral strategy one that will provide a good dynamic
themes.We focus on four in particular. match between organizationaland environmen-
First, a key feature of the model is that firm tal attributesif and when it is implementedand
organizationand firm environmentinteractwith sustained.
each of the subprocessesof strategic manage- An examplefrom a familiarcontext may illus-
ment.The roles of differentelementsof the firm's tratethis point.Whenthe traditionalchoice model
environmentand firm organizationare not con- is applied, a firm consideringentry into a new
fined to being inputs to strategy,but extend to industryneeds to evaluate the structureof that
being a context for facilitatingstrategy,interact- industryvis-a-vis the firm's availableresources.
ing with the actual process of realization,and We proposeto considerhow industrystructureand
partly being products of strategy itself. Specif- firmresourcesmightlook if and whenento occurs
ically, external action-interactionsequences are and is completed:what changeswill occurbefore
importantin strategyrealizationat the same time and during formulationor execution (e.g., the
that internalsocial, cognitive, cultural,and politi- simultaneousentry of other firms),what changes
cal processes play a role in strategyformulation. will be producedby the entry (e.g., migrationof
Furthermore, administrativeissues and implemen- customers),whatresourceswill be consumeddur-
tation may requireformulationand planningtoo, ing the process (e.g., managerialattention),what
and content issues need to include the choice of implementationcapabilitythe firm has (e.g., how
strategic moves and paths (see also Inkpen and efficientthe entryprocessis likely to be), andhow
Choudhury,1995). Each of the strategicmanage- internalandexternalstakeholdersmightsupportor
ment subprocessescombinesboth social and ana- interferewith execution (e.g., reactionof incum-
lytic considerations.A moreholistic view of strat- bents, and employee support).
egy replacesthe conventionaldistinctionbetween Moreover,the potentiallypath-dependent nature
contentand process. of strategysuggests that the evaluationof alter-
The integrationof organizationand environ- native strategies needs to consider their impact
ment into each of the subprocessessuggests a on subsequentstrategies,for example, the ease
view of strategic managementas a process of of transitionfrom one alternativeto a fall-back
managing change (or persistence).It thus high- alternative.Beyond the question of how current
lights human engagement,the particularrole of strengths,weaknesses, opportunities,and threats
strategicleaders,and the particularconsiderations (SWOT) affect the choice of a currentstrategy,
associatedwith change such as lags, timing,dura- an equally importantconsiderationmight be the
tion, momentum,inertia, and abortiveefforts. It extentto which an executedstrategyimprovesthe
Copyright (C)2002 John Wiley & Sons, Ltd. Strat. Mgmt. J.. 23: S61-S94 (2002)
Towardsan OrganicPerspectiveon Strategy 583

futureSWOTof the firm.The view of strategyas Summary of the organic perspective's

creatingand affectingits own inputsalso suggests epistemologicalunderpinningand their
the need for backwardand interactivereasoning, manifestations
which is not an integralpartof the SWOTmodel Likethe mechanisticperspectiveit seeks to extend,
(Hill and Westbrook,1997).l7 the organicperspectiveoffers a coherentview of
A third implicationof the organicmodel sug- core strategyissues.Forexample,the view of strat-
gests that strategyformulation,the main focus of egy as affecting the firm's environmentis also
strategyresearchand teaching, may have a less reflected in the reciprocalcausality between the
significantrole in the overall strategic manage- main constructsin the OESP model, and in the
ment process and in affecting performanceout- role of strategyformulationand realization.The
comes than traditionallyconceived. This can be idea of continuityand pathdependenceis evident
appreciatedthroughthe use of backwardreason- in the attentiongiven to future strategiesin the
ing. As Figure2 indicates,what may eventually organicmodel of strategicmanagement.Also, the
affect a firm'sperformanceis its realizedstrategy. unifiedview of constructsand relationshipsin the
Therefore,a main managerialquestion becomes OESP model helps better link the differentsub-
how to generatethe most effective realizedstrate- processes of strategicmanagement.This internal
gies. This comes down to either implementing consistencyis enabledby the sharedepistemolog-
a previouslyformulatedstrategy,or realizing an ical assumptionson time, flow, and the coupling
emergentstrategy.Furthermore, bothplanned(and of constructs.It puts conceptual,theoretical,and
subsequentlyimplemented)and emergentstrate- prescriptivemodels of strategyon an equal epis-
gies are supportedby more basic and recurrent temological footing and encouragestheir cross-
strategicmanagementactivities.Consequently,the fertilization.Panel B of Table 1 summarizesthe
firm may need to either plan well or create the content,influences,andcontextof the organicper-
organizationnecessary to implementeffectively, spective on strategy.Taken together,the table's
or respond effectively, throughemergent strate- two panels demonstratehow each set of episte-
gies. Thus, given the potentialeffects of imple- mological assumptionsprovidescoherencewithin
mentation,emergentstrategies,and strategicman- each of the perspectives,and how the differences
agement's basic functions, the traditionalatten- in the sets often yield distinctviews on the same
tion given to choice and formulationmay be core issues.
A finalkey implicationis thatstrategicmanage-
mentwhen continuouslypracticedmay developto DISCUSSION
be a core firmcapability.A firmmay particularly
excel at the strategic managementof alliances, Summary and contributions
or become adept at more recurrenttasks: man- The key drive behind writingthis paperwas the
aging formulationand implementationin parallel, growing awarenessthat mechanisticmodels and
switchingandresolvingconflictsbetweendifferent ideas are losing theirpotency,while organicideas
modes of strategyformation,and learningacross have not gone far enough to renew them or to
cycles. Generalizingrelatedsuggestions(e.g., Hart provide an alternativeand more currentperspec-
and Banbury,1994; Teece et al., 1997), strategic tive. One potentialremedyis the developmentof
managementratherthan one-time strategiesmay a differentoverridingperspectivethat will help
have moreenduringeffectson the firm'slong-term renew and integrateexisting ideas and stimulate
performance. new ones. To thatend we focused firston uncov-
ering epistemologicalassumptionsthat have been
used throughoutthe field's evolution, and sec-
'7Familiarplanningtools such as the industrylife-cycle and
ond on selectively using organic assumptionsto
scenarioplanningoften imply the design of strategiesaround develop an internallyconsistentset of concepts,
externalgivens. They do not usuallyconsiderchangesin the explanatoryand prescriptivemodels. This focus
environment producedby strategyitself.Theneedto choosethe reflectsour belief thatit is throughthe reexamina-
best strategygiven the strategiesof otherplayersis implicitin
thegame-theoretic notionof theNashequilibrium. Thisnotionis tion of epistemologicalfoundationsthatlong-term
extendedhereto includeactionsandresponsesof internalactors. progressin the field can be made:a fruitfulway to
Copyright C) 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
584 M. Farjoun

change entrenchedviews is to recognizethe way as interactionand feedback. It furtherprovides

we think. substanceto the notion of integrationby offer-
Each pillar of the organic perspective,devel- ing broadlydefined constructs,establishingtheir
oped in this paper, offers a distinctive view on and showinghow diversemod-
the field's main issues as well as new directions els can be unified. Moreover,it joins prior pro-
that can be explored.First,the organicconceptof posals to combineboth dynamicsand integration
strategy stressesaction,coordination,and adapta- (e.g., Bourgeois,1984;BowmanandHurrey,1993;
tion. It suggeststhatpriornotionsof strategysuch MacIntosh,and MacLean, 1999). It particularly
as position and a patternmay have much more in puts to use, updates,and elaboratesthe work of
commonthanpreviouslysuggested.It particularly Bourgeois(1984), amongthe firstto highlightthe
highlightsthe need to betterunderstandthe variety need for the field to move from mechanisticto
of coordinatingmechanisms,the ways they com- organicviews.'8
bine or conflict in practice, and the contexts Though they provide differentperspectiveson
in which they are most effective. Second, the the same issues, there are many ways in which
OESP model shows how different lower-level organic and mechanisticideas complementeach
models stem from a more integratedand dynamic other. Particularly,the questions of how a par-
overview of the field's main constructsand rela- ticular firm succeeded or failed, and what were
tionships.The model can be extendedby examin- the contributinghistoricalconditions and devel-
ing less researchedlinkages,using processmodels opments, go hand in hand with the question of
(e.g., dialectics) to explain such issues as advan- whetherits fortunescame aboutbecauseof a bril-
tage creation,attendingto history,multiplecauses liant strategy,superiorresources,favorableenvi-
and change, and dealing with specific concerns ronment,or pure luck. Moreover,rationalanal-
of strategy like positioning or scope decisions. ysis is incomplete if it fails to account for the
Finally,the organicmodelof strategicmanagement social natureof reality. In turn,the use of anal-
highlightsthe recurrentand integratedaspects of ysis and logical baselinescan informattemptsto
the process and suggests a more holistic view of influenceor developactualbehaviorof individuals
strategyitself. It urgesus to betterunderstandhow and social systems.
strategyemergesandis enabled,andhow the exter- The organic perspective also offers several
nal and internalaspects of managingchange are implications for the development of practice.
actuallyintegrated. When employed as a way of thinking, it
We see the paper'schief contributionin propos- encourages managersto think and act in ways
ing an extensionand alternativeto the mechanistic thataremoreallocentric,holistic,process-oriented,
perspectiveand one that potentiallyoffers a more entrepreneurial,and creative. It sensitizes them
dynamic, integrative,and appropriateframework to issues of timing, critical interventionpoints,
for the phenomenaand questions of interest to interaction, and the recognition of temporal
the field. The focus on organicideas as desirable patternsand sequences.However, unless organic
for the field's developmentis meantto reducethe ideas are supplementedby the applicableanalytic
perceivedasymmetrybetween their potentialand models, strategic analysis and managementrisk
actual use, and to suggest that relying solely on becoming exclusively an art. Although good
mechanisticideas may lead into a blind alley. The
organicperspective provides a coherentyet dis- l8 A similar progression to a more organic view can be found
tinctview on the field's core concernsanda means in models of human behavior. A major debate in the fields
to generate and exchange ideas, facilitate inter- of psychology and organization behavior has focused on the
disciplinarywork, and increase the compatibility relative primacy of personality and situational determinants
in explaining individual behavior. Although neither position
betweenwhat we study,teach, and practice. completely negates the other, internal views see people as being
The organicperspectiveis consistentwith prior motivated by inner drives (Freud, 1964) or traits (Allport, 1961),
advocatesof integration(e.g., Barney and Zajac, while external models (e.g., Skinner, 1953) view humanbehavior
as primarilycaused by external stimuli. A third and more recent
1994) and dynamics (Porter, 1991). Yet it also perspective explains human functioning in a more dynamic and
extends these works. It gives a more concrete integrated manner. In social cognition theory (e.g., Bandura,
meaning to the notion of dynamics by com- 1986), human behavior is explained in terms of a model of triadic
reciprocity in which behavior, cognitive and other personal
bining issues related to time, such as process capabilities, and environmental events interactively influence
and history, with those related to flow, such each other.

Copyright t 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J.. 23: 561-594 (2002)
Towardsan Organic Perspective on Strategy 585

beginningshave been made by options thinking, benefit from using multiple time frames, com-
new analytic models that can help strategic parative(historical)research,simultaneousexplo-
managers better deal with uncertainty, rapid rationof differentlevels of analysis,and multiple
change, and turning points are badly needed. theoreticallenses. Clearly,such a researchagenda
Traditionalanalytic tools can also be improved. is more demandingand thereforeit may be better
For example, models of internalanalysis should approachedin researchprograms,in large, book-
move beyond the analysis of resources and length studies, and in periodical reviews rather
activities to include other organizationalaspects, than in the usual single-studyformat.However,it
and to highlight the role of organization as is likely to betterplacetheoreticalideas andempir-
a context, process, and product of strategy. ical observationsin a broaderand more temporal
Similarly,models that integratesociological and context.
economicaspectsof the environment,or thatmove
beyond traditionallife-cycle conceptions of its Historyandprocess research
evolution,are lacking.Moreover,althoughSWOT
The organic perspectivehighlights the historical
analysisis still useful, it can no longer serve as a
primarymodel to guide strategicchoice (Hill and dimension of strategy-relatedphenomena. As
Westbrook,1997). illustratedin Chandler's(1962) research,the nature
What general directions for a new research of historicalperspectivemakesit morelikely to be
agenda for the field of strategy can be derived eclectic, integrative,and sensitiveto time, interac-
from the organic perspective?We divide these tion, context,and multiplelevels of analysis.Case
into conductand substanceimplicationswhile rec- historiesof firms and industriesthat were instru-
ognizing that some implicationscontain a little mentalto the field's early developmentare some-
of both. times labeled 'prescientific'(e.g., Rumelt etal.,
1994). However, a renewed interestin historical
and clinical researchis not a sign of regression
Conduct implications but of the field's maturity.The benefitsof such an
approachare too great to be ignoredby strategy
Variableresolution researchers.New historicalresearchis likely to be
differentfrom earlierwork since it can now build
A betterunderstanding of strategy-relatedphenom- on the cumulativeprogressmadein the field. First,
ena is unlikely to be gained by attendingto a it can use both qualitativeand dynamicstatistical
single theoreticalperspective, level of analysis, modeling. Second, it can use a better-developed
context, or time frame. Thus for example, the theoreticalbase to frame the analyses. Third, it
factors associated with the success of a single can be moresensitiveto readinghistoryforwardas
strategicdecision, the tenure of a specific exec- opposedto retrospectively,thus providinga better
utive team, or firm survival across several gen- appreciationof how firmsandmanagerscope with
erationsof technologicalbreakthroughscan vary uncertainty,multiple trajectories,lags, and dead
widely (see Zaheer, Albert, and Zaheer, 1999, ends. Fourth,it can examine the developmentof
on the issue of time scale). Furthermore,what firms,industries,andstrategiesbeforetheybecome
may be optimal at a collective level may not full-blownentities and thus add more knowledge
be optimal at the unit level. Progress is more on their early emergence,variation,and selection
likely to be made by using researchwith different (see, for example, Aldrich, 1999). A revival of
degrees of resolution. By employing both fine- 'neo-historical'researchin strategymay thus ben-
grainedandcoarse-grainedapproachesalternately, efit from the path-dependent intellectualevolution
a more holistic appreciationof strategyissues can of the field itself.
emerge. The content and spirit of the organic perspec-
Much progress has been made in the study tive requirethe use of longitudinalresearchandof
of highly specific phenomena such as acquisi- less acceptedmethodssuch as sequencemodeling,
tions and multipointcompetition.Attentionat the ethnography,and case histories. Cross-sectional
level of individualsand to micro phenomenacan studies can be useful but they cannot remain
also make new and importantadvances. At the the predominantmode of analysis (Bowen and
other end of the spectrum,strategyresearchcan Wiersema,1999). Processmodels look at different
Copyright i) 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
586 M. Farjoun

issues than variancemodels and thereforepoten- the search for common ground that combines
tially produce different observations. Although strengthsand minimizes weaknesses, and in the
therearedifferentopinionswith regardto the need case of dialectics the use of differencesand ten-
to integratevarianceand processapproaches(e.g., sions betweencompetingperspectivesto produce
Langley, 1999), we certainlysee the use of pro- new understandings(Morgan, 1983: 377-382).
cess models as appealingin severalrespects.First, One illustrationthat invites cross-fertilizationis
by disaggregatingtime, they introduceuniquepos- the theme of integratedmanagementof change.
sibilities for path and sequence to affect final Insights gained from behavioral models about
outcomes. Second, process models may be bet- how to initiate and institutionalizechange can
ter sultes to galn lnslgzts lnto ( uratlon varl- be synthesizedwith those coming from economic
. . . . . . .

ables in general and into sustainedperformance models, such as strategicinteractionand options

in particular.Third,by their greatersensitivityto theory. Although they originatein differentdis-
multiple trajectories,process models and studies ciplines, these models deal with similar issues:
are more likely to reveal sources of both success managinguncertainty,overcomingresistanceand
and failure.l9 inertia, coalition formation,and communication.
As anotherillustration,models of learning and
experimentation traditionallydealt with by behav-
Interactionand managerialdiscretion ioral analystscan examine,for instance,what the
The interactiveview of flow in the organicper- most effective experimentationstrategiesin dif-
spective has several implications.First, as sug- ferentcontextsmay be (e.g., Mosakowski,1997),
gested by others (e.g., Rindova and Fombrun, and more generallybecome the focus of analytic
1999) there is a need to go beyond stating the approaches.
existence of mutual influences to specifying the
exact mechanismsby which interactionoccurs. Languageand communication
Second, if we take seriously the idea that firms
and environmentsinfluenceeach other,then it fol- As pointedout by others(e.g., Weick,1969),atten-
lows thatsome of the firm'sresourcesandunique- tion to process and interactionrequiresthe use
ness is due to its embeddednessin a particular of dynamicvocabulary.Foundationalwork in the
industrynetwork,geography,and historicalcon- mechanisticperspectivecoming from both eco-
text. In turn,the firm'sresourcesand actionsmay nomics and organizationtheory has focused for
affect industryattributes,such as entry barriers. too long on structuralfeatures of markets and
Moreover,both firms and industriesare subject organizations.The trend towards more dynamic
to emergentand selection processes that are less analyses that came with the organic develop-
likely to be influencedby managers,if at all. The ment may requirea greaterattentionto the rep-
issue thenbecomesnot so muchwhetherthe indus- resentationand communicationof dynamicideas.
try or the firmis a more importantdeterminantof One approachis to use verbs, such as organiz-
firmperformance,but ratherwhat discretionman- ing and strategizing,to highlight micro actions
agers and other employees have in affecting the andhumanprocessesandpractices.Modelingpar-
firm'sinternalor externalcontext,and underwhat ticular aspects of time such as pace and dura-
conditions. tion may be anotherstrategy(e.g., Monge, 1990).
Finally, the use of visual vocabularyto convey
process and interactionmay also be beneficial.
Integration These differentforms of presentingand commu-
We see synthesis and dialectic as particularly nicatingideas can complementthe use of organic
useful strategiesto integratedifferenttheoretical epistemologicalassumptionson time, flow, and
perspectivesand researchtraditions(e.g., in the coupling.
United Statesand Europe),or differentfacets of a
phenomenon.In the case of synthesisthis involves Substance implications

Using the analogy of language,the organicper-

19For an excellent introductionto the conduct of process research
and to pertinentfoundational work on time in the social sciences
spective generallydoes not include specific sen-
see Pettigrew (1997). tences and a rigid syntax, but ratherproposes a
Copyright t 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
Towardsan OrganicPerspectiveon Strategy 587

sharedbase of key assumptions,concepts,relation- examples see Moldoveanu,2001). Although not

ships, and themes upon which a varietyof stories simple to design, studiesthat look simultaneously
can be told. What are some of the researchable at the two classes of units of analysis can shed
questionsconsistentwith the organicperspective light on how micro and macro processes inter-
that can be pursuedwith the stylistic and method act and enhancecross-fertilizationof disciplinary-
themesdiscussedabove? based ideas.

Dynamicdecisiontasks Imperfectadaptationand inefyiciency

Strategic decisions are dynamic decision tasks. Muchof the empiricalresearchon strategyis often
Takingtime into accountcan be eitherin termsof criticizedfor being outcomebased and confining
consideringthe durationneededto makethe deci- itself to instancesof success (e.g., Carroll,1993).
sion, the optimaltime to make a decision, or the The focus of the organicperspectiveon process
changesin the decision structureover time (Arieli andpathenablesa betterappreciationof imperfect
and Zakai, 2001). These aspects are relatively adaptiveprocesses and instances of inefficiency,
neglected in strategyresearchand in models of mistakes,and failures.One remedyfor the poten-
strategicchoice and management.Particularly,the tial existenceof a bias may involve sampleselec-
rational unitary actor model used in the mech- tion. However,severalmore substantivequestions
anistic perspective is largely insensitive to the remainto be addressed.Forexample,in whatways
notion of time. The best-knownmodel of orga- are the prerequisitesand contributingprocesses
nizational decision making that does take time for firm survival differentfrom those contribut-
and timing seriously into account, the garbage ing to sustainedexceptionalperformance?What
can' model (Cohen, March,and Olsen, 1972), is are the implicationsof the differencein the time
mainlya descriptivemodel of organizationalanar- framesinvolved in firms sustainingsuperiorper-
chy. Is it possible to come up with otherstrategic formanceas opposedto experiencingdecline and
decision-makingmodels, descriptiveor prescrip- bankruptcy? In whatways, if at all, arethe sources
tive, thatwill takeinto accountcontinuouschanges and developmentof strengthsdifferentfrom those
in resources,interests,competitiveresponses,and of weaknesses?
otherfactors,includingthose happeningwithinthe
decision makingperiod? Theeconomicsof firm's transitions

Dual classes of unitsof analysisand their Anotherareaof researchthatis consistentwith our

interaction emphasis on process is the efficiency by which
firms change their strategy, structure,products,
An importantdistinctionin processandevolution- technology,and the like. The mechanisticempha-
ary analysisis betweenboundedentities (individ- sis on staticefficiency,evidentin frameworkssuch
uals, work units, firms, groups)that strategically as the value chain,have precludeda betterunder-
interact,andthe units (such as routines,strategies, standingof how efficient firms are in their tran-
rules,institutions,transactions,competencies)car- sitions. Issues such as how efficientlyfirmsmove
riedby these entities(e.g., Baumand Singh, 1994; from one position to another,and from one mar-
Aldrich, 1999). An advantageof makingthis dis- ket to another,or how adept they are in imple-
tinctionis thatone can learnaboutthe development menting acquisitions,alliances or organizational
processes of a unit from one class by examining changes,are not adequatelycapturedby the notion
how unitsfromthe otherclass develop.For exam- of switchingcosts either. Among other concerns
ple, as shown in the work of Nelson and Winter of the field, the analysisand measurementof the
(1982), the evolutionof routinescan shed light on economics of transitionscan improvethe under-
firmand industryevolutionas well as be informed standingof sources of firm success and failure,
by this evolution.Otherdomainsof inquiry,par- extend traditionalstatic frameworksof compara-
ticularlyrelevantto the strategyfield, may include tive analysis of competitorsand other interacting
the diffusion of strategies,the evolution of net- actors, improve the analysis of various decision
works, and the relationshipsbetween institutions alternatives,and strengthenthe links betweencon-
(e.g., norms, conventions)and rivalry (for other cerns of strategyformulationand realization.
Copyright t 2002 John Wiley & Sons, Ltd. Strat. Mgmt. J., 23: 561-594 (2002)
588 M. Farjoun

Multipleand inconsistentgoals in unison. It thereforebuilds on the strengthsof

Most mechanisticmodels convenientlyadopt the the two priordevelopments:it betterharmonizes
classic economic model of profit-maximizing strategic models and constructswith one another,
firms. However, in reality and even when and with the new realities.
a long-term unitary strategy exists, managers
often pursue several and at times inconsistent
goals and objectives. In particular,tensions arise
between profitabilityand growth and between I thankthe anonymousreviewersof
the paperfor
short-termand long-termperformance.What are
their constructiveand thoughtfulcomments.An
the implications of using multiple and partly
earlierversion of the paperwas presentedat the
inconsistentperformancecriteriain both empirical
Fourth Conferenceon Competence-BasedCom-
researchand strategicmanagementmodels?How
petition (Oslo, Norway). I thank the conference
do we treata firm'sactionsthatmaybe appropriate
participantsas well as Ron Sanchez, Eli Segev,
for the short run and not the long run or
and Gerda Kessler for their contributionsto the
conversely? These issues, and particularlythe
developmentof the paper.
temporal tension between static and dynamic
efficiency, are centralto the practiceof strategic
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, (Based on Chandler(1962), Rumelt(1974), Williamson(1975), ArmourandTeece (1979), Hall and Saias (198
and Fligstein( l 991))

< MechanisticThemes
O The study connects the main constructsof interestto strategyresearchin the following (primarilylinear) wa
= the environment(E) and the resourcesof the organization(O), influencethe strategy(S) chosen and this in t
c. structure(O). Subsequently,the evolutionof the environmentand resourcesbringsabouta new strategyand a n
Chandler'sbook (p. 314), strategy-structure (S-O) mismatchresultsin inefficiency(P). This proposition,as well
link, were subsequentlyexaminedby others (e.g., Rumelt(1974)). Furthermore,firms in some industrieswe
others(E-S) or adoptcertainstructures(E-O)(Williamson,1975:141).Chandleralso tends to view strategyas a
strategicmanagementprocessas a formaland analyticalprocessdirectedby a dominantleader.These aspect
the case of Du Pont's diversificationand structuredecisions(p. 80) and in the organizationstudyat GM.
Organic Themes and Distinctive Features of the OESP model

Illustration in Chandler's Work and Selected Subsequ

OESP: Views of strategy and * In StandardOil, structuraladjustmentand strategic expansion came in a more
Organic strategy making: way. Change did not follow an explicitly defined plan (p. 172). Emergent stra
Themes Strategy as interactive, experiences with prior anti-competitionstrategies showed their limitations and
dynamic, learned, (p. 33). Evolutionarystructuralchange. Endogenous growth creates unexpecte
integrative, inventive, and * Sears' revo]utionarystrategy in direct retailing (p. 233).
emergent. * Goals-Strategy-Structurecoordination;strategy adaptationto changes in econo
Strategy as adaptive * Individuals (e.g., consultants) and strategic leaders play a central role in strate
. * .

(p. 283).
Strategy making as social, * Benchmarkingand learning from other firms (p. 95).
intuitive, interpretive,and * Executives' sense making of recent performanceproblems (p. 98).
continuous. * Conflict in decision making at Sears (p. 247).
* Multi-divisional structurefacilitates strategy formation.
New linkages in SCP, * Strategy grows out of structureand in turn leads to its modification (Hall and
SSP, RBV * Strategy affected by those in power and their perceptions (Fligstein, 1991).
Organic developments * Process of structuralchange-internal conflicts and politics, study committees,
(s.d.m, s. Ieadership, (p. 303).
managementof change, * Competitive imitation and responses to structuralchange (p. 380).
strategic interaction). * The essential reshaping of administrativestructurenearly always had to wait f
(p. 381). Family held firms were slower to change both structureand strategy.

Illustrationin Chandler'sWork and SelectedSubsequ


5 OESP: Integrated Constructs * Strategyincludesbothgoals and actions(p. 13), Environment includeseconom

Distinctive as social institutionalones (e.g., Fligstein,1991),Structureincludesculture,po
Features 1980).Performanceincludesshort-runand long-runconsiderations.
Self-inf uences * Momentum in structuralor strategychanges(Amburgey and Dacin,1994);Per
for growth(p. 383).
3 Path dependence and * Historicalcontext(e.g., ]920) providedopportunities (Fligst
for diversification
r history * HistoryaJfectsstrategythrl)ughstructure.
* Warexperiencein explosivesaJfectsdiversification pathat Du Pont.
* Thewayin whichitsfoundersor theirfamiliesmaketheirtermswiththe admi
large-scaleenterpriseis crucialto the laterhistoryof a frm (p. 381).
Imperfectadaptation * Organizational anarchyandimperfectcoordination: eachfunctionaldepartme
* Functionalstructureimpedesmanagers'strategicviewand channelstheiratte
* Biasesin identifyingcapabilitiesat Du Pont (p. 112).
* Sears' Woodstrategy:generaldirectionis correctbutmanymistakeshappeno
* Delaysbetweenintroduction of strategyand adoptionof structure(p. 135).
* Indicationof inertiain structuraladoptionat Du Pont (p. 101).
Process models (how * Processof growthis endogenousand emergent exploitingresourcesas a dyn
questions) strategyand structure(p. 384).
* Structure'sinXquence on strategyis mediatedby its inXquence on thestrategicde
roles,skillsandperceptionsof top management (Amburgey andDacin,1994).
* StructuraldiJfusionas a process(ch. 7).
A network of relations, * Currentlevel of diversification (S) andgrowth(P) affectsstrategy(S) and stru
interactions, equifinality Dacin,1994).
and multi-causality * Familyheldfirmsslow to changestrategiesbutalso lackof strategicdecision
* Equifinality:diJferentroutesto the innovationof multi-divisionalform.
* Structureat Jerseya resultof historicalevolution,personalpreferences,legal r
(p. 165).
* Structureand strategyare affectedby legitimizingnorms,imitationandfashio
ce Amburgey and Dacin, 1994)
* As morefirmsadoptedthestructure,the linkbetweenstructureadoptionandpe
and Teece,1979)
* Mutuallearningbetweenthefocal four f rmsandotherf rms(p. 17).
Strategy eJ%ectson * Sears'entryto directretailingrevolutionizes the industry(p 233).
n Performance as indepen- (Amburgey
Decliningproftabilityat base industrypushesfor diversification an

I dent variable Performancerecordof unrelateddiversification has inXquencedsubsequentchoi

v: Depressionas an externalshockinXquencing choicesof strategy(Fligstein,199
- >
. Basic reorganizationsin Du Pontand GMcameaftermajorfinancialcrisis.