Knowledge that Transforms

Abstract ‘Strategic awareness’ is viewed in two ways: the extent to which an executive's perception of the organization's strategy aligns (a) with the organization's ‘realized’ strategy and (b) with the chief executive's perception. Strategic awareness is positively related to hierarchical level, but differs across the three industries studied. Awareness is greater in organizations that have recently changed their strategies than in those that have not.

This paper incorporates both diversification strategy and market structure variables in a study of corporate economic performance. A subsample of 128 firms from Rumelt's 1974 study was updated and utilized to investigate the possibility that market structure variables might moderate or confound the diversification/performance relationship he reported. Study results indicate that performance differences could be demonstrated for some of Rumelt's categories, but, across the range of categories, a hypothesis of performance differences was rejected. As expected, categories associated with distinctly high or distinctly low economic performance were also associated with significant differences in a series of market structure variables.

This paper investigates performance differences (in terms of ROA) between related and unrelated diversified firms. Two regression models of performance are estimated using a sample of 80 firms. Performance differences are associated with advertising expenditures, accounting determined risk, research and development expenditures and capital intensity. The models suggest that research and development expenditures are an important determinant in the performance advantage enjoyed by related diversified firms.

The involvement of government in the affairs of business has been increasing rapidly over the past two decades in most western economies. This paper examines the impact of a particular instrument designed by government in the U.K. to attempt to be involved with corporate planning at the level of the individual company. The paper reports the views, attitudes, and expectations of government and those of a number of the major companies which were politically and economically selected by government as being suitable candidates for planning agreements. Finally, the attitute of senior trade unionists were sought to complete a tripartite analysis consistent with that of other institutions created for indicative economic planning. The results do not appear favourable to this particular instrument nor would they augur well for others unless the basic climate of trust and understanding between the different parties dramatically improved.

Diversification Through Acquisition, Malcolm Salter and Wolf Weinhold, Free Press, New York, 1979. No. of pages: 330. Price: $24.95.

The microeconomic theory of the firm encompasses classical marginal analysis and modern operations research techniques. Yet, one finds a paucity of explicit application of microeconomics to corporate planning. In this paper we explore the reasons for the seeming void and develop an economic theory of corporate planning. Our main thesis is that received microeconomic theory focuses on answers, and answers stated in non‐operational terms. Nonetheless, economic theory asks questions of central importance to the strategic choices of the firm. These questions arise from economic theory and the fundamental notion of trade‐offs. We develop a microeconomic theory of strategic search for corporate planning. The theory is used to develop important questions and efficient search in lieu of chaotic and random search.