Knowledge that Transforms

In recent years there has been worldwide interest in ‘privatization’ and transferring government department functions to quasi‐autonomous agencies. This paper presents the results of a study of 10 organizations in the U.K. which underwent changes in their organizational status within government or which crossed the public‐private boundary. The focus of the study is the impact of these organizational status changes on financial performance measured using a set of standard financial ratios. These ratios did not provide a consistent set of statistically significant results. Organizational status changes in the direction of privatization do not appear to guarantee improved performance.

Numerous authors have argued for the need to study the process of strategic decision making. In the present study a judgement capturing methodology is employed, to identify the specific structures of decision models and simplification heuristics in a series of strategic investment decisions. Implications of the results and suggestions for future research are discussed.

This paper explores the nature of competitive assets that are based on control of part of a market's infrastructure using a case study of the U.K. frozen food market. Following an argument due to Stigler, the thesis of the paper is that such assets are inherently transitory, and that positions of market leadership based on them tend to erode. This argument is consistent with the experiences of Birds Eye during the post‐War period.

This paper gives an introduction to a recently developed strategic decision support methodology, which makes it possible to represent rule‐setting and rule‐fulfilling decision‐making processes in companies with their structural and behavioral differences. This new methodology also allows us to simulate evolutionary processes in company systems based on these two forms of decision‐making. The new strategic decision support methodology combines the continuous feedback loop concept of system dynamics with discontinuous logical loops, which we call spiral loops. The spiral loop concept, which is based on new developments in evolutionary theory and in the field of artificial intelligence, is used to represent the rule‐setting strategic decisions, which generate qualitative change and evolution. The continuous feedback loop concept is used to model the rule‐fulfilling policy decisions of companies, which can generate quantitative changes in interaction processes. In order to demonstrate how loop‐based strategic decision support systems work in principle we show the ‘portfolio simulation model,’ which helps us to explain and to design the evolution of multibusiness firms in duopoly markets.

Critics of game theory claim that it can be used to rationalize anything—even bank presidents setting their pants on fire in public. This article verifies the claim with a simple signalling model. The paper goes on to argue, however, that this criticsm is without force. Game theory is a toolbox for constructing useful models, rather than an empirically substantive theory; its power comes from imposing logical discipline upon the stories we tell.

The purpose of this paper is to expand the discussion of the ‘state‐of‐the‐science’ in strategy research. We critically examine the role that theory plays in strategic research, and describe the principles underlying good theory. From a philosophy of science perspective, we argue that: (1) both inductive and deductive methods are valid ways of generating theory; (2) the falsificationist perspective provides an inadequate model for describing the process of theory testing; and (3) managers, researchers, public policy‐makers, the popular press, and the public at large all have important roles to play in the knowledge development process.

This paper explores the factors involved in determining the differential performance of firms in bear markets. Bear markets are identified at the industry level by employing the criterion of a 20 percent drop of the industrial value added index over a period of at least 3 years. Twenty‐one matched pairs of Dutch firms which have experienced such bear markets (one successful, the other unsuccessful), are analyzed. The dominant finding is that successful firms follow market‐oriented strategies, whereas their unsuccessful counterparts are distinguished by their focus on costs. Success, however, is a multifaceted phenomenon. Differences in initial conditions, in other types of strategic measures, in energy levels and in timing are also involved. The findings are related to the literatures on decline, failure, turnaround and transformation.