Knowledge that Transforms

This communication offers comment on Gilbert's critique of the strategic management paradigm for failing to recognize the role and justice of the individual purpose in business organizations.

Boone and De Brabander (1993) contend mat Hodgkinson's (1992) strategic locus of control scale will not lead to interesting research results and that researchers should continue to adopt the well known Rotter (1966) I‐E scale. Central to their argument is the assertion that responses to domain‐specific control expectancy scales, such as the strategic locus of control scale, largely reflect actors' perceptions of their current circumstances, whereas responses to the I‐E scale are a function of stable personality differences. In this reply the literature on the locus of control construct is briefly reviewed, in order to show that the accumulated empirical research evidence does not support the notion of generalized control expectancies as a simple unidimensional personality trait, but points overwhelmingly to the conclusion that control expectancies are more appropriately construed as a multidimensional, domain‐specific, cognitive variable shaped by the combined effects of disposition, prior learning experiences, reinforcement histories and current circumstances. The rationale for the development of the strategic locus of control scale is further explained, in order to clarify a number of other misconceptions.

For an industry facing both internationalization and impending maturity, available strategic prescriptions suggest four options which are at variance with each other. To assess the validity of competing strategic prescriptions, the outcomes of these four options are examined empirically by means of a longitudinal study of the vehicle components industry. Rather than going for strategies based on market domination, large British vehicle component companies would generally have performed better had they concentrated on resource‐based priorities; market domination has generally only proved feasible in national markets, and the outcomes of such strategies have proved little short of disastrous. Explanations are explored through a case study of one British national market leader and through international comparisons from Germany, the U.S.A. and Japan, which highlight the importance of manufacturing policies as primary sources of sustainable competitive advantage.

In this overview to the Strategic Management Journal Winter 1993 Special Issue, we comment on the relationship between organization theory, strategy and decision making, and we review the contributions to this theme by our distinguished panel of authors. What is distinctive about strategic decisions? How does the organization function as an information processing mechanism? What information is strategic; when does information become strategic; and how do decision bias and locus affect competitive outcomes? How do process and structure, decision criteria, the layering of decisions, and domestic vs. global considerations affect performance? What is the role of beliefs and expectations; how do organizations effect proactive, creative behavior to recast their strategic decision patterns?

We show that the risk‐return paradox can be partly explained by the choice of accounting risk and return measures. Returns computed with equity or assets from End‐of‐Period (EOP) annual reports produce negative risk‐return associations, while measures calculated using Beginning‐of‐Period (BOP) equity or assets yield more positive relationships. The likelihood of reporting negative relationships using EOP methods is accentuated by dividing samples at median returns. Below‐median firms suffer losses and may appear to have lower and more variable returns than above‐median firms, simply because of EOP methods. Our results show that mean and variance measures are unstable and risk‐return relationships vary inversely the number of firms reporting mean losses.

Efficiency has been defined in at least two different ways: in terms of the refinement of existing products, processes or capabilities (static efficiency) or the development of new ones (dynamic efficiency). This paper analyzes the organizational trade-off between these two forms of efficiency. It shows that there is a tendency towards extremes, and that the irreversibility of efficiency orientations tends to tip the balance to be struck between static and dynamic efficiency toward the latter. The paper also advances hypotheses about the industry, business and corporate factors that mediate between the choice of a particular efficiency orientation and organizational performance.