Towards a dynamic theory of strategy

Abstract

This paper reviews the progress of the strategy field towards developing a truly dynamic theory of strategy. It separates the theory of strategy into the causes of superior performance at a given period in time (termed the cross-sectional problem) and the dynamic process by which competitive positions are created (termed the longitudinal problem). The cross-sectional problem is logically prior to a consideration of dynamics, and better understood. The paper then reviews three promising streams of research that address the longitudinal problem. These still fall short of exposing the true origins of competitive success. One important category of these origins, the local environment in which a firm is based, is described. Many questions remain unanswered, however, and the paper concludes with challenges for future research.