Strategy as Economics
Richard N. Langlois
Department of Economics
The University of Connecticut
U63 Storrs, CT 06269-1063 USA
(860) 486-3472 (phone)
(860) 486-4463 (fax)
Langlois@UConnVM.UConn.edu
August
2000
Paper for the Academy of Management Annual Meeting
Toronto 2000
Panel on
“Integrating
Management and Economics Perspectives
on Competitive Strategy:
An Oasis or a Mirage?”
ABSTRACT
Clearly, strategy and economics differ along one
critical dimension. Strategy is
concerned descriptively with firms and normatively with the tasks of managers,
whereas economics is concerned descriptively with the entire economic system
and normatively with the effective functioning of that system. Nonetheless, the overlap is
considerable, and both management scholars and economists have ransacked
economic thought for inspirations to strategic theory and managerial
practice.
At one time, of course, there was little
distinction between economics and management as intellectual disciplines. In the 1920s, one could find books like
Dexter Kimball’s Industrial Economics, which attempted to embrace both the
descriptive and normative elements of industrial practice in the spirit of
Smith, Babbage, and Marshall. But
synthesis cannot long withstand the forces of the extent of the market. By the 30s, economics was already
producing a specialized and highly abstract variant of price theory that was to
become the basis of the field of industrial organization. Later, after World War II, management
(and indeed strategy) also began to coalesce as a specialty. Like many other parts of the
university, this new area came to suffer — and sometimes eagerly to seek — the
“imperialism” of a more abstract and highly developed economics research
program.
This essay will
examine and evaluate the history of borrowings from economics by management
scholarship. More interestingly,
perhaps, it will suggest that perhaps the process ought to be reversed. Economics as it is now practiced would
do well to learn from strategy.
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