The Theory-Based View: Economic Actors as Theorists

Strategy Science, Forthcoming

14 Pages Posted: 13 Nov 2017 Last revised: 12 Dec 2017

See all articles by Teppo Felin

Teppo Felin

University of Oxford - Said Business School

Todd Zenger

University of Utah

Date Written: November 9, 2017

Abstract

This paper outlines the theory-based view of strategy and markets. We argue that novel or “great” strategies come from theories. Entrepreneurs and managers originate theories and hypotheses about which activities they should engage in, which assets they might buy, and how they will create value. A firm’s strategy, then, represents a set of contrarian beliefs and a theory — a unique, firm-specific point of view — about what problems to solve, and how to organize and govern the overall process of value creation. We outline the cognitive and perceptual, organizational and economic foundations of the theory-based view of strategy. We also discuss the essential attributes needed for a firm-level theory of strategy. Throughout the paper we offer informal examples of our argument, by briefly discussing the strategies of companies like Apple, Uber and Airbnb. The theory-based view of strategy and markets also offers important insights for how firms govern themselves (including ownership, boards and organization design) and how firms interact with capital markets and external evaluators and stakeholders. We conclude with a discussion of the practical and managerial applications of the theory-based view.

Keywords: Strategy, Cognition, Perception, Theory for the Firm, Governance

JEL Classification: M13, L1, O31, O32

Suggested Citation

Felin, Teppo and Zenger, Todd R., The Theory-Based View: Economic Actors as Theorists (November 9, 2017). Strategy Science, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3068134 or http://dx.doi.org/10.2139/ssrn.3068134

Teppo Felin (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://sites.google.com/site/teppofelin2/

Todd R. Zenger

University of Utah ( email )

David Eccles School of Business
1655 East Campus Center Drive
Salt Lake City, UT 84112
United States
801 585-3981 (Phone)
801 581-7939 (Fax)

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