Viewing Global Strategy Through a Microfoundations Lens

30 Pages Posted: 18 Dec 2018

See all articles by Farok Contractor

Farok Contractor

Rutgers, The State University of New Jersey - Rutgers University, Newark

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation

Sumit Kundu

Florida International University (FIU)

Somnath Lahiri

Illinois State University

Date Written: November 27, 2018

Abstract

Academic Abstract

The emerging microfoundations literature asserts that macro concepts and macro-outcomes, such as firm-level capabilities, performance and strategies, need to be understood in terms of the underlying actions, interactions and characteristics of micro-level entities, such as individual actors and managers. This literature has specific implications for the understanding of cross-level explanatory mechanisms; notably, it asserts that all relations between macro variables are mechanisms that involve micro variables. While the microfoundations literature has been influential in the general strategy literature, global strategy has been less impacted by it. This is paradoxical because the research challenges pointed to by the literature are often magnified in the multinational corporation and in a global strategy context. We characterize microfoundations, discuss their relevance to the global strategy, and show how the papers in this special issue fill important microfoundational gaps in the global strategy literature. For example, Google’s strategic decision in 2018 to reenter the Chinese market (macro-level analysis) is best understood through the thinking of decision-makers in the company, as well as opposition to the move from over one thousand of its employees.

Managerial Summary

For too long, studies of corporate strategies have focused on the firm as a unit of analysis, as if the firm could decide or think on its own, neglecting the fact that it is managers who think. The underlying motivations, interactions and characteristics of individual managers of companies have often been missing in explanations of global strategy formulation. This can especially be a lacuna in closely-held companies in emerging countries where decision-making is more concentrated in the minds of owners, top managers and family members.

The microfoundations literature specifically tries to connect the thinking and backgrounds of individual managers with strategic decisions their firm makes. While the microfoundations literature has made some headway in the general strategy literature, the analysis of global strategy has been less impacted by it. This is paradoxical because the research challenges pointed to by the literature are often magnified in the multinational corporation and in a global strategy context. This introductory paper first refines and enunciates microfoundations theory, in its application to global business. It then also shows how the papers in this special issue fill important microfoundational gaps in the global strategy literature.

Keywords: Global Strategy, Microfoundations

JEL Classification: A, D, L, M

Suggested Citation

Contractor, Farok and Foss, Nicolai J. and Kundu, Sumit and Lahiri, Somnath, Viewing Global Strategy Through a Microfoundations Lens (November 27, 2018). Available at SSRN: https://ssrn.com/abstract=3291634 or http://dx.doi.org/10.2139/ssrn.3291634

Farok Contractor (Contact Author)

Rutgers, The State University of New Jersey - Rutgers University, Newark ( email )

180 University Avenue
Newark, NJ 07102
United States

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

Sumit Kundu

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Somnath Lahiri

Illinois State University ( email )

Normal, IL 61761
United States

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