2016/07/18 by Eric Van den Steen
Business, Management and Accounting · #Business Strategy and Innovation
paper · doi:10.1287/mnsc.2016.2468
What makes a decision strategic? When is strategy most important? This paper formally studies these questions, starting from a (functional) definition of strategy as the smallest set of choices to optimally guide (or force) other choices. The paper shows that this definition coincides with the equilibrium outcome of a “strategy formulation game,” in which such strategy endogenously creates a hierarchy among decisions. With respect to what makes a decision strategic and what makes strategy valuable, the paper considers the effect of commitment, reliability, and irreversibility of a decision; the presence of uncertainty (and the type of uncertainty); the number and strength of its interactions and the centrality of a decision; its level and importance; the development of capabilities; and competition. This paper was accepted by Bruno Cassiman, business strategy.