The Industry Analysis/Positioning Dominance Myth

11 April 2008 at 4:27 am Nicolai Foss 2 comments

| Nicolai Foss |

Until the advent in the mid-1980s of the resource-based view in the writings of Barney, Wernerfelt, Rumelt, etc. industry analysis and positioning ruled the roost in the strategic management, right? Many expositions of the brief history of strategic management make this claim (and I have done so myself on many occasions). There is a certain dramatic quality to the story, á la from external to internal analysis, a swinging pendulum, etc., a story of controversy between opposed positions (“Porter vs. Barney”), etc.

However, the idea of the dominance of industry analysis/positioning/market power is a complete myth says Phil Bromiley (here and in a chapter with Lee Fleming in this book). Bromiley seeks to demonstrate this by simply checking the contents of strategic management’s leading journal, the Strategic Management Journal. As he concludes, “Even a casual perusal of the tables of content of the Strategic Management Journal demonstrates that industry analysis never formed more than a small fraction of strategic management scholarship” (p. 86, in The Behavioral Foundations of Strategic Management.

However, while Bromiley certainly has a point, industry analysis may well have been dominant in teaching. And the fact remains that Porter’s 1980 tome, Competitive Strategy, is among the most cited references in strategic management.

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2 Comments Add your own

1. spostrel | 16 April 2008 at 1:43 pm

You are right. Positioning analysis was dominant in teaching and consulting but received very little scholarly attention. Resource-based theory is dominant in scholarship but has a minimal profile in consulting and a pretty small one in teaching.

There are a lot of things about positioning analysis we still don’t understand very well, e.g. general quality-quantity relationships under different assumptions about costs and demand distributions. I’m not sure there’s much of an appetite in the field for tackling such problems.
2. David Hoopes | 17 April 2008 at 12:04 am

Given how much Porter is cited I’m afraid Phil’s argument that it was not a dominant for seems week. Porter’s 1985 book is cited over 10,000 times on Google. Also, many if not most economists believed that differences between firms in the same industry were trivial short run things.

Phil’s book is great. But, it does not really offer an alternative theory to equilibrium economics or any model based on relaxed assumptions of simple microeconomics. He simply shows how the assumptions do not hold with reality.