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The Theory-Based View: Economic Actors as Theorists

Author

Listed:
  • Teppo Felin

    (Saïd Business School, University of Oxford, Oxford OX1 1HP, United Kingdom)

  • Todd R. Zenger

    (David Eccles School of Business, University of Utah, Salt Lake City, Utah 84112)

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, Disney, Wal-Mart, 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.

Suggested Citation

  • Teppo Felin & Todd R. Zenger, 2017. "The Theory-Based View: Economic Actors as Theorists," Strategy Science, INFORMS, vol. 2(4), pages 258-271, December.
    • Handle: RePEc:inm:orstsc:v:2:y:2017:i:4:p:258-271
    DOI: 10.1287/stsc.2017.0048
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    Cited by:

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    19. Ehrig, Timo & Foss, Nicolai J., 2022. "Why we need normative theories of entrepreneurial learning that go beyond Bayesianism," Journal of Business Venturing Insights, Elsevier, vol. 18(C).
    20. Haji Ali Beigi, Maryam, 2021. "External knowledge diversity, competition intensity and innovation performance in logistics: Implications for less versus more innovative industries," Ilmenau Economics Discussion Papers 157, Ilmenau University of Technology, Institute of Economics.
    21. Caleb Bernacchio, 2023. "Business and the Ethics of Recognition," Journal of Business Ethics, Springer, vol. 185(1), pages 1-16, June.
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