Strategic Reflexivity as a Framework for Understanding Development in Modern Firms. How the Environment Drives Innovation

In this chapter, we argue that ‘strategic reflexivity’ can be seen as one way to conceptualize the development of modern firms. Modern firms and other organizations are often under pressure to develop or innovate in order to survive, but they depend on future markets and environments of which they do not have objective knowledge. Therefore they have to make use of uncertain development strategies within a framework of what we here call ‘strategic reflexivity’. Strategic reflexivity is based on reflexive interpretations about developments in the environment (or the market) of the firm. For instance, what is normally conceived as market driven innovation (Nyström, 1990; Tidd, Bessant & Pavitt, 1997) must, within the framework of strategic reflexivity, be understood as a process in which the firm does not react directly on the basis of ‘objective’ market changes, but creates an interpretation of the future environment that guides their development process. This approach to strategy can also be found in Mintzberg (1998) as well as Daft and Weick’s (1984) view of the firm as an interpretation system; thus it is not new. What is new in this chapter is the combination of this approach with Weick’s (1995) sense-making approach and the resource-based view of the firm (e.g., Grant, 1991) in an attempt to explain innovation. This theoretical combination is particularly useful as it leads us to a broader interpretation of the concept of innovation and a new model of the innovative organization, which specifies the firm as a system of roles.