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Firm strategy, innovation and consumer demand: a market process approach


  • Paul L. Robertson

    (Department of Management, University of Wollongong, Wollongong, NSW, Australia)

  • Tony F. Yu

    (School of Economics and Management, University College, University of New South Wales, Canberra, NSW, Australia)


Despite recent advances by economists such as Porter and those associated with the resource-based school, the economics of demand rarely features in discussions of business strategy. Porter and the resource-based school take the characteristics of demand as given, and place almost exclusive emphasis on the role of supply-side factors in formulating strategy. Scholars in strategic marketing, by contrast, recognize the importance of demand factors, but do not analyse them from an economic standpoint. Moreover, none of the important schools of strategic management attempts to explore the relationship between supply and demand in much analytical depth. In this paper, we adopt a market process approach to strategy formulation as a preliminary step towards rectifying these problems. First, we explore the factors that affect the economics of demand, particularly in innovative situations. Second, we adapt Lancaster's attribute analysis to show how the interaction between supply and demand can be represented from a market process perspective. On the basis of our efforts, we conclude that further work in these areas would benefit students of both strategic management and economics. Copyright © 2001 John Wiley & Sons, Ltd.

Suggested Citation

  • Paul L. Robertson & Tony F. Yu, 2001. "Firm strategy, innovation and consumer demand: a market process approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 183-199.
  • Handle: RePEc:wly:mgtdec:v:22:y:2001:i:4-5:p:183-199
    DOI: 10.1002/mde.1016

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    References listed on IDEAS

    1. Brian J. Loasby, 1989. "The Mind and Method of the Economist," Books, Edward Elgar Publishing, number 288.
    2. Cheung, Steven N S, 1983. "The Contractual Nature of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 26(1), pages 1-21, April.
    3. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    4. Paque, Karl-Heinz, 1985. "How Far Is Vienna from Chicago? An Essay on the Methodology of Two Schools of Dogmatic Liberalism," Kyklos, Wiley Blackwell, vol. 38(3), pages 412-434.
    5. Richard N. Langlois & Metin M. Cosgel, 1996. "The Organization of Consumption," Working papers 1996-07, University of Connecticut, Department of Economics.
    6. Ulrich Witt, 2006. "Evolutionary Economics," Papers on Economics and Evolution 2006-05, Philipps University Marburg, Department of Geography.
    7. Richardson, G B, 1972. "The Organisation of Industry," Economic Journal, Royal Economic Society, vol. 82(327), pages 883-896, September.
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    Cited by:

    1. Yu Tony Fu-Lai, 2002. "The Knightian Firm: Uncertainty, Entrepreneurial Judgement and Coordination," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(4), pages 1-17, December.

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