The Dynamic Context of Strategic Actions

This chapter postulates that the continuously emerging strategic (and entrepreneurial) actions, which are elemental to the dynamic strategy of profit-seeking firms within an evolving economic population, and the firm-specific outcomes of those actions, are necessarily determined in a dynamic (i.e., continuously evolving) context. The two integrands of this dynamic context include the dynamic structural context, which comprises time-varying elements of the external environment common to a group of firms (i.e., a ‘population’), and the dynamic strategic context, which comprises time-varying elements of the internal environment of a particular firm. The evolutionary processes that drive the dynamic interplay among the structural and strategic contexts are not the ones associated with equilibrium states but that of creative accumulation and destruction processes characterized by continuous disequilibrium. These are driven on the one hand by sundry investments in physical and/or intangible capital, and various types of innovations, and on the other hand a variety of market selection forces and processes. The explanation of the processes of dynamic economic selection, which operate in the firms’ external and internal selection environments respectively and which winnow out the spatio-temporal variety of strategic actions, requires making a conceptual distinction between internal selection within firms (in the strategic context) and external selection among firms (in the structural context). While the former explains the impetus for within-firm variation in strategy over time, the latter explains the within-industry variation in strategy over time.