Market frictions as building blocks of an organizational economics approach to strategic management

Joseph T. Mahoney, Lihong Qian

Research output: Contribution to journalArticle

Abstract

This paper shows that market frictions are fundamental building blocks for an organizational economics approach to strategic management. Various organizational economic approaches (transaction costs, property rights, real options, and resource-based) have distinctive focal problems and emphasize different combinations of market frictions. A wider recognition of the role of market frictions is useful for three main objectives. First, it helps identify an evolving market-frictions paradigm in strategic management. Second, it shows how two primary questions in strategy of why firms exist and why some firms outperform others and the three primary strategic goals of cost minimization, value creation, and value capture can be better joined and evaluated. Third, different combinations of market frictions can generate new research questions and advance theory development in the strategic management field.

Original languageEnglish (US)
Pages (from-to)1019-1041
Number of pages23
JournalStrategic Management Journal
Volume34
Issue number9
DOIs
StatePublished - Sep 1 2013

Keywords

  • cost minimization
  • market frictions
  • organizational economics
  • value capture
  • value creation

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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