Value-Based Business Strategy: Theoretical Implications for Strategy Formulation
Abstract
The value-added approach is now widespread in the research, practice and teaching of business strategy. However, we argue that because value-added analysis is inherently incomplete, its conclusions can be unreliable. Using coalitional game theory, we show that the generic strategies arising from value-added thinking can go wrong in subtle ways. Instead of generic strategies, we propose managers use the shadow prices associated with their competitive alternatives to guide strategy development. We illustrate this with an analysis of value appropriation in the context of commercializing new technologies.
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