This paper reviews the progress of the strategy field towards developing a truly dynamic theory of strategy. It separates the theory of strategy into the causes of superior performance at a given period in time (termed the cross-sectional problem) and the dynamic process by which competitive positions are created (termed the longitudinal problem). The cross-sectional problem is logically prior to a consideration of dynamics, and better understood. The paper then reviews three promising streams of research that address the longitudinal problem. These still fall short of exposing the true origins of competitive success. One important category of these origins, the local environment in which a firm is based, is described. Many questions remain unanswered, however, and the paper concludes with challenges for future research.

https://onlinelibrary.wiley.com/doi/pdf/10.1002/smj.4250121008

Towards a dynamic theory of strategy

The importance of performance measurement has long been recognized by academics and practitioners from a variety of functional disciplines. Seeks to bring together this diverse body of knowledge into a coherent whole. To ensure that the key issues are identified, focuses on the process of performance measurement system design, rather than the detail of specific measures. Following a comprehensive review of the literature, proposes a research agenda.

Performance measurement system design: A literature review and research agenda

A century after the publication of Max Weber's The Protestant Ethic and the "Spirit" of Capitalism, a major new work examines network-based organization, employee autonomy and post-Fordist horizontal work structures.

The New Spirit of Capitalism

The impact of supply chain integration on performance: A contingency and configuration approach

Several years ago we introduced the Balanced Scorecard (Kaplan and Norton 1992). We began with the premise that an exclusive reliance on financial measures in a management system is insufficient. Financial measures are lag indicators that report on the outcomes from past actions. Exclusive reliance on financial indicators could promote behavior that sacrifices long-term value creation for short-term performance (Porter 1992; AICPA 1994). The Balanced Scorecard approach retains measures of financial performance--the lagging outcome indicators--but supplements these with measures on the drivers, the lead indicators, of future financial performance. THE BALANCED SCORECARD EMERGES The limitations of managing solely with financial measures, however, have been known for decades. [1] What is different now? Why has the Balanced Scorecard concept been so widely adopted by manufacturing and service companies, nonprofit organizations, and government entities around the world since its introduction in 1992? First, previous systems that incorporated nonfinancial measurements used ad hoc collections of such measures, more like checklists of measures for managers to keep track of and improve than a comprehensive system of linked measurements. The Balanced Scorecard emphasizes the linkage of measurement to strategy (Kaplan and Norton 1993) and the cause-and-effect linkages that describe the hypotheses of the strategy (Kaplan and Norton 1996b). The tighter connection between the measurement system and strategy elevates the role for nonfinancial measures from an operational checklist to a comprehensive system for strategy implementation (Kaplan and Norton 1996a). Second, the Balanced Scorecard reflects the changing nature of technology and competitive advantage in the latter decades of the 20th century. In the industrial-age competition of the 19th and much of the 20th centuries, companies achieved competitive advantage from their investment in and management of tangible assets such as inventory, property, plant, and equipment (Chandler 1990). In an economy dominated by tangible assets, financial measurements were adequate to record investments on companies' balance sheets. Income statements could also capture the expenses associated with the use of these tangible assets to produce revenues and profits. But by the end of the 20th century, intangible assets became the major source for competitive advantage. In 1982, tangible book values represented 62 percent of industrial organizations' market values; ten years later, the ratio had plummeted to 38 percent (Blair 1995). By the end of the 20th century, the book value of tangible assets accounted for less than 20 percen t of companies' market values (Webber 2000, quoting research by Baruch Lev). Clearly, strategies for creating value shifted from managing tangible assets to knowledge-based strategies that create and deploy an organization's intangible assets. These include customer relationships, innovative products and services, high-quality and responsive operating processes, skills and knowledge of the workforce, the information technology that supports the work force and links the firm to its customers and suppliers, and the organizational climate that encourages innovation, problem-solving, and improvement. But companies were unable to adequately measure their intangible assets (Johnson and Kaplan 1987, 201-202). Anecdotal data from management publications indicated that many companies could not implement their new strategies in this environment (Kiechel 1982; Charan and Colvin 1999). They could not manage what they could not describe or measure. INTANGIBLE ASSETS: VALUATION VS. VALUE CREATION Some call for accountants to make an organization's intangible assets more visible to managers and investors by placing them on a company's balance sheet. But several factors prevent valid valuation of intangible assets on balance sheets. …

/pdf/transforming-the-balanced-scorecard-from-performance-2itnw9juqa.pdf

Transforming the Balanced Scorecard from Performance Measurement to Strategic Management: Part II

"Relevance Lost" is an overview of the evolution of management accounting in American business, from textile mills in the 1880s and the giant railroad, steel, and retail corporations, to today's environment of global competition and computer-automated manufacturers. The book shows that modern corporations must work toward designing new management accounting systems that will assist managers more fully in their long-term planning. It is the winner of the American Accounting Association's Deloitte Haskins & Sells/Wildman Award Medal. It is also available in paperback: ISBN 0875842542.

Relevance Lost: The Rise and Fall of Management Accounting

From the Publisher:
Building on his pathbreaking, award-winning bestseller, Relevance Lost, H. Thomas Johnson presents a devastating critique of the top-down hierarchical accounting systems that have dominated American corporations since the 1950s. Johnson shows exactly how "managing by remote control" through results-oriented accounting information has obscured and obstructed the real business objective: to reduce process variation and lead times for the purpose of obtaining and keeping satisfied customers. The failure of most American businesses to be competitive and profitable in recent years, he contends, is their reliance on management accounting information to control people's actions and productivity. Cost-focused imperatives from on high must be replaced, Johnson asserts, with information systems that link actions with imperatives of global competition. Past practices of manipulating processes to achieve accounting cost targets dictated by "top-down" command and control information must he replaced by "bottom-up" empowerment. Self-managing work teams, according to Johnson, must own problem-solving information to reduce variation, delays, and excess in processes. Johnson prescribes the necessary changes in management principles that must replace the outdated style associated with the industrial revolution. Responsiveness to customers--not accounting costs--and flexibility--reducing lead times and removing constraints--are necessary for sustained competitive excellence and long-term profitability. Johnson discusses the radical overhauls of companies, such as General Electric's work-outs/"best practices" program, Eastman Kodak's process control costing, and Harley-Davidson's work simplification programs, and shows how these strong commitments to new strategies maximize a company's most important assets: people and time. To be globally competitive, he claims, a company's work must be directed toward selling to customers, not just selling products. Transaction- or product-orien

Relevance Regained: From Top-down Control to Bottom-up Empowerment

The Rise and Fall of Management Accounting

This essay explores the organizational conditions underlying the emergence and role of management accounting and the organizational processes through which management accounting affects society. Management accounting emerged to provide information needed by organizers of firms-economic entities that operate partly outside of the market system. Organizers create firms in order to earn higher returns from economic resources than they can earn through ordinary market exchange. Management accounting information defines the internally-controlled domain of opportunities in which organizers search for higher returns. This information also influences the effort that organizers and other members of a firm make to derive gains from internally-controlled resources; and it shapes the opinion that society holds of firms' activities.

H. Thomas Johnson

Papers

Relevance Lost: The Rise and Fall of Management Accounting

Relevance Regained: From Top-down Control to Bottom-up Empowerment

The Rise and Fall of Management Accounting

The search for gain in markets and firms: A review of the historical emergence of management accounting systems

Profit Beyond Measure: Extraordinary Results Through Attention to Work and People