The microfoundations of strategy: empirical explorations under conditions of environmental uncertainty

Abstract

Purpose Strategy scholars have argued that microlevel behavioral decisions by firms play a disproportionate role in making a firm nimble. Central to this issue is the interplay among several factors, such as actions by individual actors, firm-level decisions and broader changes in the economic environment that lead to a firm being successful in a competitive environment. The purpose of this paper is to offer a theoretical exploration of microfoundations research and subject the idea to empirical analysis using the constructs of customer orientation, competitor orientation and technology orientation as microfoundations of strategy. Design/methodology/approach Data collected through a key informant survey of executives were tested through a hierarchical regression analysis. Findings The results of the study suggest that the microfoundations of strategy are located more in a firm’s customer and competitor focus, rather than a technological orientation. The findings also suggest that that customer orientation is a significant component of firm-level strategy and needs to be incorporated into decision-making in firms. Originality/value This study provides a framework that integrates the structural determinants of firm performance with microfoundations theory to refine our understanding of market knowledge capability.