On dominant logic: review and synthesis

ORI GIN AL PA PER

On dominant logic: review and synthesis

Tim Franke • Dodo zu Knyphausen-Aufsess

Published online: 11 September 2013

� Springer-Verlag Berlin Heidelberg 2013

Abstract Building on the idea of managerial relatedness among businesses, the

concept of ‘‘Dominant Logic’’ (DL) was developed to provide insights into what the

determinants for successful diversification and organizational adaptation may be.

Since Prahalad and Bettis’ seminal article (Strateg Manag J 7(6):485–450, 1986),

management scholars have drawn on the concept of DL for almost 25 years and

applied it to various strategic management contexts. However, the lack of a sys-

tematic review that integrates the past decades’ fragmented research on DL and

resolves its conceptual inconsistencies hinders the purposeful application of the

concept and its further development. Hence, we seek to contribute to the literature

by addressing this substantial gap. Developing an integrated framework, we provide

an overview of DL research concentrating on (1) the antecedents of DL formation

and adaptation, (2) the DL commonality-performance linkage, and (3) the dynamics

of DL. By introducing the distinction between absolute and relative dominance, we

offer a more precise definition of DL that clarifies and theoretically distinguishes the

concept. We conclude by highlighting salient research gaps and identifying prom-

ising areas for future research efforts.

Keywords Diversification � Dominant logic �Multi-business firm � Synergy �Top management team

JEL classification M00 � M10

T. Franke (&) � D. zu Knyphausen-Aufsess

Chair of Strategic Leadership and Global Management, Technische Universitat Berlin,

Straße des 17. Juni 135, 10623 Berlin, Germany

e-mail: [email protected]

D. zu Knyphausen-Aufsess

e-mail: [email protected]

123

J Bus Econ (2014) 84:27–70

DOI 10.1007/s11573-013-0690-4

1 Introduction

The concept of ‘‘Dominant Logic’’ (DL) was developed to provide insights into

what the determinants for successful diversification and organizational adaptation

may be. Since Prahalad and Bettis’ seminal article (1986), management scholars

have applied the concept to various strategic management contexts, such as joint

ventures (e.g., Guidice and Mero 2007; Lampel and Shamsie 2000), entrepreneur-

ship and new ventures (e.g., Kuratko and Audretsch 2009; Lumpkin and Brigham

2011; Obloj et al. 2010), (international) mergers and acquisitions (e.g., Cote et al.

1999; Weber and Camerer 2003; Weber and Shenkar 1996; Chatterjee et al. 1992;

Verbeke 2010), international management (e.g., Vora and Kostova 2007; Kostova

and Roth 2002; Kostova 1999), and strategic change, as well as renewal and

adaptation (e.g., Gilbert 2005; Ginsberg and Venkatraman 1992; Hodgkinson 1997;

Prahalad 2004).

However, the literature’s continuous growth but largely fragmented nature

prevent scholars from convincingly applying and enhancing the concept (e.g., Bettis

and Prahalad 1995; Grant 1988; Stimpert and Duhaime 1997; von Krogh and Roos

1996; Verbeke 2010). There is neither a solid knowledge base regarding what the

antecedents of DL formation and adaptation may be, nor a consensus on how DL

commonality between businesses may drive the management of a multi-business

firm or merger and acquisition decisions and processes, nor is there certainty

regarding how DLs may alter over time. Therefore, there is a need for a systematic

literature review that sets the foundation for the purposeful application of the

concept highlighting salient research gaps and identifying promising areas for future

research efforts.

The aim of our review is to contribute to strategic management literature by

closing this substantial gap. Having conducted a systematic review of the DL

literature from 1986 to date (including articles available up to May 2012), we

provide a comprehensive overview of the research on the concept of DL concerning

(1) the antecedents of DL formation and adaptation, (2) the DL commonality-

performance linkage (in the diversified firm), and (3) the dynamics of DL. Using

qualitative meta-analysis, we synthesize the fragmented research found across levels

of analysis and applied contexts into an integrated framework and offer a more

precise definition of DL; we thereby introduce the distinction between absolute and

relative dominance, clarifying and theoretically distinguishing the concept to enable

its promising future application. Finally, we discuss the implications of our findings,

and highlight important directions for future research efforts.

2 The concept of dominant logic

DL ‘‘is defined as the way in which managers conceptualize the business and make

critical resource allocation decisions’’ (Prahalad and Bettis 1986, p. 490). It acts as

an ‘‘information filter…[which focuses organizational attention]’’ (Bettis and

Prahalad 1995, p. 7) and is ‘‘in essence, the DNA of the organization’’ (Prahalad

2004, p. 172). As such, an organization’s DL is determined by the experiences of its

28 T. Franke, D. zu Knyphausen-Aufsess

123

top management group and typically influenced by its ‘‘largest business or the ‘core

business’ which was the historical basis for the firm’s growth’’ (Prahalad and Bettis

1986, p. 490–491; see also Dess et al. 1990). Following this conceptualization of

DL, at a given point in time a particular DL is appropriate to a business or a

portfolio of businesses that are strategically similar if it is appropriate to the external

environment.

However, over time, strategic similarity in a diversified firm can vary due to (1)

‘‘changes in the mix of businesses caused by acquisitions or internal development,’’

or (2) ‘‘changes in the structural characteristics of the existing mix of businesses’’

(Prahalad and Bettis 1986, p. 495). Hence, the primary managerial challenge is to

decide whether the currently applied DL is likely to also be appropriate to a newly

acquired business (e.g., Prahalad and Bettis 1986; Cote et al. 1999; Weber and

Camerer 2003; Weber and Shenkar 1996; Chatterjee et al. 1992; Verbeke 2010) or,

for example, a newly created joint venture (e.g., Guidice and Mero 2007; Lampel

and Shamsie 2000). Fit and consistency from the bottom to the top are further

important prerequisites for successful cross-unit collaboration within diversified

firms (Martin and Eisenhardt 2010).

Subsequently, managers must continuously judge whether their current DL

requires adaptation or has even become entirely obsolete, for example, due to recent

changes in the organization’s environment (e.g., Bettis and Prahalad 1995; Miller

1993; Prahalad 2004; Sirmon et al. 2007; Tripsas and Gavetti 2000; von Krogh et al.

2000). The latter is probably one of the most challenging tasks in management because

‘‘if the ‘machine’ is beautifully tuned and aligned with its environment, it can beat

everything in sight’’ and ‘‘these stellar successes are impossible to forget. They tempt

and tantalize managers to go just a little bit further’’ (Miller 1993, p. 134).

Hence, on the one hand, a DL can be seen as an important (intangible) resource,

which is valuable, rare, and difficult to imitate (Amit and Schoemaker 1993; Barney

1991; Ilinitch and Zeithaml 1995; Obloj et al. 2010), but on the other hand, managers

need to be aware of the blinders of their current DL, which can be a significant source

of inertia (e.g. Gilbert 2005; Ginsberg and Venkatraman 1992; Hodgkinson 1997;

Prahalad 2004). Given this double-edged character of a DL, it is the responsibility of

corporate managers to distinguish between these two edges and to develop the

capability for continuously adapting the DL as a specific dynamic core competence

(Lei et al. 1996). This would facilitate the preservation of competitive advantages on

the business-level, the reduction of uncertainty and path dependency (Hatum and

Pettigrew 2006; Lei et al. 1996; Sydow et al. 2009), and most importantly, the

avoidance of ‘‘hidden costs of diversification’’ (Prahalad and Bettis 1986, p. 497).

These costs can be caused by (a) the corporate headquarters’ inadequate oversight of

the business units or (b) slow and inadequate responses to environmental changes

(e.g., crises), both of which may be due to the application of an inappropriate DL.

3 Study overview and review methodology

To ensure rigor in the pursuit of our research objectives, the relevant literature on

DL was identified using an adapted version of the approaches developed by David

On dominant logic: review and synthesis 29

123

and Han (2004) and Newbert (2007). In the interests of the qualitative and

conceptual aims of our review, we adapt these approaches according to Tranfield

et al. (2003), who focus on a more qualitative but systematic management review

approach. As we review a concept rather than a theory, our review has to consider

the routes of the concept, that is, the original article where it was developed, as well

as its core tenets, as they have become apparent in the literature over the last

25 years. We aim to enable a literature-based synthesis of the respective dimensions

of DL research conducted to date. Thus, in the light of the exploratory nature of our

analysis, we used the following procedure:

1. Search for published journal articles only.

2. Search the Business Source Complete, EconLit, ABI/INFORM, and the Web

of Science databases.

3. Conduct scoping study (i.e., most relevant articles on DL with DL in title or

abstract in high-impact journals) to assess the relevance and amount of

literature, and derive search terms and review themes for a systematic search.

4. Again search the Business Source Complete, EconLit, ABI/INFORM, and the

Web of Science databases.

5. Search the articles from the citation reports of the original article by Prahalad

and Bettis (1986) and the revised interpretation of DL by Bettis and Prahalad

(1995).

6. Search references from the articles retrieved from steps 4) and 5), which were

assumed to be relevant according to the review themes defined in step 3).

7. Ensure substantive relevance by requiring that selected articles contribute to

one or more of the review themes.

8. Conduct article quality assessment (i.e., impact factor assessment) to ensure

high impact of conceptual and empirical works included.1

9. Ensure substantive relevance by analyzing all remaining abstracts for

substantive context (i.e., discussion of the core tenets of DL according to

the defined review themes).

10. Further ensure substantive relevance by reading all remaining articles in their

entirety for substantive context and conducting qualitative data extraction.

11. Consolidate results and eliminate duplicate articles.

First, in our scoping study (see steps 1–3 above) a preliminary database search

revealed a large but fragmented body of literature including more than 500 citations

of the two fundamental works of Prahalad and Bettis, and a multiplicity of current

articles from major management journals (e.g., Nadkarni and Barr 2008; Nadkarni

and Narayanan 2007; Obloj et al. 2010; Prahalad 2004; Purdy and Gray 2009;

Verbeke 2010). Search terms to narrow this large amount of work and guide the

systematic review were derived and improved by iterative modification until

promising search matches reached saturation (see Appendix 1). We derived three

themes from the scoping study that guided our systematic review. These themes

were (1) antecedents of DL, (2) the DL commonality-performance linkage (e.g., in

1 Only high-impact journals may qualify as sources for deriving a consensual conceptualization and

definition of DL, acceptable to the research community.


123

the diversified firm), and (3) the dynamics of DL. The first theme, antecedents of

DL, incorporates literature that looks into the question ‘‘what determines and

influences a specific DL?’’ Different theoretical foundations, contextual research

settings, and respective levels of analysis provide multiple dimensions, each

incorporating several antecedents of DL. These deserve consolidation and

integration. Having clarified what determines a DL leads to the question ‘‘what

distinguishes two (or more) DLs and how does DL commonality constitute strategic

similarity and thereby drive the performance of a portfolio of businesses?’’ Hence,

the second theme encompasses literature investigating DL commonality and

respective implications. Besides internal changes concerning the mix of businesses,

every organization is confronted with the challenge of either proactive or reactive

adaptation to structural changes in its external environment in order to maintain

fitness (e.g., Siggelkow 2001, 2002; Sydow et al. 2009). The final and third theme

consolidates and integrates the literature examining the dynamics of DL and the

determinants of its adaptation and rigidity.

Second, we started a triangulated search process to find relevant work on DL (see

steps 4–6 above) by (1) employing database searches via the derived keywords (175

articles), (2) using articles from the citation reports of the original article by

Prahalad and Bettis (1986) (393 articles) as well as the revised interpretation of DL

by Bettis and Prahalad (1995) (117 articles), and, finally, (3) including references

from the articles retrieved from steps (1) and (2) that were assumed to be relevant to

the review themes as defined in stage 1 (105 articles). The databases used were

Business Source Complete (and EconLit) via EBSCO Webhost, ABI/INFORM

Complete via Proquest, and the Web of Science via ISI Web of Knowledge. After

the exclusion of doublings from different search strategies, ‘‘false positives,’’ and

most importantly, the screening of abstracts pertaining to the articles’ contribution

to the search themes, this procedure yielded 49 conceptual and 80 empirical efforts.

The total of 36 academic journals publishing relevant works were predominantly

high-impact management journals. The majority of articles were found in Strategic

Management Journal (34; 27 %), Journal of Management Studies (14; 11 %),

Academy of Management Journal (12; 9 %), Academy of Management Review (9;

7 %), Organization Science (6; 5 %), Administrative Science Quarterly (5; 4 %),

Management Science (4; 3 %) and Journal of Management (3; 2.4 %). Overall,

these 8 outlets accounted for 70 % of the works on the concept of DL. An additional

12 % were distributed throughout different management disciplines and published

as follows: Entrepreneurship Theory & Practice (4; 2.4 %), Journal of Interna-

tional Business Studies (3; 2.4 %), Journal of Organizational Behavior (3; 2.4 %),

British Journal of Management (2; 1.6 %), Harvard Business Review (HBR) (2;

1.6 %), and Long Range Planning (LRP) (2; 1.6 %). The concentration of articles in

high-impact journals underlines the academic importance of the concept of DL; the

surrounding more practitioner-oriented journals, such as HBR or LRP, support its

managerial relevance. The remaining 18 % of works were spread over 21 journals

from different management disciplines and the Academy of Management Proceed-

ings. To precisely determine the impact and quality of the work used in our review,

we employed the Thompson Reuters impact factor and 5-year impact factor

rankings (see step 8 above). We note that 80 % of the relevant works exhibit an


123

impact factor above 2.9 and a 5-year impact factor above 4.6 (for complete

overview of articles and impact factor rankings see Appendix 2).

The 49 conceptual and 80 empirical articles were subjected to explorative in-

depth review and qualitative meta-analysis with special attention to the aspect of

multilateral confirmation concerning attributes of the research themes (1) to (3) (see

step 7 and steps 9–11 above). Qualitative data extraction of research findings is

representatively documented in Appendix 3. These findings were integrated into a

consolidated and comprehensive ‘‘Dominant Logic Research Framework’’ and

summary tables. Findings and synthesis are presented and discussed in the following

section.

4 Results

4.1 Overview and definition of DL

Without doubt, it is a challenging task to provide a clear picture of how a DL

may evolve, what determines it, and how a DL may adapt over time. However,

we argue that an integrated view on the last 25 years of theoretical and empirical

research in this field is a promising pathway to form a coherent conceptual-

ization of DL and a first step to approach the prevailing research gaps mentioned

above.

Our review revealed the challenge that there is still no consensus on how a DL

should be operationalized and measured. That, in turn, means that there may be no

common understanding of what a DL actually is. Thus, though not intended as the

focus of our work, after extensively reviewing research on the concept, we start with

providing an enhanced definition of how ‘‘Dominant Logic’’ can actually be

conceptualized in order to clarify and theoretically distinguish the concept. As this

wording already implies a complex composition of two conceptual elements, that is,

a (managerial) ‘‘logic’’ that has become ‘‘dominant’’ within a certain context, we

provide definitions for each of these elements separately before bringing them

together again. This, we hope, will clarify what a DL actually is. Moreover, such

clarity is fundamental to pursuing further integration efforts.

The concept of what we refer to as ‘‘managerial logic’’ (or mental model, mental

map, cognitive map, schema, or knowledge structure) lies at the heart of information

processing theory. Building on Walsh’s outstanding review effort on managerial and

organizational cognition, ‘‘managerial logic’’ can be defined as a ‘‘mental template

that individuals impose on an information environment to give it form and

meaning’’ (Walsh 1995, p. 281). Managers operate on the basis of these mental

templates or representations of the world they have accumulated in their memory

over time (Prahalad and Bettis 1986; Walsh 1995). Theses templates are a learned

filter on the flood of information individuals (e.g., managers) have to deal with. This

stored, organized knowledge about an information domain enables subsequent

interpretation and action (Bettis and Prahalad 1995; Walsh 1995). Hence, mental

templates are ‘‘expressed as a learned problem solving behavior’’ (Prahalad and

Bettis 1986, p. 491). Such templates first occur on the individual level, but


123

accumulate through complex processes of interaction and diffusion into shared

mental templates on group-level (i.e., the ‘‘dominant coalition’’ or top management

team in Prahalad and Bettis 1986), on organizational-level (i.e., as an ‘‘emergent

property of complex adaptive systems’’; Bettis and Prahalad 1995), and even on

industry-level (see e.g., Reger and Huff 1993 or Walsh 1995 for a detailed

discussion). However, as the overall concept of DL is an organizational concept and

our review addresses the field of organizational rather than industry studies, we

define the organization including its members (individuals and groups) as the unit of

analysis.

Thus, a ‘‘managerial logic’’ (in the concept of DL) can be defined as the shared

mental template an organization as a whole employs and acts upon. This higher

order template might be shaped by the top management team, highly charismatic

individuals (e.g., CEO, founder, or owner), or other interest groups according to the

mental templates developed (Bettis and Prahalad 1995; Prahalad and Bettis 1986;

Walsh 1995). However, aggregation is a complex interaction rather than a simple

addition process and the overall logic of an organization cannot be interpreted as the

sum of its partial mental templates (Walsh 1995). Nevertheless, and as reflected in

the following sections, we absolutely follow Walsh that the study of managerial

logics, its antecedents and, organizational consequences has to consider the

interdependencies at all levels of analysis (Walsh 1995).

Second, the notion of ‘‘Dominance’’ has to be clarified. Drawing on the works of

Prahalad and Bettis (1986) and Bettis and Prahalad (1995), we argue that dominance

actually has two dimensions. The first dimension we term ‘‘absolute dominance’’. It

refers to the maturity and stability of a certain logic (i.e., a certain mental template)

that increases through reinforcement processes (e.g., success and persistence) over

time. It focuses on the organizational learning rather than the corporate management

facets of the concept of DL, already mentioned in Prahalad and Bettis’ 1986 article

(i.e., operant conditioning), but much more prominent in the 1995 revision (Bettis

and Prahalad 1995; Prahalad and Bettis 1986). In consequence, every single

business firm will develop a DL over time. The second dimension we term ‘‘relative

dominance.’’ It refers to the diversification and corporate management facets of DL.

Relative dominance is defined as the relative power distribution among the

businesses that represent the relative strength of the shared mental templates of the

businesses rather than as the (absolute) dominance of the logics themselves. This

idea corresponds to Prahalad and Bettis’ explanations concerning the role of the

‘‘core business’’ and its impact on ‘‘strategic variety’’ in the diversified corporation;

that is, the core business’ logic (which may exhibit different levels of absolute

dominance) is likely to dominate the overall DL of the diversified firm (Prahalad

and Bettis 1986). However, this is just a simplification of how logics may interact

and diffuse within complex power structures (e.g., Purdy and Gray 2009) as seen in

the power distribution that may arise among the businesses of a diversified

corporation due to their size in terms of revenues, profits, and number of

employees.2

2 Since we define DL as an organizational concept, we will not segment logics down to the group or even

individual level.


123

The overall dominance of a managerial logic in a multi-business firm (MBF) can

finally be defined as the product of its absolute and relative dominance. The hitherto

missed distinction between absolute and relative dominance provides an explanation

as to why the concept of DL in general is claimed to be applied ‘‘successfully’’ on

the business level (e.g., Obloj et al. 2010; Bettis and Prahalad 1995) as well as on

the corporate level (e.g., Cote et al. 1999; Lampel and Shamsie 2000; Prahalad and

Bettis 1986), leading to theoretical inconsistencies when trying to define what a DL

actually may be.

To prevent such inconsistencies in our review as well as in future works, we

define a ‘‘DL’’ (on the corporate level) as a shared (i.e., organizational) mental

template that has reached a certain level of maturity and stability (i.e., absolute

dominance) and is highly (relatively) dominant across a defined set of businesses of

the corporate portfolio, thus dominating the logics of the businesses within this set.3

This understanding of a corporate ‘‘dominant logic’’ is illustrated by the upper right

sector in Fig. 1 below. However, ‘‘strong niche logic’’ refers to logics that are very

mature and stable, but represent a minority within the corporation (strong niche

businesses, with niche logics). ‘‘Fuzzy novice logics’’ refers to businesses with very

young and still fuzzy logics that may have just entered the boundaries of a

diversified corporation, whereas ‘‘incumbent turnaround logics’’ represents logics of

large businesses within the portfolio that may have undergone recent changes and

thus exhibit low levels of stability (e.g., Bettis and Prahalad 1995). Although all

these sectors may be possible combinations along the two dimensions, a

convergence between long-term success and stability (i.e., absolute dominance)

and power, for example, in terms of revenue size (i.e., relative dominance), is likely.

However, the conceptualization of different dimensions of dominance that the

hitherto abstract managerial logics may exhibit do not allow for any statements

Fig. 1 Four types of managerial (dominant) logic

3 A ‘‘set of businesses’’ could be a sector within a diversified conglomerate (Prahalad/Bettis 1986).


123

about the commonality (or variety) of such logics or the respective potential

conflicts or managerial synergies between them culminating in impacts on

organizational performance. Thus, we synthesize the findings of our review

structured as follows:

According to the above mentioned research themes we first have to understand

what may determine a certain managerial logic, that is, identify its antecedents

across all levels of analysis (see Sect. 4.2). This is the baseline we build on to learn

more about the discriminating effects of different configurations of this set of

antecedents, the commonality between different configurations, and finally, the

performance impact arising from the different levels of relative and absolute

dominance of such configurations within the diversified (or diversifying) firm,

namely the DL-commonality-performance linkage (see Sect. 4.3). Understanding

how the complex interplay between antecedents, power distribution, and perfor-

mance may influence the development of a DL over time, i.e. its dynamics, is the

keystone of our appraisal (see Sect. 4.4).

Figure 2 displays our ‘‘Dominant Logic Research Framework’’ that integrates our

findings on 25 years of DL research concerning our research themes reflecting the

structure elucidated above.

4.2 Antecedents of dominant logic formation and adaptation

First, the ‘‘antecedents of (dominant) logic formation and adaptation’’ are held at

individual, top management team (TMT) (i.e., group-level), organizational, and

Fig. 2 Dominant Logic Research Framework


123

environmental (industry) level. The formation of a specific managerial logic (that

may become dominant over time and/or within a conglomerate) is determined by

the specification of each antecedent as well as the configuration of all of them.

Especially with respect to the dynamics of a (dominant) managerial logic and the

processes of adaptation, one has to distinguish between internal factors and external

factors. Internal factors and their configuration refer to the organization and its

members/elements, whereas external factors and their configuration are predeter-

mined by the organizations’ environment. Hence, the challenge of successful

adaptation of (dominant) managerial logics can be described as that of the

maintenance of a fit between the configuration of its internal and external elements

(e.g., Bettis and Prahalad 1995; Prahalad and Bettis 1986; Siggelkow 2001, 2002).

The majority of the literature reviewed provides insights regarding the

antecedents of (dominant) logic formation and adaptation (103 articles). Table 1

provides an overview of the antecedents derived from conceptual and empirical

efforts by their level of analysis in order to supplement the textual integration and

discussion of our findings.

4.2.1 Individual level antecedents

Following Prahalad and Bettis (1986), we distinguish between cognitive simplifi-

cations and cognitive biases as elements of complex problem-solving behavior, and

personal background, experience, and orientation as sources of (dominant)

managerial logics at the individual level.

Cognitive simplifications affect heuristics concerning information gathering,

processing, and decision making. Information-gathering heuristics are determined

by attention pattern and scanning behavior (e.g., Ocasio 1997; Dane and Pratt 2007;

Garg et al. 2003; Nadkarni and Barr 2008). Information processing is determined by

issue categorization according to learned individual cognitive taxonomies (of the

competitive environment) (e.g., Stubbart 1989; Walton 1986; Stimpert and Duhaime

1997) facilitating epistemic heterogeneity (Boisot and Li 2005) and cognitive

boundaries of an organization’s competitive space (Porac and Thomas 1990; Santos

and Eisenhardt 2005). Over time, these configurations of information gathering and

processing become the ‘‘automatic mode’’, that is, they become (absolute)

dominant, and systematically affect decision making (e.g., Dutton 1993; Louis

and Sutton 1991). Furthermore, analogical reasoning, that is, the transfer of those

dominant heuristics to new and complex settings as they are best available and most

promising with respect to past experience, is likely to guide managers through novel

and complex environments (Gavetti et al. 2005).

Cognitive biases are concomitant effects of the above-mentioned information

retrieval, processing, and decision-making processes. The predominant bias is the

self-serving attribution bias, that is, individuals tend to blame the ‘‘ungovernable’’

external environment for performance decrease and failure, whereas success is

attributed to internal elements and decisions that are subject to managerial

competence (e.g., Clapham and Schwenk 1991; Lant and Milliken 1992; Barr et al.

1992). The self-serving attribution bias may cause a somehow distorted represen-

tation of one’s environment, facilitating a (somehow inappropriate) managerial


123

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d,

exp

erie

nce

,an

do

rien

tati

on

E.g

.,ed

uca

tion,

funct

ion/t

asks,

dep

artm

ent/

com

pan

y/i

nd

ust

rym

emb

ersh

ip,

entr

epre

neu

rial

ori

enta

tion/t

echnic

alo

rien

tati

on

vo

nK

rog

han

dR

oo

s(1

99

6),

Lan

ean

dS

irm

on

(20

03),

Dan

ean

dP

ratt

(20

07),

Irel

and

etal

.(2

00

9),

An

sari

etal

.2

01

0

Wal

sh(1

98

8),

Th

om

aset

al.

(19

93),

Dan

iels

etal

.(1

99

4),

Hau

ked

alan

dG

ron

hau

g(1

99

4),

Su

tcli

ffe

and

Hu

ber

(19

98)

TM

TT

MT

char

acte

rist

ics

E.g

.,d

emo

gra

phic

s,co

mp

osi

tio

n/d

iver

sity

,p

ow

erst

ruct

ure

,si

zeG

insb

erg

(19

90),

Kli

mosk

ian

dM

oham

med

(19

94),

Mil

ler

(19

96),

Lan

ean

dS

irm

on

(20

03),

Th

om

as(2

00

5),

An

sari

etal

.(2

01

0)

Lan

tan

dM

illi

ken

(19

92),

Ho

ug

hto

net

al.

(19

94),

Kn

igh

tet

al.

19

99,

Tri

psa

san

dG

avet

ti(2

00

0),

No

da

and

Coll

is(2

00

1),

Ch

oan

dH

ambri

ck(2

00

6),

Pan

agio

tou

(20

06)

Gro

up

pro

cess

esE

.g.,

soci

o-c

ognit

ive

com

ple

xit

y/c

apac

ity/

cov

erag

e,co

hes

ion

/co

nse

nsu

s/co

nfl

ict

Gin

sber

g(1

99

0),

Ly

les

and

Sch

wen

k(1

99

2),

Kli

mo

ski

and

Mo

ham

med

(19

94),

San

tos

and

Eis

enh

ard

t(2

00

5),

An

sari

etal

.(2

01

0)

Lan

gfi

eld

-Sm

ith

(19

92),

Ho

ug

hto

net

al.

19

94;

Su

tcli

ffe

and

Hu

ber

(19

98),

Tri

psa

san

dG

avet

ti(2

00

0),

Kn

igh

tet

al.

(19

99),

En

sley

and

Pea

rce

(20

01),

Lev

y(2

00

5)


123

Ta

ble

1co

nti

nu

ed

Lev

elo

fan

alysi

sA

nte

ceden

tsC

once

ptu

alw

ork

sE

mpir

ical

evid

ence

Org

aniz

atio

nB

usi

nes

sm

od

elE

.g.,

val

ue

pro

posi

tion

(pro

du

ct/s

erv

ice-

mar

ket

com

bin

atio

n),

val

ue

crea

tio

nan

dv

alue

chai

n(v

erti

cal

po

siti

on

),v

alu

eca

ptu

re/r

even

ue

model

(dir

ect

vs.

ind

irec

t)

Do

zan

dP

rah

alad

(19

86),

Pra

hal

adan

dB

etti

s(1

98

6),

Hit

tan

dIr

elan

d(1

98

7),

Ulr

ich

and

Wie

rsem

a(1

98

9),

Gin

sber

g(1

99

0),

Tik

kan

enet

al.(2

00

5),

Mil

ler

and

Flo

rice

l(2

00

7),

Sir

mo

net

al.

(20

07)

Wal

ton

(19

86),

Fo

mbru

nan

dZ

ajac

(19

87),

Po

rac

etal

.(1

98

9),

Reg

eran

dH

uff

(19

93),

Cal

ori

etal

.(1

99

4),

Day

and

Ned

un

gad

i(1

99

4),

Ilin

itch

and

Zei

tham

l(1

99

5),

Ram

asw

amy

(19

97),

Sti

mp

ert

and

Du

hai

me

(19

97),

Cote

etal

.(1

99

9),

No

da

and

Co

llis

(20

01),

Osb

orn

eet

al.

(20

01),

Sig

gel

ko

w(2

00

2),

Peh

rsso

n(2

00

6),

Kei

let

al.(2

00

8),

Pu

rdy

and

Gra

y(2

00

9)

Str

ateg

y/

stra

teg

ico

rien

tati

on

E.g

.,p

rosp

ecto

rsv

s.d

efen

der

s,en

tre-

pre

neu

rial

(in

nov

atio

nan

do

pp

ort

un

ity

focu

s)v

s.en

gin

eeri

ng

(in

tern

alef

fici

ency

)lo

gic

/ori

enta

tion,

ST

RO

BE

,o

rgan

izat

ion

alb

ou

nd

arie

s

Pra

hal

adan

dB

etti

s(1

98

6),

Ulr

ich

and

Wie

rsem

a(1

98

9),

Mil

ler

(19

96),

San

tos

and

Eis

enh

ard

t(2

00

5),

Irel

and

etal

.(2

00

6),

Irel

and

etal

.(2

00

9),

Ku

ratk

oan

dA

ud

rets

ch(2

00

9)

Fio

l(1

98

9),

Ven

kat

ram

an(1

98

9),

Reg

eran

dH

uff

(19

93),

Do

tyet

al.

(19

93),

Ram

asw

amy

(19

97),

En

sley

and

Pea

rce

(20

01),

No

da

and

Co

llis

(20

01),

Gar

get

al.

(20

03),

Cho

and

Ham

bri

ck(2

00

6),

San

tos

and

Eis

enh

ard

t(2

00

9),

Lu

mp

kin

and

Bri

gh

am(2

01

1)

Str

uct

ure

san

dp

roce

sses

E.g

.,o

rgan

izat

ion

alar

chit

ectu

re,

ow

ner

ship

,(s

ize)

,re

sou

rce

allo

cati

on

/st

rate

gic

pla

nn

ing

/rew

ard

/co

ntr

ol

fun

ctio

ns

and

syst

ems,

(sca

nn

ing

),ex

per

imen

tati

on

,(d

yn

amic

)ro

uti

nes

Du

tto

nan

dD

un

can

(19

87b),

Gra

nt

(19

88),

Lev

inth

alan

dM

arch

(19

93),

Lei

etal

.(1

99

6),

Oca

sio

(19

97),

Mil

ler

(19

96),

Vo

raan

dK

ost

ov

a(2

00

7),

Irel

and

etal

.(2

00

9),

Kura

tko

and

Audre

tsch

(20

09),

An

sari

etal

.(2

01

0)

Wal

ton

(19

86),

Fo

mbru

nan

dZ

ajac

(19

87),

Jack

son

and

Du

tto

n(1

98

8),

Th

om

aset

al.

(19

93),

Mu

rth

aet

al.

(19

98),

Cote

etal

.(1

99

9)

Org

aniz

atio

nal

cult

ure

E.g

.,id

eolo

gy

,h

isto

rica

ln

orm

s,b

elie

fst

ruct

ure

and

val

ues

,in

no

vat

iven

ess/

op

ennes

s,fo

rmal

and

info

rmal

po

wer

stru

cture

/inte

rnal

soci

alnet

work

s,em

plo

yee

s’p

rofe

ssio

nal

cult

ure

s(e

.g.,

engin

eeri

ng

vs.

scie

nti

st)

Ko

sto

va

(19

99),

Du

tto

nan

dD

un

can

(19

87a)

,W

illi

ams

(20

01),

Lan

ean

dS

irm

on

(20

03),

Sir

mo

nan

dL

ane

(20

04),

Dan

ean

dP

ratt

( 20

07),

Vo

raan

dK

ost

ov

a(2

00

7),

An

sari

etal

.(2

01

0)

Chat

terj

eeet

al.

(19

92),

Go

llan

dS

amb

har

ya

(19

95),

Web

eran

dS

hen

kar

(19

96),

Cote

etal

.(1

99

9),

Ink

pen

etal

.(2

00

0),

van

Ou

den

ho

ven

and

van

der

Zee

(20

02),

Yiu

and

Mak

ino

(20

02),

Web

eran

dC

amer

er(2

00

3),

Bij

lsm

a-F

ran

kem

a(2

00

4)


123

Ta

ble

1co

nti

nu

ed

Lev

elo

fan

alysi

sA

nte

ceden

tsC

once

ptu

alw

ork

sE

mpir

ical

evid

ence

En

vir

on

men

tS

tru

ctu

re(i

nd

ust

ry)

E.g

.,fa

shio

nab

letr

end

s/co

nv

enti

on

alw

isdo

m/m

imet

icb

ehav

ior,

com

pet

itiv

ein

ten

sity

and

po

stu

re/s

tru

ctu

re/m

atu

rity

/m

ob

ilit

yb

arri

ers,

mun

ifice

nce

Pra

hal

adan

dB

etti

s(1

98

6),

McG

eean

dT

ho

mas

(19

86),

Hit

tan

dIr

elan

d(1

98

7),

Bo

gn

eran

dB

arr

(20

00),

Tik

kan

enet

al.

(20

05),

Mil

ler

and

Flo

rice

l(2

00

7)

Fah

eyan

dN

aray

anan

(19

86),

Fo

mbru

nan

dZ

ajac

(19

87),

Bar

ret

al.

19

92;

Cal

ori

etal

.(1

99

2),

Gin

sber

gan

dV

enk

atra

man

(19

92),

Su

tcli

ffe

and

Hu

ber

(19

98),

Co

teet

al.

(19

99),

Yiu

and

Mak

ino

(20

02),

Pan

agio

tou

(20

06),

Peh

rsso

n(2

00

6),

San

tos

and

Eis

enh

ard

t(2

00

9),

Ob

loj

etal

.(2

01

0),

Du

nn

and

Jon

es(2

01

0)

Tec

hn

olo

gy

E.g

.,te

chno

log

yin

ten

sity

,te

chn

olo

gic

ald

om

inan

cean

din

no

vat

iven

ess

Hit

tan

dIr

elan

d(1

98

7),

An

sari

etal

.(2

01

0)

Fo

mbru

nan

dZ

ajac

(19

87),

Gin

sber

gan

dV

enkat

ram

an(1

99

2),

Lan

ean

dL

ub

atk

in(1

99

8),

Tri

psa

san

dG

avet

ti(2

00

0),

Bra

nn

bac

kan

dW

iklu

nd

(20

01),

Sig

gel

ko

w(2

00

1),

Peh

rsso

n(2

00

6),

Kei

let

al.

(20

08)

Dy

nam

ics

E.g

.,fr

equen

cy/t

urb

ule

nce

,in

ten

sity

and

irre

gu

lari

tyo

fch

ang

esU

lric

han

dW

iers

ema

(19

89),

Ly

les

and

Sch

wen

k( 1

99

2),

Mil

ler

(19

96),

Bo

gn

eran

dB

arr

(20

00),

Mil

ler

and

Flo

rice

l(2

00

7),

Kura

tko

and

Audre

tsch

(20

09)

Day

and

Lo

rd(1

99

2),

Reg

eran

dP

alm

er(1

99

6),

Su

tcli

ffe

and

Hu

ber

(19

98),

Gav

etti

and

Lev

inth

al(2

00

0),

Sig

gel

ko

w(2

00

2),

Bau

man

dW

ally

(20

03),

Gar

get

al.

20

03,

Nad

kar

ni

and

Nar

ayan

an(2

00

7),

Nad

kar

ni

and

Bar

r(2

00

8),

Ob

loj

etal

.(2

01

0)

Po

licy

/re

gu

lati

on

E.g

.,d

egre

eo

fre

gu

lati

on

Hit

tan

dIr

elan

d(1

98

7),

An

sari

etal

.(2

01

0)

Fo

mbru

nan

dZ

ajac

(19

87),

Cote

etal

.(1

99

9),

Ch

oan

dH

amb

rick

(20

06),

Du

nn

and

Jon

es(2

01

0),

DiV

ito

(20

12)

Nat

ion

alcu

ltu

reE

.g.,

regu

lato

ry,

no

rmat

ive,

and

cog

nit

ive

dis

tan

ceb

etw

een

cou

ntr

ies

Do

zan

dP

rah

alad

(19

86),

Hit

tan

dIr

elan

d(1

98

7),

Ko

sto

va

(19

99),

Pal

ich

and

Go

mez

-Mej

ia(1

99

9),

Lan

ean

dS

irm

on

(20

03),

Sir

mo

nan

dL

ane

(20

04),

Vo

raan

dK

ost

ov

a(2

00

7),

An

sari

etal

.(2

01

0),

Ver

bek

e(2

01

0)

Ko

gu

tan

dS

ing

h(1

98

8),

Cal

ori

etal

.(1

99

2),

Web

eran

dS

hen

kar

(19

96),

Ink

pen

etal

.(2

00

0),

van

Ou

den

ho

ven

and

van

der

Zee

(20

02),

Co

llin

set

al.

(20

09),

Ob

loj

etal

.(2

01

0)


123

logic and its increasing absolute dominance. Thus, this bias is likely to be a strong

source of inertia or even escalating commitment in periods of change.

Personal background, experience, and orientation comprise individuals’ educa-

tional and functional background (e.g., Walsh 1988; Lane and Sirmon 2003; Daniels

et al. 1994; Ansari et al. 2010), as well as company and industry membership (e.g.,

Daniels et al. 1994; Sutcliffe and Huber 1998). Individuals’ orientation and

representation of their environment are shaped by their background and experiences

(over time), and hence influence, for example, whether a technical/engineering, a

scientific, or an entrepreneurial orientation is developed (Sirmon and Lane 2004;

Ansari et al. 2010; Ireland et al. 2009). This may extensively inform an

organization’s DL, if we consider these antecedents are intended to gain a critical

mass within an organization and/or affect the key individuals of the firm.

4.2.2 Group (top management team) level antecedents

In regard to the antecedents of (dominant) managerial logics at the group (TMT)

level, we distinguish TMT characteristics and group processes.

TMT characteristics include TMT demographics, composition and diversity,

power structure and size (e.g., Ginsberg 1990; Klimoski and Mohammed 1994;

Miller 1996; Thomas 2005; Ansari et al. 2010; Panagiotou 2006; Knight et al. 1999;

Houghton et al. 1994), as well as member tenure (in particular, CEO or owner) (e.g.,

Lant and Milliken 1992; Cho and Hambrick 2006).

Group processes, such as coverage, cohesion, consensus or conflict, and

transitory collective cognition influence the formation and adaptation of a certain

(dominant) managerial logic at the group/TMT level. These elements predominantly

drive the complex aggregation processes of the managerial logics of firms’ key

individuals forming a shared mental template (e.g., Langfield-Smith 1992; Sutcliffe

and Huber 1998; Knight et al. 1999; Ensley and Pearce 2001; Lyles and Schwenk

1992; Ginsberg 1990; Klimoski and Mohammed 1994; Santos and Eisenhardt 2005;

Ansari et al. 2010). While coverage refers to the number of elements within each

individual’s vs. the group’s cognitive map, the levels of cohesion and consensus

determine which elements of each individual’s map becomes an important element

of the shared cognitive map of the group (e.g., Langfield-Smith 1992; Ensley and

Pearce 2001). Transitory collective cognition may account for elements and

structures within the shared map that do not exist at the individual level (Langfield-

Smith 1992).

4.2.3 Organizational antecedents

A significant portion of DL research refers to organizational antecedents. We found

that an organization’s business model, strategic orientation, and architecture as well

as its culture, determine the formation and adaptation of a managerial logic at this

level of analysis.

The notion of a business model refers to a firm’s (1) value proposition to the

customer (e.g., products and services in different markets), (2) its value chain and

value creating activities, and (3) the architecture of revenues and cost including the


123

mechanisms to capture value (e.g., Zott and Amit 2010; Teece 2010). Different

configurations of one or more of these elements significantly affect the specification

of a (dominant) managerial logic. Changes in one or more of these elements induce

a reconfiguration of the business model as a whole, and hence, may require the

adaptation of the managerial logics employed. While some works point to the

characteristics of the ‘‘core business,’’ type of business, or its systemic character-

istics in general as a major determinant of a particular managerial logic (Prahalad

and Bettis 1986; Ginsberg 1990; Doz and Prahalad 1986; Ramaswamy 1997; Reger

and Huff 1993; Noda and Collis 2001; Osborne et al. 2001), others refer to single or

multiple dimensions of the business model concept. For example, evidence was

found for the strong impact of a firm’s value proposition, as product and service

businesses’ managerial logics differed considerably up to the point of strong conflict

between those (Hitt and Ireland 1987; Walton 1986; Porac et al. 1989; Stimpert and

Duhaime 1997; Cote et al. 1999; Purdy and Gray 2009; Pehrsson 2006). A firm’s

value creation activities and its value chain position also strongly influence its

managerial logic, as similar value creation activities (e.g., production, retail, or

logistics) and a similar value chain position (upstream vs. downstream) were found

to contribute to DL-commonality and higher performance in the MBF (Siggelkow

2002; Ilinitch and Zeithaml 1995; Miller and Floricel 2007). Finally, the

architecture and mechanism of revenue generation and of capturing value affect

the formation of a certain managerial logic; for example, the different levels of

complexity of direct (traditional commerce) vs. indirect (e-commerce) revenue

models may shape quite distinct mental templates (Day and Nedungadi 1994;

Ramaswamy 1997; Miller and Floricel 2007).

Configurations of strategic orientation determine a firm’s (dominant) logic, since

these reflect its strategic attitude toward conducting business. One apparent

operationalization of this concept is the classification into Defenders, Prospectors,

Analyzers and Reactors by Miles and Snow (1978), which proved to have

significant empirical relevance (e.g. Doty et al. 1993). While ‘Defenders’ focus on

the engineering problem and continually attempt to develop greater efficiency in

existing operations, ‘Prospectors’ emphasize the entrepreneurial problem and

explore environmental change in search of new opportunities. Whereas these two

configurations reside at opposite ends of a continuum of adjustment strategies,

‘Analyzers’ reside between them and ‘Reactor’ is a residual strategy arising when

one of the others is improperly pursued (Miles et al. 1978). In particular, the

Defender vs. the Prospector strategy will lead to significant differences concerning

the evolving (dominant) managerial logic (e.g., Cho and Hambrick 2006; Garg et al.

2003; Reger and Huff 1993; Ireland et al. 2009; Kuratko and Audretsch 2009;

Ireland et al. 2006). Studies that employed other operationalizations, such as

Venkatraman’s six dimensions—aggressive pursuit of growth, analysis, defensive-

ness, futurity, proactiveness, and riskiness (Venkatraman 1989; Ensley and Pearce

2001)—or industry-specific models (Ramaswamy 1997) are consistent with this

finding. Even simple distinctions in strategic orientation, such as short- and long-

term orientation, were recently identified ‘‘as a higher-order heuristic that, in

matters of intertemporal choice, provides a dominant logic for decisions and

actions’’ (Lumpkin and Brigham 2011). Furthermore, a firm’s strategic orientation


123

and intent determine its perception of organizational boundaries, that is, the

boundaries of its represented internal information environment, which serves as the

template for strategic decision making (e.g., Santos and Eisenhardt 2005, 2009; Fiol

1989; Walsh 1995).

An organization’s architecture complements its parameters of business design

and conduct. Organizational architecture (e.g., Ireland et al. 2009; Vora and

Kostova 2007), the configuration of its elements (e.g., Miller 1996; Siggelkow

2002), and its size and ownership (e.g., Walton 1986; Fombrun and Zajac 1987;

Lumpkin and Brigham 2011) affect the managerial logic formed within the firm.

Processes, such as strategic planning, resource allocation and control systems, and

human resource practices (e.g., incentive systems and promotion practices), in turn,

reflect the characteristics of a certain management logic as they support a particular

strategic attitude and respective business goals of a firm (Ocasio 1997; Ansari et al.

2010; Kuratko and Audretsch 2009; Miller 1996; Grant 1988; Dutton and Duncan

1987b; Cote et al. 1999). Thus, while an organization’s architecture was found to be

antecedent to an evolving (dominant) managerial logic of an organization, the

design of its business processes and procedures mirrors that logic in an observable

manner. However, both have to complement an organization’s business model and

strategy/strategic orientation.

Following the conceptualizations of the construct of organizational culture from

Schein (1985) and Hatch (1993), an organization’s culture, inter alia, incorporates

the administrative heritage, values, beliefs, historical norms, ideology, and attitude

toward learning, innovation, and collaboration. These intangible and elusive

elements of social norms and interaction complement the comprehensible elements

of business design and conduct, architecture and governance, and hence, affect the

specification of a managerial logic on the organizational level and are key to

understanding the complex aggregation processes from individual to group and

finally organizational level cognition, i.e., the formation of an organization’s shared

mental map (e.g., Miller 1996; Vora and Kostova 2007; Kostova and Roth 2002;

Kostova 1999; Dane and Pratt 2007; Ansari et al. 2010; Chatterjee et al. 1992; Goll

and Sambharya 1995; Weber and Camerer 2003; Weber and Shenkar 1996; Cote

et al. 1999; Inkpen et al. 2000; Yiu and Makino 2002; Bijlsma-Frankema 2004; van

Oudenhoven and van der Zee 2002; Collins et al. 2009). Furthermore, an

organizational culture is supplemented by subcultures, such as employees’

professional cultures (Sirmon and Lane 2004), and may vary in its degree of

differentiation and complexity, which are positively related to the flexibility and

adaptability of the evolving overall (dominant) managerial logic (Dutton and

Duncan 1987a).

4.2.4 Environmental antecedents

It can be assumed that external, that is, environmental antecedents have a strong

impact on the formation of a managerial logic and its absolute dominance because

(at least an initial) internal and external fit is needed to create equilibrium and

stabilize an overall configuration pattern, that is, a specific (absolute) dominant logic

(Bettis and Prahalad 1995; Siggelkow 2001, 2002). Antecedents at this level of


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analysis, which were revealed by the literature, can be grouped into five categories,

namely, structure (e.g., industry structure), technology, policy/regulation, dynam-

ics, and national culture.

Environmental (e.g., industry) structure influences the specification of a

managerial logic according to the specificity and configuration of typical industry

and market characteristics, such as market size and segmentation, competition,

customers, suppliers, and properties like munificence and maturity (Fahey and

Narayanan 1986; Fombrun and Zajac 1987; Calori et al. 1992; Sutcliffe and Huber

1998; Santos and Eisenhardt 2009; Obloj et al. 2010; Dunn and Jones 2010; McGee

and Thomas 1986). For example, new entrants in nascent markets were found to

start by claiming the market with a sense giving logic characterized by strong

customer focus; followed by demarcating the market, employing a co-optation logic

integrating suppliers and competitors into alliances; and, finally, by trying to control

the market and develop an ownership logic with a focus on competitor elimination

and acquisitions (Santos and Eisenhardt 2009). Obloj et al. (2010) also found the

impact of such DL specifications and development paths to be positively related to

entrepreneurial firm performance. Thus, it can be assumed that the greater the

distance between industries concerning their market characteristics, munificence,

and maturity, the greater the distance between the DLs developed by organizations

within these different industries.

Technology factors include technology intensity, standards, dependence, and

evolution paths (e.g., innovation barriers) (Hitt and Ireland 1987; Ansari et al. 2010;

Pehrsson 2006; Fombrun and Zajac 1987; Ginsberg and Venkatraman 1992; Tripsas

and Gavetti 2000; Brannback and Wiklund 2001; Keil et al. 2008; Lane and

Lubatkin 1998). Thus, organizational competitive advantage and long-term success

depend on technology and technological innovation factors within a firm’s

(dominant) managerial logic. For example, new technologies and new product

development were found to be central elements of the DL of pharmaceutical and

biotechnology firms, which are typically strongly R&D driven (Lane and Lubatkin

1998).

Policy/Regulation is a crucial part of an organization’s task environment (e.g.,

Dill 1958; Duncan 1972; Bourgeois III 1985). Parameters such as regulation,

lobbying intensity, and multilateral public interests and influences are determinants

of specific conditions and mechanisms within the market and competitive space.

The specifications of these parameter values require particular organizational and

managerial capabilities to allow a firm to thrive in the competitive arena, and hence,

significantly affect the characteristics of an evolving (dominant) managerial logic,

i.e. driving the absolute dominance of its policy/regulation-centered elements. (e.g.,

Cote et al. 1999; Fombrun and Zajac 1987; Cho and Hambrick 2006; Dunn and

Jones 2010; Hitt and Ireland 1987; Ansari et al. 2010; DiVito 2012). Policy/

regulation-centered sectors include energy, water supply, healthcare (e.g. pharma/

biotech), environment, infrastructure, transport and mobility, information and

communication, as well as defense (e.g., Cote et al. 1999; Dunn and Jones 2010).

DiVito (2012) recently confirmed the role of this antecedent, having found

significant differences concerning how biotech firms adapt their innovation

strategies to cope with constraints in national institutional environments.


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Environmental (e.g., industry) dynamics are constituted by the frequency (or

turbulence), amplitude, and irregularity of changes within the task (and general)

environment of an organization (e.g., Dess and Rasheed 1991; Jurkovich 1974;

Miles et al. 1974; Wholey and Brittain 1989; Boyd et al. 1993; Child 1972;

Hauschild et al. 2011). Different specifications of these constitutional elements

require specific organizational configurations and managerial capabilities. Hence,

environmental dynamics were found to determine the characteristics of a particular

(dominant) managerial logic (e.g., Baum and Wally 2003; Bogner and Barr 2000;

Day and Lord 1992; Gavetti and Levinthal 2000; Lyles and Schwenk 1992;

Nadkarni and Barr 2008; Nadkarni and Narayanan 2007; Ulrich and Wiersema

1989; Reger and Palmer 1996; Sutcliffe and Huber 1998; Obloj et al. 2010; Garg

et al. 2003). Different levels of dynamics require very different managerial logics

and the configuration of this antecedent significantly discriminates the fit of

different logics (e.g., Nadkarni and Barr 2008; Nadkarni and Narayanan 2007;

Hauschild et al. 2011).

National cultures affect the structure of organizations, the motivation of people

within these organizations, and issues people and organizations face within society

(Hofstede 1983). Cultural differences are determined by the regulative, normative,

and cognitive distance of countries (Kostova 1999). Thus, the distance of

organizations’ DLs is considerably influenced by the distance of the elements of

national cultures, that is, the greater the national cultural (i.e., regulative, normative,

and cognitive) distance between two organizational entities, e.g. the corporate

headquarter and its global subsidiaries, the greater the distance (and potential

conflict) between their DLs (e.g., Doz and Prahalad 1986; Vora and Kostova 2007;

Kostova and Roth 2002; Kostova 1999; Palich and Gomez-Mejia 1999; Sirmon and

Lane 2004; Lane and Sirmon 2003; Verbeke 2010; Kogut and Singh 1988; Calori

et al. 1992; Inkpen et al. 2000; Weber and Shenkar 1996; van Oudenhoven and van

der Zee 2002; Collins et al. 2009).

4.3 The DL commonality-performance linkage

After providing an overview of what may determine a certain managerial logic, that

is, what its antecedents across all levels of analysis may be, this section addresses

the discriminating effects of different configurations of this set of antecedents, the

relative dominance of different configurations, the commonality between them, and,

finally, the performance impact of such commonality within the diversified firm.

Within the single business firm (SBF), a particular managerial logic is related to

firm performance according to the fit between its internal and external configuration,

that is, high levels of fit are related to superior performance and vice versa,

increasing the ‘‘absolute dominance’’ of a certain logic over time (e.g., Miller 1993;

Nadkarni and Narayanan 2007; Obloj et al. 2010; Siggelkow 2001, 2002). Thus, for

SBFs, the corporate-view of our framework would be masked.

A multi-business firm (MBF), however, has to orchestrate a portfolio of

businesses, and, consequently—as the corporate-view of our framework illus-

trates—a portfolio of managerial logics, of which the relative dominance may vary

according to the power distribution across the businesses as well as exhibit different


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levels of commonality. Following Prahalad and Bettis (1986), scholars continued to

propose a positive relationship between high levels of commonality among

businesses’ managerial logics and corporate performance (e.g., Grant 1988; Palich

and Gomez-Mejia 1999; Lane and Sirmon 2003; Gavetti et al. 2005; Dane and Pratt

2007). Superior corporate performance is presumed to arise from strategic

similarities in administrative structures, processes, and systems (Grant 1988),

superior firm efficiencies (Palich and Gomez-Mejia 1999), appropriate replication of

DL core elements across businesses (Gavetti et al. 2005), and the higher probability

of making good intuitive decisions through a shared domain-relevant scheme (Dane

and Pratt 2007). For example, DL commonality between joint venture parents is

expected to increase joint venture performance moderated by the power relations

between the parents (Guidice and Mero 2007). DL commonality is also assumed to

moderate positively the relationship between related complementary resources and

the effectiveness of value-creating activities in alliances (Sirmon and Lane 2004), to

decrease role conflicts of subsidiary managers in multinational enterprises (MNE)

(Vora and Kostova 2007), and to increase post-merger success with high levels of

desired reverse knowledge transfer, particularly in international mergers and

acquisitions (Verbeke 2010). The proposed positive effects of the commonality of

managerial logics were frequently supported empirically, for example, for MBF

performance (Ilinitch and Zeithaml 1995; D’Aveni et al. 2004; Pehrsson 2006; Goll

and Sambharya 1995; Cote et al. 1999), as well as for post-merger and acquisition

performance (e.g., Datta 1991; Chatterjee et al. 1992; Weber and Camerer 2003;

Weber and Shenkar 1996; Ramaswamy 1997; Inkpen et al. 2000). In particular, high

levels of commonality between managerial logics allow for higher levels of control

and faster integration (Bijlsma-Frankema 2004), whereas low levels of DL

commonality were related to decreasing innovation capabilities (Paruchuri et al.

2006; Puranam et al. 2006). Moreover, Lyles and Reger (1993) provided evidence

of the impact of high vs. low DL commonality and the respective low vs. high level

of joint venture autonomy on joint venture performance. Kostova and Roth (2002)

provided evidence of the impact of logic commonality on coherent and effective

management in MNEs.

Moreover, a positive (DL) commonality-performance relationship is assumed to

be moderated by the managerial capability to handle multiple DLs (Bettis and

Prahalad 1995), as well as the ability to integrate similar DLs into a coherent system

by linking an organization’s macro-logic with its micro-logics (Lane and Sirmon

2003). For example, Calori et al. (1992) found support for the relevance of cognitive

complexity to predicting managers’ ability to manage effectively strategic variety

and handle multiple DLs, whereas others refer to the importance of managerial

capabilities to integrate and exploit synergies in order to achieve superior

performance using the high levels of commonality between the managerial logics

of different lines of businesses (e.g., Bijlsma-Frankema 2004; Pehrsson 2006;

D’Aveni et al. 2004).

However, most of these works employed a fragmentary and inconsistent

operationalization of DL, taking only a very limited number of antecedents into

consideration. For example, Ilinitch and Zeithaml (1995) focus on a firm’s position

in the value chain to operationalize strategic relatedness, while others focus on


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national cultural differences and facets of international management (e.g., Inkpen

et al. 2000; Kostova and Roth 2002) or corporate cultural elements (e.g., Chatterjee

et al. 1992; Weber and Shenkar 1996; Weber and Camerer 2003).

Table 2 summarizes the conceptual and empirical findings.

4.4 The dynamics of DL

The literature on the dynamics of (dominant) managerial logics refers to what we

termed absolute dominance that is characterized by either (1) reinforcement and

stabilization or (2) break-up and transformation. Both development paths are

moderated by the presence of anthropogenic cognitive biases and firm-specific

contextual factors (i.e., most prominent environmental dynamics). As illustrated in

our framework (Fig. 2), these moderated reinforcement or break-up processes may

affect the current DL directly (single loop learning) or indirectly via the

specification of the antecedents of DL and a (re-)configuration of an organization’s

internal elements (double loop learning) respectively (see, e.g., Argyris 1976).

4.4.1 Reinforcement and stabilization

Reinforcement and stabilization of managerial logics have been conceptualized as a

function of time and success. That is, the more successful organizations are over long

periods of time, the more their configuration and managerial logic become dominant

and rigid (Bettis and Prahalad 1995; Miller 1993; Prahalad 2004, 2010; Dane and Pratt

2007). This relationship appears simple and is backed by strong empirical evidence

(e.g., Bateman and Zeithaml 1989; Tripsas and Gavetti 2000; Noda and Collis 2001;

Siggelkow 2001; Weinstein and Standifird 2010). The processes of reinforcement and

stabilization carry the risk of decreasing flexibility and engendering inertia, myopia,

and path-dependent learning processes that block adaptation to structural changes in

the environment (e.g., Miller 1993; Sirmon et al. 2007; Levinthal and March 1993;

Bettis and Prahalad 1995; Prahalad 2004, 2010). This may cause organizational

decline due to slow and inadequate responses to environmental changes and strategic

issues, that is, the application of an inappropriate DL (e.g., Bettis and Prahalad 1995;

Prahalad 2004, 2010). Thus, long-term competitiveness and success depend on

managers’ willingness and ability to challenge continuously the appropriateness of

their DL and modify it, or even unlearn the old and implement a new DL if necessary

(e.g., Hamel and Prahalad 1993; Prahalad 2004, 2010; Bettis and Prahalad 1995; Lei

et al. 1996). This relationship amplifies in high-velocity environments, as highly

flexible schemata were found to lead to superior performance. In contrast, the high

costs of change and hastily negated wisdom in stable environments may derogate

performance (Gavetti and Levinthal 2000; Siggelkow 2002; Garg et al. 2003;

Nadkarni and Barr 2008; Nadkarni and Narayanan 2007).

4.4.2 Breakup and transformation

Empirical research into the dynamics of DL focused on elucidating the processes of

breakup and transformation of a DL and the barriers to adaptation and unlearning on


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Table 2 The dominant logic commonality-performance linkage

Article Research/study design Findings on the relationship between

DL commonality and performance

Prahalad and

Bettis (1986)

Conceptual work Strategic variety in the multi-business

firm is limited by managerial

capabilities for handling multiple

DLs. Hidden cost of diversity can be

caused by (a) inadequate influence

on the business units or (b) slow and

inadequate responses to

environmental changes (e.g., crises)

Grant (1988) Conceptual work Focus should be on strategic similarity

rather than on business-level

similarity as transaction costs for

synergies hardly pay off

Ginsberg (1990) Conceptual work The economic benefits of creativity

and diversity have to be balanced

with the costs of collaboration and

relatedness

Palich and

Gomez-Mejia

(1999)

Conceptual work DL commonality facilitates superior

firm efficiencies, e.g., in strategy

formulation, implementation, and

control, and, in turn, leads to

superior corporate performance

Lane and Sirmon

(2003)

Conceptual work Meso-logic serves as a link between

firms’ macro-logic (e.g., corporate

DL) and micro-logic(s) (e.g.,

business or functional logic), and

serves to ensure commonality across

businesses. A high degree of

realized commonality (vs. intended

commonality) increases

performance (corp. and BU-level)

and other relevant processes, e.g.,

integration success

Sirmon and Lane

(2004)

Conceptual work Differences in international alliance

partners’ DL, as determined by

national and professional cultures,

negatively moderate the relationship

between related complementary

resources and the effectiveness of

the alliance’s value-creating

activities

Gavetti et al.

(2005)

Conceptual work High levels of DL commonality

among businesses in the diversified

firm lead to superior performance as

DL can be replicated (via analogical

reasoning) throughout the portfolio

Dane and Pratt

(2007)

Conceptual work DL commonality across the portfolio

ensures the appropriateness of a

learned, complex domain-relevant

schema (DL) that leads to a higher

probability of making effective

intuitive decisions


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Table 2 continued



Guidice and

Mero (2007)

Conceptual work DL commonality between JV parents

is positively related to JV

performance and moderated

(strongly) by power relations

between parents

Vora and

Kostova (2007)

Conceptual work DL commonality facilitates a nested

‘‘dual organizational identification’’

and, hence, decreases role conflicts

of subunits’ managers

Alain Verbeke

(2010)

Conceptual work The desired level of reverse

knowledge transfer (high vs. low)

and the (ex post) DL commonality

(high vs. low distance) determine

post-merger success, particularly in

international M&As as the potential

distance between DLs increases in

cross-border M&As

Datta (1991) Survey data from 173 U.S.-based

manufacturing and mining firms

Low DL commonality has a negative

impact on performance in

acquisitions characterized by both

high and low levels of post-

acquisition integration

Chatterjee et al.

(1992)

Survey and archival data from 52 U.S. firms

(regressions on performance for 30 firms)

Strong inverse relationship is seen

between low DL commonality

(determined by cultural differences)

and shareholder gains.

Overemphasis on controlling newly

acquired firms by imposing the

acquirers’ DL may be detrimental

Lyles and Reger

(1993)

Longitudinal case study (1946–1978) of a

joint venture between U.S.- and EU-based

industry tooling manufactures

Low levels of DL commonality

between JV partners require high

degree of (JV) autonomy

Calori et al.

(1992)

26 Case studies involving CEOs of UK- and

France-based firms from the brewing, car,

retail banking, and book publishing

industries

Cognitive complexity is a predictor of

managers’ ability to effectively

manage strategic variety, and,

hence, handle multiple DLs

Goll and

Sambharya

(1995)

Survey data from 91 U.S. manufacturing

firms

Higher levels of DL commonality

facilitate a ‘‘meta-logic’’ in

diversified firms at the corporate

level with different dominant logics

at the business level

Ilinitch and

Zeithaml

(1995)

Archival data from 1981 to 1985 from U.S.

Fortune 100 companies in industries such

as forest products (n = 144), oil

(n = 116), and highly diversified firms

(n = 145)

Diversified firms should operate in

lines of business that are

managerially similar (meaning

businesses that show high levels of

DL commonality) in order to

minimize complexity and apply core

skills appropriately to realize

superior performance


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Table 2 continued



Weber and

Shenkar (1996)

Survey data from 52 mergers of U.S.-based

firms comparing international and

domestic mergers

Synergies (through high fit) resulting

in outperforming outcomes in

horizontal (‘‘related’’) mergers may

be explained by clashes caused by

low levels of DL commonality as

problems are in the case of misfit

(same vice versa for conglomerate

mergers)

Ramaswamy

(1997)

Archival data (1984–1990) from 46 mergers

(comprising 92 banks) in the U.S. banking

industry

High levels of DL commonality

between bidder and target firms

have a positive impact on post-

merger performance. Differences

between business models (e.g.,

product-market combinations and

revenue models of wholesale vs.

retail banks) largely account for

strategic dissimilarities

Inkpen et al.

(2000)

6 longitudinal cases (1990–1999) of EU

acquirers that made acquisitions in U.S.

IT sector (Silicon Valley), and

comparison with CISCO

European firms have struggled with

their Silicon Valley-type

acquisitions and, in particular, with

the integration and governance of

the acquired firms. Failure was

mainly caused by national and

corporate cultural differences,

reflecting significant differences in

DLs

Kostova and

Roth (2002)

Survey data from 534 managers and 3,238

non-managerial employees in 104

subsidiary locations from 10 countries

DL commonality (reflected by the

institutional distance) between host/

sub and parent country and the

relational context within the MNC

(dependence, trust, and identity)

have an influence on organizational

coherence, and hence, for example,

effective diffusion of practices

van Oudenhoven

and van der

Zee (2002)

Survey data from 78 managers representing

a diverse set of countries

High levels of DL commonality and

the learning ability of organizations

(handling of multiple DLs and

mutual integration of such) are

critical to success in international

cooperation

Weber and

Camerer

(2003)

Laboratory experiment incorporating five

sessions of 20 rounds with two pairs of

subjects

Low levels of DL commonality lead

to decreased performance in

mergers. In addition, each group

(firm) blames the other for that

decrease

Bijlsma-

Frankema

(2004)

Interview data from nine managers of a

Dutch multinational engineering company

about the success and failure factors of

(post-) acquisition processes

Higher levels of DL commonality

allow for higher levels of control

and faster integration in post-merger

integration processes (without

destroying value)


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different levels of analysis. In general, changes in DL are likely to occur due to the

detection of events (environmental/structural changes) that are perceived to threaten

the central goals or survival of the firm (e.g., Fahey and Narayanan 1986; Jackson

and Dutton 1988; Barr and Huff 1997; Gilbert 2005), and finally, due to phases of

poor performance or crises (e.g., Bateman and Zeithaml 1989; Lant and Milliken

1992; Cote et al. 1999; Siggelkow 2001). This relationship was termed threat bias,

and refers to the fact that managers are more sensitive to threat frames than to

opportunity frames (Jackson and Dutton 1988; Fahey and Narayanan 1986). Thus,

opportunity-framed environmental change is likely to result in ‘‘fit-conserving

change’’, that is, ‘‘the environmental change has left the internal logic of the firm’s

system of choices intact while decreasing the appropriateness of the system as a

whole’’ (Siggelkow 2001, p. 841). Managerial reaction to such changes is very

difficult as it requires managers to perceive the systemic characteristics of the

needed changes and be willing to implement changes on a broad scale that may

contradict their past decisions. Threats that trigger the breakup and transformation

of a DL were radical changes in technology (Ginsberg and Venkatraman 1992;

Brannback and Wiklund 2001), industry transformation and (de)regulation (Barr

and Huff 1997; Barr et al. 1992; Cho and Hambrick 2006). Organizational and

resource dependence (Milliken 1990), as well as competitive posture (Ginsberg and

Table 2 continued



D’Aveni et al.

(2004)

Archival data from 3,185 U.S. firms—from

261 manufacturing and 14 non-

manufacturing categories (SIC 4 digit)

The more closely a business unit (BU)

is aligned with its parent’s dominant

logic, that is, the higher the DL

commonality between the BU and

the center, the better it performs and

the lower its costs relative to

competitor BUs of the focal BU’s

industry

Paruchuri et al.

(2006)

Archival (patent application) data from

3,933 inventors from M&As within the

U.S. pharmaceutical industry between

1979 and 1994

Low levels of DL commonality and

high levels of integration after a

merger lead to a decrease of

innovation capabilities in the

acquired firm and may lead to an

overall performance decrease

Pehrsson (2006) Survey data from 124 Swedish

manufacturing firms

High levels of DL commonality

across the business portfolio have a

positive impact on performance in

(intended) related diversified firms

Puranam et al.

(2006)

Archival data (1988–1998) of 207

acquisitions from 49 acquirers from the

U.S. information technology hardware

industry

Disruptions due to loss of autonomy

as a result of structural integration

and DL imposition are particularly

severe at early stages of the acquired

firm’s innovation trajectory (in

which exploration is more important

than exploitation)


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Venkatraman 1992), increase the momentum for change as they increase threat

perception. However, Gilbert (2005) found that subcategories of resource and

routine rigidity are discrete and have different causal mechanisms.

Threat perception releases constraints on resource rigidity (single loop learning)

while amplifying problems with routine rigidity (double loop learning) (Argyris

1976). This is in line with Milliken (1990), who found a significant impact of the

perceived threats on releasing resource rigidity but could explain only a small

amount of the variance in certainty regarding how to respond to the changes.

Structural autonomy as well as outside influence on decisions and opportunity

framing helps to decouple the effects of cognition on the different types of inertia

(Gilbert 2005, 2006; Bateman and Zeithaml 1989; Houghton et al. 1994), because

the interpretation of controllability serves as an antecedent of strategic action

(Thomas et al. 1993). Hence, a separated structure with high levels of autonomy

allows the threat perception to overcome resource rigidity in a parent company,

whereas opportunity perception relaxes routine rigidity in a new venture or a line of

business (Gilbert 2005, 2006).

Besides the threat bias, the self-serving attribution bias—blaming the environ-

ment for poor performance while attributing superior performance to internal

management capabilities and initiatives—was found to be a predominant cognitive

barrier to DL breakup and transformation (Clapham and Schwenk 1991; Barr et al.

1992; Lant and Milliken 1992; Hodgkinson 1997). Moreover, these cognitive biases

may be encouraged by organizational processes and systems, for example, incentive

and reward systems (Levinthal and March 1993; Jackson and Dutton 1988), that

channel and distribute the attention of their decision makers (Ocasio 1997), and/or

either environmental munificence (Barr et al. 1992) or the presence of well-known

threat stimuli that blocks new information (Hodgkinson 1997).

Moreover, a greater differentiation (Dutton and Duncan 1987a) or ‘‘bandwidth’’

(von Krogh et al. 2000) of an organization’s DL was found to support the reduction

of said biases. This refers to a more complex belief structure with a greater coverage

and lower consensus regarding the strategic array of issues incorporated that in turn,

facilitates organizational flexibility, adaptability, and momentum for change

(Dutton and Duncan 1987a; Lyles and Schwenk 1992). Outward-oriented scanning

efforts and environmental awareness as well as TMT diversity, its size and member

turnover, and TMT compensation that favor strategic change were found to

encourage these organizational characteristics (e.g., Lant and Milliken 1992;

Thomas et al. 1993; Tripsas and Gavetti 2000; Noda and Collis 2001; Cho and

Hambrick 2006; Houghton et al. 1994; Panagiotou 2006). Furthermore, internal and

external experimentation helps managers and organizations to develop cognizance

of their future capability and logic needs, and adapt to environmental change

accordingly (e.g., Barr et al. 1992; Lei et al. 1996; Keil et al. 2008; Farjoun 2008).

However, purposeful organizational unlearning and the search for a new DL are

highly complex processes and accompanied by the risks of under- and over-

identification that cause time lags and impede the search for an appropriate DL as a

whole (Fahey and Narayanan 1989; de Holan and Phillips 2004). Hence, effective

change in DL remains a major managerial challenge.


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Finally, an organization’s capability to identify and react to environmental

changes that require the adaptation or unlearning and relearning of a certain DL is of

particular relevance in high-velocity environments (Day and Lord 1992; Reger and

Palmer 1996; Ulrich and Wiersema 1989; Bogner and Barr 2000; Kuratko and

Audretsch 2009; Obloj et al. 2010). This is essential, as highly flexible schemata and

logics were found to lead to superior performance in high-velocity environments,

while imposing costs of change and hastily negated wisdom in stable environments

will negatively impact performance (Gavetti and Levinthal 2000; Siggelkow 2002;

Garg et al. 2003; Nadkarni and Barr 2008; Nadkarni and Narayanan 2007).

However, as organizations and industries mature over time, DLs might have to

become relatively stable while remaining sensitive to disruptive changes in the

competitive landscape (Obloj et al. 2010).

In summary, maintaining a continuous fit between an organization’s DL and its

environment is a necessary condition for high performance. Therefore, fit-

destroying change, that is, lower performance and threat perception, provokes a

straightforward internal reconfiguration to achieve a new fit between a firm’s set of

choices and its environment and will lead to quick reaction and adaptation. In

contrast, in the case of fit-conserving change, no obvious misfits can be detected

because the current DL remains intact (Siggelkow 2001). However, the concept of

DL is characterized by equifinality, as the fit of a specific DL and its respective

environment at a given point in time always indicates an idiosyncratic local

optimum within the performance landscape that reflects the firm’s specific internal

and external fit (Bettis and Prahalad 1995; Siggelkow 2001). This opens up the

solution space for many alternative scenarios of internal and external fit leading to

different performance levels. How to navigate such landscapes and find the peaks

still has to be investigated in large part.

5 Concluding remarks and directions for future research

The purpose of this review was to provide a comprehensive overview of the existing

DL research and to integrate the continuously growing, large, and fragmented body

of literature that currently prevents scholars from purposefully applying and

enhancing the concept (e.g., Bettis and Prahalad 1995; Grant 1988; Stimpert and

Duhaime 1997; von Krogh and Roos 1996; Verbeke 2010). We summarize the

theoretical extensions that became apparent from our integration efforts, that is, an

enhanced conceptualization and definition of the DL concept itself. Salient gaps and

fruitful avenues for future research efforts are identified and discussed below,

providing further implications of our research.

First, in introducing the distinction between absolute and relative dominance we

explain not only why the concept of DL in general is claimed to be ‘‘successfully’’

applied on the business level (e.g., Obloj et al. 2010; Bettis and Prahalad 1995) as

well as on the corporate level (e.g. Cote et al. 1999; Lampel and Shamsie 2000;

Prahalad and Bettis 1986), but we account for past theoretical inconsistencies and

confusions when trying to define what a DL actually may be. We address the

substantial lack of a common conceptualization, its definition, and clear distinction


123

from other concepts in an effort to prevent such inconsistencies in future works; we

do this by defining a ‘‘DL’’ (on the corporate level) as a shared (i.e., organizational)

mental template that has reached a certain level of maturity and stability (i.e.,

absolute dominance) and is highly (relatively) dominant across a defined set of

businesses of the corporate portfolio, thus dominating the logics of the businesses

within this set. Besides clarifying the DL concept itself by means of our

conceptualization and definition, we make a clear distinction from other related

concepts (e.g., managerial and organizational cognition, mental models or schemas)

in order to prevent the confusion of future scholarship with regard to theory

development and discussions of applicability. However, the lack of a consensus on

how a DL should be operationalized and measured calls for a detailed review of the

conduct of empirical DL research and should focus on these issues, by contrasting

the different operationalizations and measurement instruments on different levels of

analysis. The three areas of DL research identified by our review [i.e., themes (1) to

(3)] provide a starting point to guide such important efforts.

Second, in keeping with the structure of our research framework (see Fig. 2),

research on DL included investigating different antecedents of the formation/

adaptation of managerial logics at a certain level of analysis. However, studying

managerial logics and its antecedents and organizational consequences requires

considering the interdependencies at all levels of analysis (Walsh 1995). Moreover,

research on managerial logics is all about distance of configurations and the drivers

of that distance. Thus, future research on antecedents of DL should investigate the

relative impact of these antecedents concerning the distance between DL

configurations. This starts with questions on discriminating patterns that emerge

from the discussion on antecedents, for example, do business models with a novelty

theme lead to (and demand) significantly different managerial logics than those with

an efficiency theme (e.g., Zott and Amit 2010), or do dynamic environments shape a

discriminating, different logic compared to that of stable ones (e.g., Nadkarni and

Narayanan 2007)? We would obviously assume ‘‘yes’’ from the perspective of a

single level of analysis, but how do probable interdependencies between both levels

of analysis (i.e., firm level and environmental level) influence the evolving logic of a

firm? Do different business model patterns overrule different industry dynamic

patterns concerning the distance of the evolving managerial logic or vice versa?

Thus, a major area of future research will involve identifying the vital few out of the

trivial many antecedents at all levels of analysis that drive the distance (or fit) of

managerial logics. A main emphasis of future research efforts should be on the

antecedents of DL that are subject to managerial influence and control—such as the

business model pattern—in order to contribute equally to management research and

practice (Markides 2007). Moreover, the indirect rather than the direct feedback

effects of the dynamics of DL, that is, the evolution of its absolute dominance, on its

antecedents and the (re-)configuration of an organization’s internal elements

(double loop learning) remain an intriguing area for future research (see future

research on dynamics of DL for details on the evolution of the absolute dominance

of logics).

Future research should also focus on the intersection of the antecedents of DL

and the DL-commonality-performance linkage, that is, investigating discriminating


123

DL configurations. As the source of a DL’s success does not lie in the specification

of each of its elements, but rather in the configuration and fit of its internal and

external elements (e.g., Miller 1993, 1996; Siggelkow 2001, 2002; Doty et al. 1993),

scholars could contribute by identifying certain discriminating configuration

patterns and estimating the distance between them. This would be a first step

toward the hitherto missing predictive power of DL research, and in turn be helpful

to managers who face the question of integration or separation when conducting

diversification moves or when thinking of different governance structures for an

alliance or joint venture (e.g., Aggarwal et al. 2011).

This empirical challenge could, for example, be approached by employing

repertory grid methodology to derive the most discriminating antecedents (e.g.,

Ginsberg 1989, 1990), and qualitative comparative analysis to derive discriminating

DL patterns and estimate their distance (e.g., Fiss 2007).

Furthermore, concerning the relative dominance of managerial logics, the

question of how DLs diffuse across businesses within MBFs and/or across country

borders within MNEs is of significant scholarly and managerial importance.

Coherent corporate management logic, linking the corporate and business levels,

provides guidance for the different businesses and subsidiaries, and ensures strategic

alignment between the businesses, subunits, and headquarters (Lampel and Shamsie

2000; Lane and Sirmon 2003). Superior business level performance is related to an

alignment of corporate and business level logics concerning decentralized business

conduct (Lampel and Shamsie 2000). However, very little is known about the

antecedents, processes and mechanisms of DL diffusion though these are central

managerial issues. Existing research refers to the transfer of practices within MNEs

(Kostova 1999; Kostova and Roth 2002) and issues concerning the dual

organizational identification of subsidiary managers in MNEs (Vora and Kostova

2007). The context of MNEs, however, is limited to the impact of national and

cultural differences on diffusion. With respect to MBFs, differences in strategic

orientation among business units and divergent business models, as well as

environmental dynamics, are likely to increase the complexity of the relationships

and mechanisms. Furthermore, antecedents of DL are multidimensional and the

diffusion mechanisms of DL may differ from what is known of the diffusion of

practices. Moreover, we found evidence for the ‘‘role of hierarchy,’’ that is, at

different management levels different signals are perceived and interpreted

differently, which in turn may seriously impair a coherent corporate strategy and

its successful implementation (Lane and Sirmon 2003; Murtha et al. 1998; Tripsas

and Gavetti 2000). This issue must be resolved by aligning and linking the different

logics to avoid diverging strategic action and detrimental effects on performance at

all levels. Hence, the ‘‘role of hierarchy’’ clearly merits further scholarly attention.

Multi-level studies investigating the coherence and the respective absolute

dominance of managerial logics (or at least common elements of such) on different

management levels in comparison with the aggregated repertory grids on each level

(e.g., Ginsberg 1990, 1989) could be a first step into this important research area.

Concerning the dynamics of DL (i.e., absolute dominance), empirical evidence

underlines the dangers of inertia that originate from a stable DL and stresses the

biases and barriers that block strategic change. Moreover, research efforts on


123

breakup and transformation are limited to reactive change as a response to

performance decrease or even crisis, but knowledge of the processes and

determinants for purposeful unlearning and (re)learning that adopt an opportunity-

rather than a threat-driven approach toward DL adaptation remains vague at best

(Fahey and Narayanan 1989; de Holan and Phillips 2004). What we termed absolute

dominance has to be understood in greater detail in order to ‘‘manage’’ dominance

purposefully or at least be aware of the underlying processes and so avoid escalating

commitment to a losing course of action (e.g., Ross and Staw 1993). Future research

should address the process of proactive and purposeful unlearning and their

antecedents, to enable scholars to provide meaningful advice to managers on

matters such as how to set-up their organizational structure, on processes and

routines to recognize the signs of a need for strategic change early, and on how to

promote these changes throughout the organization. As velocity and volatility

increase throughout all industries (e.g., Castrogiovanni 2002) and appropriate

strategic innovation of business models (e.g., Markides 2006; Charitou and

Markides 2003; Gilbert and Bower 2002; Dewald and Bowen 2010) as well as

complementary management innovations (e.g., Birkinshaw et al. 2008) are more

important than ever, it is crucial that the role and pitfalls accompanying the inertial

power of an established DL are understood by the world-leading incumbents to

preserve and strengthen their current market positions. Intriguing perspectives are

offered by Karl Weick and his works on sense-making vs. schemas in reliable vs.

efficient organizations (e.g., Vogus et al. 2010; Weick 2008; Weick 2011). Learning

from reliable organizations and incorporating processes of continuous sense-making

rather than establishing schemas (i.e., managerial logics) might be a pathway to

successful adaptation for organizations operating in particularly dynamic environ-

ments that would keep absolute dominance below a certain level in order to allow

opportunity-driven adaptation when such opportunities are sensed.

Finally, the co-evolution and co-existence of multiple (conflicting) logics

emerged as an important topic for future research efforts. Though Prahalad and

Bettis (1986) conceptualize a sectoral structure for conglomerate diversified firms

with a distinct coherent DL within each sector, the literature still remains to be

empirically validated concerning this question. Nevertheless, evidence was found for

the co-evolution and persistence of multiple (conflicting) institutional and profes-

sional logics (Purdy and Gray 2009; Dunn and Jones 2010). Conditions supporting

the institutionalization of multiple logics in this field were (1) the field character-

istics, such as the emerging nature of a field, the low degree of urgency, and its lack

of unified goals; (2) multiple local contexts; (3) the presence of multiple resource

pools facilitating the persistence of different logics through respectively different

funding schemes; (4) resistance from existing institutions; and, finally, (5) the lack of

field-level regulation (Purdy and Gray 2009). These first empirical insights into the

complex arena of co-evolution and co-existence of multiple DLs provide a starting

point for further theory-building and testing within the organizational field.

A great methodological challenge for those researching the dynamics of DL is

the need for at least medium-sized comparative longitudinal data. Again, qualitative

comparative analyses of primary and secondary data provide a promising

methodological approach for future research efforts in this field.


123

Drawing on 25 years of DL research, our review provides a comprehensive

overview of these efforts, and serves as a starting point for purposeful theoretical

elaboration and empirical application of the concept. By providing such a

cornerstone, we hope to revive the scholarly dialogue on the concept of ‘‘Dominant

Logic’’ and encourage future research.

Appendix 1

See Table 3.

Table 3 Example of identification of search terms and database search

Step 0 ‘‘Quick search’’ for first set of appropriate search terms

Search area Dominant logic

Search terms [AB (‘‘dominant logic’’ OR ‘‘dominant management logic’’)]

not [AB (‘‘service-dominant logic’’ OR ‘‘service’’ OR

‘‘marketing’’)] and [SU (Strategic OR Management OR

Business)]

No. of articles found 34

Step 1 Broad search

Step 1.1 Broad search concerning dominant logic and relevant

synonyms or neighbored concepts (derived from ‘‘quick

search’’ findings)

Search area Dominant logic, (shared) mental models, etc.

Search terms AB (‘‘dominant logic’’ OR ‘‘dominant management logic’’

OR ‘‘mental model*’’ OR ‘‘mental map*’’ OR ‘‘cognitive

map*’’ OR ‘‘managerial perception*’’ OR ‘‘mindset*’’ OR

‘‘managerial cognition*’’ OR ‘‘managerial representation*’’

OR ‘‘strategic variety’’ OR ‘‘strategic schema*’’) NOT AB

(‘‘service-dominant logic’’ OR ‘‘service’’ OR ‘‘marketing’’)

OR TI (‘‘dominant logic’’ OR ‘‘dominant management logic’’ OR

‘‘mental model*’’ OR ‘‘mental map*’’ OR ‘‘cognitive map*’’ OR

‘‘managerial perception*’’ OR ‘‘mindset*’’ OR ‘‘managerial

cognition*’’ OR ‘‘managerial representation*’’ OR ‘‘strategic

variety’’ OR ‘‘strategic schema*’’) NOT TI


No. of articles found 11,145

Step 1.2 Broad search concerning diversification and corporate

management

Search area Diversification and corporate management

Search terms AB (‘‘diverse*’’ OR ‘‘multi business*) OR ‘‘multi business

firm*’’ OR ‘‘corporate strategy’’ OR ‘‘parenting advantage’’

OR ‘‘corporate-level*’’ OR ‘‘business-level*’’ OR

‘‘corporate center*’’ OR ‘‘strategic N2 related*’’) OR TI

(‘‘diverse*’’ OR ‘‘multi business*’’ OR ‘‘multi business

firm*’’ OR ‘‘corporate strategy’’ OR ‘‘parenting advantage’’

OR ‘‘corporate-level*’’ OR ‘‘business-level*’’ OR

‘‘corporate center*’’ OR ‘‘strategic N2 related*’’)

No. of articles found 379,643


123

Appendix 2

See Table 4.

Table 4 Overview of articles: distribution per journal and impact factors

Journal No. of

articles

Impact

factor

(IF)

5-Year

IF

Cum.

share

(%)

Total

share

(%)

Strategic Management Journal 34 3.344 6.708 26 26.4

Journal of Management Studies 14 2.558 3.485 37 10.9

Academy of Management Journal 12 6.079 7.670 47 9.3

Academy of Management Review 9 6.125 8.211 53 7.0

Organization Science 6 2.575 5.453 58 4.7

Administrative Science Quarterly 5 2.853 6.313 62 3.9

Management Science 4 2.354 4.065 65 3.1

Journal of Management 3 3.08 4.532 67 2.3

Entrepreneurship Theory & Practice 4 1.726 3.327 71 3.1

Table 3 continued

Step 2 Focusing

Step 2.1 Focus search on dominant logic

Search area Dominant logic and relevant synonyms or neighbored

concepts within the strategic management field

AB (‘‘dominant logic’’ OR ‘‘dominant management logic’’

OR ‘‘mental model*’’ OR ‘‘mental map*’’ OR ‘‘cognitive

map*’’ OR ‘‘managerial perception*’’ OR ‘‘mindset*’’ OR

‘‘managerial cognition*’’ OR ‘‘managerial representation*’’

OR ‘‘strategic variety’’ OR ‘‘strategic schema*’’) NOT AB


OR TI (‘‘dominant logic’’ OR ‘‘dominant management

logic’’ OR ‘‘mental model*’’ OR ‘‘mental map*’’ OR

‘‘cognitive map*’’ OR ‘‘managerial perception*’’ OR

‘‘mindset*’’ OR ‘‘managerial cognition*’’ OR ‘‘managerial

representation*’’ OR ‘‘strategic variety’’ OR ‘‘strategic

schema*’’) NOT TI (‘‘service-dominant logic’’ OR

‘‘service’’ OR ‘‘marketing’’) and SU (strategic

management)


Step 2.1 Intersection of broad searches to provide focus

Search area Search for articles included in step 1.1 and in step 1.2

Search terms n.a. (intersection of search routine 1.1 and search routine 1.2.)


Step 3 Consolidation and adjustment of database search (e.g.,

doublings, false positives, etc.)

No. of articles (from database search)

included for detailed review

173


123

Appendix 3

See Tables 5 and 6.

Table 4 continued

Journal No. of

articles

Impact

factor

(IF)

5-Year

IF

Cum.

share

(%)

Total

share

(%)

Journal of International Business Studies 3 2.992 5.030 73 2.3

Journal of Organizational Behavior 3 2.441 3.932 75 2.3

British Journal of Management 2 1.839 2.112 77 1.6

Harvard Business Review 2 1.793 2.314 78 1.6

Long Range Planning 2 1.617 1.781 80 1.6

Management Decision 2 0.622 n.a. 81 1.6

Academy of Strategic Management Journal 1 82 0.8

Research Policy 1 2.508 4.242 83 0.8

Academy of Management Executive (Perspective in

Ranking)

1 1.118 1.118 84 0.8

Applied Psychology: An International Review 1 1.811 2.424 84 0.8

California Management Review 1 1.109 2.142 85 0.8

Creativity & Innovation Management 1 n.a. n.a. 86 0.8

Human Resource Management 1 0.729 1.378 87 0.8

International Journal of Innovation Management 1 n.a. n.a. 88 0.8

Human Relations 1 1.372 1.827 88 0.8

Journal of Bioeconomics 1 n.a. n.a. 89 0.8

Journal of Business Research 1 0.943 1.695 90 0.8

Journal of Business Strategy 1 n.a. n.a. 91 0.8

Journal of Management & Governance 1 n.a. n.a. 91 0.8

Journal of Managerial Psychology 1 n.a. n.a. 92 0.8

Journal of Marketing 1 3.598 7.092 93 0.8

Journal of Risk Management in Financial Institutions 1 n.a. n.a. 94 0.8

Knowledge & Process Management 1 n.a. n.a. 95 0.8

Managerial and Decision Economics 1 n.a. n.a. 95 0.8

Organization Studies 1 1.857 2.653 96 0.8

Problems & Perspectives in Management 1 n.a. n.a. 97 0.8

Scandinavian Journal of Management 1 0.765 n.a. 98 0.8

Academy of Management Best Paper Proceedings 3 n.a. n.a. 100 2.3

Total 129 2.312 3.891 n.a. n.a


123

Table 5 Examples of findings from conceptual research on dominant logic (complete tables incorpo-

rating all 49 articles are available)

Article Theory base Level of analysis Key findings and contribution to dominant

logic research

Hitt and

Ireland

(1987)

Dominant logic/RBV Organizational Drivers of commonalities between

businesses can be (1) product markets,

(2) technology, (3) managerial dominant

logic, and (4) corporate distinctive

competencies

Grant (1988) Dominant logic Organizational Examination of dominant logic not as a

mindset but as a set of specific corporate-

level functions: (1) Allocation of

resources, (2) formulation and

coordination of business-level strategies,

and (3) setting and monitoring

performance targets for BUs. Focus

should be on strategic similarity rather

than on business-level similarity since

transaction costs for synergies hardly

pay off

Hamel and

Prahalad

(1993)

RBV/DC (Managerial

frames)

Individual Managerial frames (e.g., dominant logic)

bind company’s approach to competitive

warfare and determine competitive

outcomes. Long-term competitiveness

depends on managers’ willingness to

continually challenge their frames (to

avoid blinders of dominant logic)

Klimoski and

Mohammed

(1994)

Shared mental models Team Dominant logic can be interpreted as a

team mental model concept that refers to

collective strategic decision making

Bettis and

Prahalad

(1995)

Dominant logic Organizational DL is a local optimum concerning the

adaptation of complex organizations to

their (stable) environments. Changes in

the environment make a DL obsolete and

it has to be unlearned and a new one

learned. This gets harder as such

configurations tighten over time. Firms

need to differentiate between financial

and strategic performance to achieve

long-term success

Prahalad

(2004)

Dominant logic Organizational DL keeps organization on road ahead but

can also act as a blinder, obstructing

peripheral vision and environmental

changes. DL needs to be reassessed

regularly

Tikkanen

et al. (2005)

Managerial cognition Individual DL (as part of managerial cognition)

directly influences the evolution of an

organization’s business model


123

Table 5 continued

Article Theory base Level of analysis Key findings and contribution to dominant

logic research

Boisot and Li

(2005)

RBV/KBV (dominant

logic as part of

KBV)

Individual (and

organizational)

Dominant logic is construed via epistemic

heterogeneity and, in turn, allows

epistemic heterogeneity among firms to

persist. This leads to competitive

advantage or a debilitating inertia

depending on the appropriateness of the

employed DL for environmental

conditions

Guidice and

Mero (2007)

Dominant logic/

principal-agent and

stewardship theory

Network (joint

venture)

Dominant logic consistency/commonality

of JV parents (agent vs. steward control-

performance logic) is positively related

to JV performance. This relationship is

strongly moderated by the power

relations between parents and is

particularly important for symmetrical

power relations (and weaker for

asymmetrical power relations)

Farjoun

(2008)

Managerial cognition/

reasoning

Individual Besides analogical reasoning, mental

experimentation, and other methods may

play a larger role in invent-ting effective

strategies in novel and complex contexts,

such as procedures for changing and

adding dominant logics as new

businesses are added or significant

environmental changes occur

Kuratko and

Audretsch

(2009)

Dominant logic (and

various)

Organizational An entrepreneurial DL promotes strategic

agility, flexibility, creativity, and

continuous innovation throughout the

firm. The focus of the firm is opportunity

identification, discovery of new sources

of value, and product and process

innovation that will lead to greater

profitability. This focus is translated into

the objectives, strategies, reward

systems, control systems, planning

approaches, structure, etc., of the firm

Verbeke

(2010)

Dominant logic Organizational Social community building and the

balancing of DL integration (unilateral

imposing of acquirer’s routines vs.

mutual adaptation of routines) are both

crucial dimensions in (international)

post-merger success. The desired level of

reverse knowledge transfer (high vs.

low) and the (ex post) DL commonality

(high vs. low distance) determine post-

merger success, particularly in

international M&A as the potential

distance in DL increases in cross-border

M&A


123

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reso

urc

e


123

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