Why Porter Is Not Enough: Economic Foundations of Sustainable Strategic Management

Abstract

Currently the field of strategic management is in the middle of a paradigmatic shift similar to the one that took place over 40 years ago when the internal, conceptual model of business policy and planning was questioned and then changed to the externally, focused paradigm of strategic management. The Porterian models of industry structure and value creation have provided the cornerstones for the development of the field of strategic management. By taking a coevolutionary perspective, we argue that the field is now moving to the next coevolutionary stage in its development, to sustainable strategic management (SSM), an open-systems view of the processes of strategic management. SSM is culminative in nature, encompassing both the business policy/planning and strategic management paradigms. It, however, expands the strategic management paradigm to the realistic view of the organization and its strategic management processes as a subsystem of not only the economy, but also the larger society and ecosystem. SSM provides a theoretical framework to incorporate critical global issues such as climate change and income inequality. Although Porter and Kramer’s creating shared value (CSV) concept is a step toward SSM, it is still based on the unrealistic, neo-classical economic assumption of the economy as a closed system. The open-system view of the firm, based on the assumptions of ecological economics, provides strategic managers with conceptual models that better depict the reality of the practice of management. Current models used in most textbooks today demonstrate the fallacy of misplaced concreteness, mistaking abstract models for accurate descriptions of reality.