Strategic Resource Dynamics of Manufacturing Firms

We conceptualize strategic decision-making processes within a manufacturing firm as streams of resources allocated to short- and long-term changes. The analogous ecological model, referred to as the Lotka-Volterra model, captures this dynamic tension between decisions made by the firm and its manufacturing operations. This representation leads to evolutionarily stable manufacturing strategies (ESMSs), which contribute to a firm's competitive advantage in different ways. Using a random sample of 30 firms from the U.S. semiconductor industry, we estimate parameters of the model and arrive at four ESMSs or strategic manufacturing groups that reflect theoretically and empirically distinctive adaptation patterns through their dynamic resource allocations. We observe that a majority of the firms were classified in one of the four groups, with relatively fewer firms in the other three. Notably, our classification based on ecology models agrees well with taxonomies in manufacturing and business strategy theory. Furthermore, our analysis shows significant differences among manufacturing practices and competitive capabilities of the four strategic groups. Managerially, these insights could provide the foundation to implement strategic changes that enable firms to leapfrog from one ESMS to another. This study also paves the way for development of a meso theory of the dynamics of manufacturing strategy.