Economic theory in corporate planning

Richard M. Burton and Thomas H. Naylor

Strategic Management Journal, 1980, vol. 1, issue 3, 249-263

Abstract: The microeconomic theory of the firm encompasses classical marginal analysis and modern operations research techniques. Yet, one finds a paucity of explicit application of microeconomics to corporate planning. In this paper we explore the reasons for the seeming void and develop an economic theory of corporate planning. Our main thesis is that received microeconomic theory focuses on answers, and answers stated in non‐operational terms. Nonetheless, economic theory asks questions of central importance to the strategic choices of the firm. These questions arise from economic theory and the fundamental notion of trade‐offs. We develop a microeconomic theory of strategic search for corporate planning. The theory is used to develop important questions and efficient search in lieu of chaotic and random search.

Date: 1980
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