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Winter 2021

ISSN 0890-913X

Volume 36, Number 4

Frank Knight on Business Strategy

Seth W. Norton, Wheaton College

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FrankKnightonBusinessStrategySethW.Norton*WheatonCollegeTheJournalofPrivateEnterprise36(4),2021,45–62_____________________________________________________AbstractMuchoftheeconomicfoundationofbusinessstrategystemsfromindustrial-organizationeconomicsviaMichaelPorterandfrominstitutionalperspectivesviaOliverWilliamson.FrankKnightwasoneoftheleadingeconomictheoristsofthetwentiethcenturywhoprofoundlyinfluencedmicrotheory,especiallythetheoryofthefirmandthetheory(andpractice)offinance.Yetthebusiness-strategyliteraturelargelyignoresKnight’swritingsthatarecloselyalignedwithbusinessstrategy.ThispaperfocusesonKnight’sbookRisk,Uncertainty,andProfit.ThelinkswithKnightincludeforecastingdemand,forecastingnewproducts,managerialselection,andthelinkbetweenmanagerialselectionandmanagerialcontrol.__________________________________________________________JELCodes:B1,D2,D8,E3,G3,L1,L2Keywords:businessstrategy,forecasting,newproducts,control,managerialselectionI.IntroductionBusinessstrategyhasanimportantbutambiguouslinkwitheconomictheory.Thisconclusionfollowsfromimportantreviewsoftheeconomicfoundationsofthebusinessschoolsubjectknownasstrategicmanagementorjuststrategy(Rumelt,Schendel,andTeece1995).Animportantobservationisthatprominenteconomistsviewstrategyfromdifferentperspectivesandthereforeformdifferentconclusionsregardingtheeconomicfoundationsofstrategy.Forexample,Porter(1980)extendsthestructure-conductperformanceparadigmtoidentifyalternativegenericbusinessstrategiessothatmanagerscanselectthemostappropriatemeanstodominatethe(productmarket)competitionandthusobtainpositiveabnormalreturns.Morerecently,Porter(1995)attemptstodevelopadynamictheoryofstrategy.Porterendeavorstoidentifythesources*IreceivedhelpfulcommentsfromJamesE.McClureandotherparticipantsinthe2021AssociationofPrivateEnterpriseEducationmeeting.

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Title	Frank Knight on Business Strategy
Authors/Creators:	Seth W. Norton, Wheaton College
Year:	2021
Volume:	36
Number:	4
Pages:	45 - 62
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	business strategy, forecasting, new products, control, managerial selection

Citation:
Norton, Seth W. / 2021. "Frank Knight on Business Strategy." The Journal of Private Enterprise, 36(4): 45-62.