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BUZZWORDS IN INTERNATIONAL MANAGEMENT EDUCATION

Mark Casson and Marina Della Giusta

 

 

Introduction

This handbook reviews a large number of concepts and techniques that appear in international management education. Some have been borrowed from related disciplines, including economics, sociology and psychology, but many have originated within business and management studies. Some concepts have well-established intellectual pedigrees, while others are more recent innovations.

Compared with most other social sciences, management studies is a relatively new area of professional inquiry, and within this domain small business studies is one of the newest. Given the large number of concepts that are currently employed to analyse international business behaviour, this chapter considers how many of these concepts are likely to survive as building blocks for future research. It argues that there is a significant degree of redundancy in the terminology of international management studies. There seem to be many words denoting the same thing, and sometimes no clear definition of the things they are supposed to denote.

In the theory of the firm, for example, the success of a firm, in terms of its profitability and growth, is variously imputed to superior capabilities, competencies, entrepreneurship or managerial skills. But is entrepreneurship just a special type of capability, and is competence just another word for skill? Is entrepreneurship just one of many types of capability, or is it the key capability without which other capabilities (if they exist) are of little value? There is very little debate on these issues. Some scholars support one view and others another, but the supporters of alternative views rarely seem to engage in meaningful dialogue with one another. Similarly, entrepreneurship is often associated with innovation, risk-taking, business venturing, imagination and creativity. Are all these concepts really different from each other, or are some of them just the same concept by different names? How many genuinely distinctive concepts are required in order to understand international business behaviour properly? Judging by the number of concepts in circulation, management studies must be an extremely complex discipline, but has it become so complex that it is just confusing? Real-world business behaviour is undoubtedly complex, but if the theory is just as complex as the phenomena it describes then is it any help in actually understanding the phenomena?

While some redundancy is a natural feature of the evolution of language, this chapter argues that the current level of conceptual redundancy in international management is excessive. The chapter has three main objectives: to analyse the process by which redundancy is generated; to demonstrate that current levels of redundancy are excessive; and to suggest ways by which redundancy can be reduced. The issue of redundancy needs to be addressed, it is claimed, because excessive redundancy creates confusion rather than clarity.

The second section introduces a theoretical framework that explains, not the behaviour of firms, but the behaviour of academics seeking to explain the behaviour of firms. An obvious starting point when addressing the behaviour of an academic profession is the set of social networks the profession employs to develop and diffuse new ideas. Drawing on recent developments in social network theory, the spread of buzzwords is proposed as a major factor generating redundancy. The process of creating and diffusing buzzwords, it is suggested, explains a great deal about the evolution of international management as a discipline.

The theoretical framework itself is perfectly general, and its application to management studies is simply a special case. It can be applied to any branch of academia. The theory proposes that the spread of buzzwords is governed by economic incentives acting upon individuals. Although network structure is important, it is incentives that are key. In line with theories of entrepreneurship, the theory emphasizes individual rather than collective action, and personal agency rather than social structure. The theory suggests that under certain conditions economic incentives may lead to excessive conceptual innovation. These conditions, it is suggested, have prevailed in business and management studies, and have generated the conceptual redundancy referred to above.

The third section applies the theory using a case study. The case study focuses on a single concept: strategy. There are many concepts that could have been selected for a case study, including entrepreneurship, globalization, and even culture. Strategy was chosen because it is a widely used concept that is regarded by many business academics as fundamental, and its spread is relatively well documented. There are many surveys of the strategy literature and of the various sub-fields that the concept has spawned. The object of this case study is not to review or replicate previous bibliometric work on publications and their citations, but rather to assess how well the theory of buzzwords explains the diffusion of the strategy concept.

The fourth section evaluates the effects of the diffusion of the strategy concept in management studies. It is argued that the spread of the word has been facilitated by the fact that it can be applied in many different contexts, and therefore appears to be a unifying idea. In practice, it is suggested, strategy has different meanings in different contexts, so that its apparent generality is spurious. The illusion of generality has been maintained because many writers who use the term fail to specify in detail the context in which they use the term. Such spurious generality is characteristic of many buzzwords. Spurious generality undermines logic rigour, rather than reinforcing it, as abstract concepts often claim to do. The harmful effects of excessive reliance on the strategy concept have persisted because of weak intellectual leadership in the profession, it is suggested.

The conclusions, and their implications for the future development of management studies, are summarized in the fifth section.

A theoretical perspective on buzzwords and their diffusion

The significance of buzzwords

Most academics, whatever their discipline, would probably agree that their own subject has buzzwords. Taken at face value, buzzwords relate to important aspects of a subject, and are particularly associated with exciting and emergent topic areas. From another perspective, however, they could be indicative of the fads and fashions through which the development of most subjects seems to progress. While they may sometimes relate to novel and important developments, buzzwords can also relate to not-so-novel or not-so-important developments instead. They may lack genuine novelty because they just say the same old thing in a different language — they represent ‘old wine in new bottles’, in other words. On the other hand, they may be genuinely novel but also genuinely unimportant — an irrelevance or, even worse, a ‘red herring’.

Buzzwords appear in both documents and discussion. Referees and research committee members often report that certain buzzwords are regularly repeated in the grant applications that they review. Conference-goers report that buzzwords frequently appear in the titles of conference papers, and in comments and questions addressed to speakers by young and ambitious members of the audience. Buzzwords, it seems, are often used to impress.

Much of the evidence relating to academic buzzwords is anecdotal. This is not due simply to a lack of evidence. For example, there are substantial archives relating to past grant applications, and until recently it was quite common to tape-record discussions at academic conferences for the benefit of rapporteurs who summarized debates on conference issues. Content analysis could readily be applied to such sources in order to determine the frequency with which various words appear. Buzzwords could be identified as frequently occurring words (other than common prepositions, etc.) or as words whose frequency had increased substantially over time.

There is a problem of interpretation, however. The frequency with which a word is used does not, by itself, indicate whether the word is being used through logical necessity or simply because of a desire to impress. Context is needed to address this issue. Context can indicate whether the use of a word is gratuitous, in the sense that no meaning would be lost if the word were left out, or whether it is unnecessary in the sense that some other commonly occurring word could just as easily have been used instead. However, it is much more laborious to analyse context than to simply count the number of times that a word is used.

A framework

Context and definition

The research question addressed in the chapter is why academic buzzwords are often used in cases where they seem to be either unnecessary or misleading. It considers why they might be used simply to impress. Addressing this issue raises further questions, however. Is everyone impressed, or just certain people? Does it matter that some people are unimpressed if others are? Furthermore, why are people impressed anyway? If everyone recognizes that buzzwords are used in order to impress, why do they not discount the use of these words and demand that people address them in conventional language instead? If some people recognize that buzzwords are used to impress and others do not, then surely it will be the less astute people who are impressed. But if the more astute people are also the more influential people, then will the strategy not fail because only people with limited influence are impressed?

It is useful to begin with a definition of an academic buzzword. An academic buzzword is defined as a novel and widely adopted label for a concept that features in academic research. This definition is only one of several that could be suggested; it has been selected because it is useful in addressing the following questions:

• Why are academic buzzwords so often used in cases where they seem to be either unnecessary or misleading?

• Are buzzwords simply used to impress?

• If so, is everyone impressed, or just certain people? Does it matter that some people are unimpressed if others are?

• If everyone recognizes that buzzwords are used in order to impress, why do they not discount the use of these words and demand that people address them in conventional language instead?

• If some people are impressed by buzzwords and others are not, then surely it will be the more gullible people who are impressed. Astute people will not be impressed. But if astute people are influential and gullible people are not, then will the strategy not fail, even though some people are impressed?

Words that label concepts

Words are widely used to label things. The kinds of words included in this study are words that are used to label concepts employed to analyse complex social systems.

• Typologies of large social systems typically involve an -ism: socialism, capitalism, individualism, collectivism, etc.

• The structures and processes of a system are often described using words ending in -ion: competition, cooperation, specialization, differentiation, integration, agglomeration, organization, evolution, etc.

• The properties of a system are often described using words ending in -ity: identity, stability, sustainability, creativity, credibility, etc.

Modern disciplines are replete with such words: in econometrics, for example, -ity words proliferate; there are desirable properties of a system, such as normality, stationarity and identifiability, and a host of undesirable properties, including endogeneity, multicollinearity and heteroscedasticity. Anyone who can succeed in adding to the vocabulary of complex systems is guaranteed a glittering academic career; the incentive to coin a new buzzword is considerable.

While this chapter focuses on buzzwords used in scholarship and research, there is an indirect connection with the general discourse of university administration. This is because many buzzwords developed in business and management studies are widely used in universities when discussing staff motivation (the language of ‘human resources management’), student recruitment (‘marketing’), the maintenance of buildings (‘facilities management’) and catering (‘hospitality services’).

Two words for a single concept

There is considerable redundancy in ordinary language, as noted above. There are many pairs of words that mean the same thing. In the context of academic research this implies that the same concept can be labelled in different ways. This duplication provides scope for purely cosmetic innovation, in which one word replaces another while the concept remains the same.

It is unusual, however, for two words to mean exactly the same thing. Words may be similar, but they are rarely identical. This is because most words carry a connotation which is provided by the context in which they originated or in which they are most commonly used. When a novel word replaces another word, therefore, the concept to which it refers may acquire a somewhat different connotation. In the 1970s, for example, the founder of a small business was usually described as self-employed; this terminology emphasized that they were not employed by anyone else, and might suggest to some audiences that no one else was willing to employ them. The small business owner was seen as being a worker that employed themselves. Today such a small business founder would be described as an entrepreneur. This carries the connotation of someone who initiates an innovative project (the formation of their firm) and bears significant risk (of losing the personal capital they have invested in it). The small business owner is therefore seen as more like a successful adventurer than an ordinary worker. The change in terminology partly reflects a different view of small business, driven by wider economic and social changes, but the terminology itself reinforces the change of view. It is not only small business founders that have benefited from this change; academics who study small business are now perceived to be studying the roots of enterprise and innovation rather than just the survival strategies of people who do not want, or cannot find, a regular job.

Innovation and diffusion of buzzwords

Redundancy and connotation between them provide a useful explanation of why scholars may be motivated to introduce new words by replacing existing words. They can gain a reputation as an innovator, and also as someone who has raised the status of their subject by giving it a more positive image with the public.

This does not explain why other scholars in the same profession will wish to take up the new word, however. Changing vocabulary can be costly, because it involves learning to express oneself in a different way. But where a new word provides a more positive connotation for a subject, other members of a profession may find it useful to embrace the word too. This is particularly true if a profession has acquired a rather negative image that it wishes to live down. In the big-business shake-out of the 1970s, for example, personnel departments became extremely unpopular, but they were able to re-invent themselves quite successfully as ‘human resources’ departments in the 1980s, even though their job was basically the same as before. ‘Personnel’ was associated with shop-floor conflicts and making people redundant, whilst ‘human resources’ was focused on recruitment, training and retention of staff. Increasing the work-loads of junior staff became ‘empowerment’, whilst laying off senior staff became ‘delayering’. In academic research, ‘industrial relations’ experts reappeared as ‘human resource strategy’ professors, and ‘labour economists’ became ‘personnel economists’ instead.

Conceptual arbitrage and the import of jargon from other disciplines

There is, however, another reason why academics may take up a buzzword introduced by others: that the new word establishes a link with a related phenomenon in another field. The appearance of a buzzword may signal an attempt at conceptual innovation, in other words. In the 1950s economists avidly imported jargon from mathematics and statistics because they wished to exploit the concepts to which the jargon referred. ‘Equilibrium’, ‘stability’ and ‘homotheticity’ (constant returns to scale) became extremely fashionable words. Economists of the time were widely criticized for being pseudo-scientific, and even of suffering from ‘physics envy’, but in the hands of scholars such as Samuelson the novel concepts were put to good use, and their legacy has endured.

The concepts imported into economics in the 1950s were successful because they reflected a logical isomorphism between economic systems and engineering systems. These isomorphisms were particularly strong in respect of linear dynamic systems. The innovation of jargon was therefore associated with the development of a new and profound set of insights that linked economics with an established body of theory about a general class of systems. The new words carried appropriate connotations when they were imported into economics because the logical structures in which they were embedded were the same.

There are many other examples of the successful transfer of jargon as part of a process of deepening understanding, in which general principles of systems behaviour are discovered to be relevant to fields to which they had not previously been applied. The success of these transfers may wrongly suggest, however, that the transfer of jargon is invariably indicative of an advance in understanding. By exploiting this misunderstanding, astute researchers can gain a reputation as conceptual innovators purely by coining new words, or by taking words from the vocabulary of one discipline and applying them indiscriminately to another.

Following the successful transfer of mathematical methods to economics, it was realized that many mathematical models were too rigid in their structures to accommodate the flexibility that is characteristic of market economies. The structures of economies evolved faster than the assumptions of conventional mathematic models allowed. An obvious — if superficial — response was to turn to biology, which models flexible systems in nature. Furthermore, the fact that theoretical biologists used ‘evolutionary’ theory suggested a ready set of evolutionary metaphors for models of the economy — an idea reinforced by the fact that economics and evolutionary biology possessed a common intellectual ancestry in the work of Malthus. Unfortunately, however, evolutionary biology did not have an appropriate mathematical model — like physics — but only a set of metaphors and analogies. Where there were exact models, as in evolutionary game theory, they did not fit economic phenomena particularly well. Although ‘evolution’ has become a buzzword in modern economics, therefore, the question still remains open as to whether it represents a genuine conceptual innovation or just a passing fad.

Economics, like other social sciences, has made many attempts at importing concepts from other disciplines, and indeed few disciplines have been immune. In the 1920s economic theorists, in homage to Einstein, applied the concept of relativity to economics, and in the 1930s business economists experimented with concepts drawn from social psychology. Marxist economists of the 1960s relied heavily on sociological concepts (e.g. class) and political concepts (e.g. power). Most of these applications failed because the buzzwords introduced were merely suggestive of metaphors and analogies. These metaphors and analogies hinted at profound commonalities in the systems studied by the different disciplines, but they have never translated into widely accepted models of the formal mathematical kind that economists prefer. The notion that profound connections do indeed exist still remains, but the logical isomorphisms have never been fully established.

Buzzwords in a world of ignorance and confusion

If an academic discipline were controlled by a wise and knowledgeable elite, then misguided attempts to import buzzwords from other disciplines would be met by well-informed and closely reasoned objections. Attempts to introduce an entirely new word, on the grounds that some new and important concept had just been discovered and needed a name, would encounter ruthless criticism. While they may impress the junior members of the profession, or the members who are most naëve, they may lose the patronage of experienced senior people. Experienced members of the governing elite would obstruct any diffusion. Innovative scholars promoting new buzzwords that they could not legitimate would not be acclaimed, but derided. A buzzword innovator would face a serious risk of losing their reputation.

In practice, the opposite situation is often observed. Elites often appear remarkably weak. A simple way of explaining this anomaly is that no one in a profession — including the elite — privately believes that they understand their subject. Their members may feel that they have established their own reputations on the basis of introducing buzzwords themselves. Public criticism and withdrawal of patronage by members of the elite is therefore reserved for those who attack established concepts and the claims that they have made for it, rather than for those who simply propose another word for the same thing.

Members of the elite may privately believe that existing concepts are inadequate for their purpose. In order to address this problem, it is deemed necessary for the leaders of the profession to encourage innovation in the hope that some of the attempts may prove successful. Since the subject is not well understood, however, it is difficult to know how to discriminate between a successful innovation and an unsuccessful one. Members of the elite could pass arbitrary judgements on innovations as they occur, but denunciations would only carry weight if there were a degree of consensus among them. Disagreements may discredit the elite as a whole, as they will appear incompatible with any claim that the elite, as a group, knows best.

If an elite wishes to remain silent, in order to avoid damaging disagreements between themselves, then popularity becomes the obvious criterion by which to determine the success of an innovation. In a world where no one understands very much, popularity itself signifies very little, but it can at least be measured. Furthermore, when no one believes that anyone else knows anything much anyway, popularity may reflect a collective wisdom of the masses, if any such wisdom exists.

Under these circumstances, an individual may acquire a useful reputation simply as someone who is a potential rather than an actual innovator. Unsuccessful innovations are rated more highly than no innovation because successful innovation is recognized as something that is very difficult to achieve. Successful innovation cannot be achieved without attempted innovation, and so attempted innovation is rewarded to some degree independently of success.

A similar principle is recognized in small business economics, where entrepreneurs are applauded for setting up new businesses even if they fail. If they salvage enough from a failure to start another business, then, sooner or later, on the law of averages, they will succeed, and at this point they may be hailed as a ‘serial entrepreneur’. While some serial entrepreneurs achieve consistent success, the failures of ordinary entrepreneurs may cost their creditors their savings and their employees their jobs. Nevertheless, those serial entrepreneurs whose success is only intermittent can also achieve a degree of celebrity status.

Another implication of a general lack of understanding is that using buzzwords may also be valued highly even though people recognize that a buzzword may quite possibly signify nothing. A person who is quick to adopt a new buzzword signals that they socialize with innovative people, and this may in turn suggest that they are more likely than most to come up with an innovation of their own. ‘Dropping names’ is a widely recognized way of advertising a person's social contacts, but in an academic environment, dropping buzzwords can be just as effective, as knowing the appropriate buzzwords to drop into conversation can be a signal of knowing the right people too.

Peer opinion versus elite opinion

Where there is no belief in the value of tradition, or the existence of an accumulated stock of knowledge, the opinions of experienced members may count for little with younger and less experienced members. Furthermore, if the profession is rapidly growing, then the younger and inexperienced members may heavily outnumber the older and more experienced members, and if there are plenty of jobs available, then the rationing of jobs by senior members may be only a minor consideration. Under these circumstances, peer opinion may be more important for junior members than the opinions of the elite — peers who are colleagues of similar age and experience who expect, as the rising generation, to become the new elite. In the absence of respect for tradition, the new elite has no need to embrace the ideas of the old elite — they can make up their own systems and beliefs without regard for those of the preceding generation. Under these circumstances, innovators of useless buzzwords have little to fear from reputation loss, because the only people with whom they are likely to lose reputation are people who do not matter much anyway.

Evaluation of buzzwords

Even if it were true that most professions operate under conditions of very limited understanding, it would still be questionable whether uncritical acceptance of buzzword innovations was an efficient strategy for a profession as a whole. In the absence of any agreed critical standards by which to assess potential conceptual innovations, innovation may come to be regarded as an end in itself, rather than as the necessary means towards a higher end. In pursuit of reputations for innovation, members of the profession may be discouraged from making the effort required to attempt a genuine innovation. They may focus purely on innovating new buzzwords and demonstrating their familiarity with the most recent buzzwords introduced by others. This is a lower-cost strategy than attempting a genuine innovation.

A useful way of assessing the seriousness of this problem is to examine some practical case study evidence. The field of management studies is a fertile field for case study material. It has been a major growth area for teaching and research in the social sciences in the post-war period. It is a multidisciplinary area in which interdisciplinary research has been encouraged. Its leading journals explicitly encourage conceptual innovation. Many of its leading academics have achieved a ‘guru’ status both in the business community and within academia profession. Many of the management buzzwords coined in the post-war period have found their way into popular use. The case study below focuses on one of the most important buzzwords in the post-war history of management studies — namely strategy.

A case study: ‘strategy’ as a buzzword

The importance of strategy to international management

The concept of strategy is widely used in international management. It has given its name to an entire field of study, to a significant number of sub-fields, and to an associated suite of prestigious academic journals. It has provided a valuable ‘meal ticket’ for many academics. Indeed, many social scientists publishing in economics, sociology and business history journals might not have had an academic career if it were not for a post in a business school as a strategy professor. By many criteria, strategy is an immensely valuable concept, but the question considered in this case study is whether it actually contributes to conceptual clarity. This case study suggests that strategy has succeeded purely because it is a buzzword and not because it represents an important conceptual innovation.

Strategy, though widely used, is unfortunately rarely defined. Most published definitions of strategy appear in literature reviews, survey articles, handbooks and reference works. Almost all these definitions fudge the conceptual issue by emphasizing that strategy is a versatile concept that can be applied in different fields and therefore defies any single definition. Most attempts at definition degenerate into typologies, in which various fields of strategy studies are delineated and labelled. As a result, different sub-fields of strategy are defined with respect to the different contexts in which the concept is applied, but the concept itself remains undefined.

The emergence of strategy as an analytical concept

Definitions of strategy that address the conceptual issue are mainly found in the early literature. This is quite a common phenomenon where buzzwords are concerned. Scholars who innovate a word often feel obliged to offer a definition, if only a provisional one. As other scholars adopt the word, the original definition may appear too restrictive, or the adopters may simply not care about the original definition. Indeed, if the word that labels the concept is attractive simply because it has other connotations, then it may be advantageous to drop the original definition altogether.

Prior to Porter (1980, 1996), the concept of strategy had strong military connotations. Strategy was usually distinguished from policy, which in the military literature was seen as being political in nature. Thus military strategy was often seen as peaceful policy pursued by ‘other means’. In a military context a strategist usually faces a clear opponent — the enemy - and the object of strategy is to outmanoeuvre them. In the military literature it is usually assumed that both the strategist and opponent control hierarchical organizations (e.g. armies) in which strategy is set by the leader. Strategy is implemented by middle managers — an ‘officer class’ — who devise tactics to implement the strategy in the context of specific circumstances that they face. Workers — the ‘rank and file’ — simply follow orders; they are often referred to as the resources of the organization.

The application of strategy to business is linked to the evolution of the modern managerial corporation. Early management theorists who invoked the concept of strategy, such as Ansoff, Declerck and Hayes (1976) and Steiner (1979), were concerned with the problems of managing large hierarchical organizations. Strategy-speak was a tool by which top managers could communicate with middle managers in order to ensure that the objectives pursued at lower levels of the organization were compatible with those at the top. The more that middle managers understood about the objectives of senior management, the easier it was to delegate decisions. Delegation in turn made the organization more responsive to local conditions — especially to moves by local competitors to gain market share. This may explain why strategy has had less influence in small business research than in large business research. Owner-managers of SMEs have less need for formal strategies because they can communicate their objectives face-to-face.

Critics of the strategy concept have claimed that in large organizations discourse about strategy has been used to legitimate the status of senior managers, by implying that they understand strategy better than their subordinates. In a small firm there may be less need for such rhetoric, either because there are fewer levels of management, or because communications are better, or both.

Conceptual issues: the relation of strategy to entrepreneurship and the firm

In management studies the relation between strategy and entrepreneurship is unclear. Does a successful entrepreneur have to have a strategy? If so, is having a strategy a hallmark of an entrepreneur? Indeed, is having a strategy the same thing as being an entrepreneur? Is the theory of entrepreneurship just the theory of strategy by some other name, or conversely, is strategy just the theory of entrepreneurship by another name (Pozen, 2008)?

Then there is the question of strategic interactions between firms. Such interactions can be very complicated, particularly when questions arise about ‘who is influencing whom’, and ‘who is influenced by whom’. Much of the strategy literature discusses these issues from the standpoint of a single firm, rather than from the standpoint of the business system as a whole.

This firm-centred view often appears biased towards pro-active firms which initiate strategies rather than reactive firms which respond to other firms' strategies. It also tends to focus upon successful firms, or at any rate survivors, rather than firms that fail or become extinct through acquisition. In other words, the firm-centred view of strategy can lead to a biased view of strategic issues in business as a whole.

There are two main ways of addressing such questions of this type. One is to take the questions at face value and to assume that a careful reading of strategy literature will therefore divulge important insights. The second is to assume that these questions remain meaningless so long as the concept of strategy is undefined. While there are undoubtedly real questions to be asked about the relationship between large firms and small firms, and about the relationship of entrepreneurship to management, it is possible that these issues cannot be illuminated by a discourse that relies on the concept of strategy. These issues may be best resolved by restating the questions without any reference to strategy and then analysing them using plain and simple language instead.

This case study tends to support the second approach. It suggests that most arguments expressed in terms of strategy can be expressed equally well without the word, and indeed, can usually be expressed with greater clarity in this way. An examination of the way that the use of the term strategy has evolved suggests that it began as a means of relabelling an unfashionable concept of ‘business policy’ that was in turn linked to a politically unpopular concept of ‘planning’. Although strategy is often presented as a major conceptual innovation in its field, it appears to have created a good deal of confusion, because of the many different ways in which it has come to be used. In the absence of any tradition of formal modelling, there are no unambiguous criteria by which to assess the theoretical contribution of a novel concept in the field of business and management studies. Strategy has acquired and maintained its status as a buzzword even though there is no agreement within the business and management professions as to what the concept actually means.

Porter's contribution

Porter's research shifted the focus of strategy away from the internal coordination of the firm towards the external marketplace. Unlike earlier writers, Porter was less concerned about the communication of strategy to middle managers than with the possibility that the strategy itself could be wrong. Porter started writing at the time of major recession, when Western economies in general — and the US in particular — were facing the full force of Japanese competition. Imports from Asia flooded domestic markets and threatened the viability of large corporations, many of which were obliged to sell off foreign operations in order to fund loss-making domestic activity.

The problem, Porter argued, was that managers did not fully understand the economic logic of the industries in which they were operating. In particular, they did not understand the ‘five forces’ that governed success, and certainly not the implications of these five forces for their competitive position in their industry. The strength of import competition demonstrated that firms must either cut their costs, or differentiate their products, or preferably both. Otherwise they must give up mass production and concentrate on niche products instead.

The same conclusions could be arrived at using conventional economic theory — indeed, some of Porter's Harvard colleagues — notably Richard Caves (1987) — arrived at similar conclusions at the same time. Porter's five forces, in fact, come straight out of economics textbooks on industrial organization and market structure. Porter's genius was to adapt the textbook treatment in two important ways.

First, using his value chain concept, he highlighted the multi-stage nature of the production process. Although multi-stage production was well established in the economics literature — notably in the theory of vertical integration — its implications for market structure had not been fully developed.

Second, Porter restated the classic theory of monopoly from the standpoint of managers rather than policy-makers. Economists of the time saw themselves as government advisers rather than business consultants, and the economic theory of industrial organization was therefore expounded from the standpoint of government anti-trust policy rather than business profitability. From the policy perspective competition was ‘good’ and monopoly was ‘bad’. Monopoly provided firms with an incentive to restrict supply and raise price, whereas competition tended to have the opposite effect.

Porter restated the theory from the boardroom perspective. From a firm's point of view, monopoly is good because it yields higher profit. Under competition a firm can only earn a normal profit in the long run — a profit that just compensates for the opportunity cost of the time and money invested in the enterprise. Under monopoly it can earn a super-normal profit. According to economic theory, monopoly profit is appropriated through a redistribution of welfare from consumers to the firm. There is a net loss of welfare as well, associated with the restriction of output arising from the high price. Porter does not emphasize this point.

Monopoly profits can only be sustained in the long run if there is a barrier to entry, such as a patent or other ‘first mover’ advantage held by the firm. In the absence of a barrier to entry, the firm must constantly keep one step ahead of its rivals — in particular imitators who are trying to copy the methods that it uses to achieve its success. Porter restated this argument by saying that a successful firm needs to remain ‘competitive’. This meant that the firm had to defend its monopoly profits by maintaining an advantage over its competitors — in other words, it had to create and sustain a ‘competitive advantage’.

The rhetoric of competitive advantage allowed Porter to side-step the sensitive issue of monopoly and to describe a successful long-run monopolist as ‘competitive’. By implication, the less successful firms that are driven out of the market by the monopolist are ‘uncompetitive’. In fact, as Baumol, Panzar and Willig (1982) noted, the uncompetitive firms are the firms that constrain the level of monopoly profit. It is their threat to re-enter the market, or to increase their market share, that forces the monopolist to keep down its price to a ‘limit price’ which is sufficient to deter its ‘uncompetitive’ rivals. If it were not for the uncompetitive competitors, prices would be higher, the redistribution of welfare from customers larger, and the deadweight welfare loss caused by restriction of output would be greater too.

The play on words involved in Porter's presentation of strategy helps to explain the popularity of his concept in business school teaching. Most managers are aware of the need to legitimate business activity in terms of ‘wealth creation’; the notion that businesses pursue monopoly profits and seek to suppress competition is unlikely to win popularity with ordinary workers and consumers. On the other hand, the notion that business managers are engaged in a constant struggle to maintain competitive advantage by offering better deals to customers, thereby preserving workers' jobs, is much more attractive.

The relation of the strategy concept to formal modelling

Strategy is a useful word if it is embedded in a proper context. The problem with the strategy concept in business and management studies is not the word itself, but the fact that the word is used so loosely. The concept of strategy is also used in economics, but in this context it is used very differently. In economics the concept of strategy is most widely used in industrial organization theory, where it describes pricing and quantity-setting by oligopolistic rivals. More generally, it is used in non-cooperative game theory to identify the options available to the players. In this context, a strategy is simply an element in a choice set; the decision-maker makes a rational choice of strategy based on a ranking of alternative expected outcomes. The advantage of this approach is that the meaning of the strategy is contingent on the assumptions of the model, and because the assumptions are made explicit the meaning of strategy in the context of the model is absolutely clear. There is no possibility of confusing the strategies within the model with unrelated strategies that appear in everyday discourse. This provides the basis for a generic definition of strategy, namely a strategy in an element in a set of alternative courses of action between which a firm can choose.

Within the context of economic models, the word strategic has another, more specific, connotation. It signifies decisions that are fundamental, in the sense that they have implications for other decisions, which are conditional on the strategic decision. In economics a strategic decision is usually forward-looking and irreversible. It involves the commitment of resources to some specific use from which they cannot later be withdrawn. The costs incurred in procuring the resources become sunk costs once the resources are committed to a specific use.

From this perspective, a strategic decision could be defined as a decision that involves an irreversible commitment of resource to a long-term investment that has significant implications for the way that other resources are subsequently used. Economic theory implies that it is most important that strategic decisions are taken correctly, as mistakes will be extremely wasteful. Since different people have access to different information, it is therefore important that the right person is selected to take the decision.

These two definitions of strategy — one generic and the other specific — provide an option for retaining the concept of strategy in the analysis of international business. Both concepts are viable because both can be embodied in a rigorous economic theory of the entrepreneur.

The generic concept implies only that strategy is an object of choice; when used in this way, most of the meaning of the term is provided by the context in which it is used. If the context changes, then the meaning changes; deductions and inferences must rely on the logic of the model rather than a play on words.

The specific differentiates fundamental decisions from unimportant ones. It resonates quite well with the use of the strategy concept in the organizational literature. The notion that strategy is set at higher levels and communicated to lower levels fits nicely with the notion that higher levels of management take long-term investment decisions and that lower levels of management take short-term decisions that are conditional on higher level decisions already made. The definition does not, however, assume that strategic decisions have to be taken at higher levels; this is an open question on which hypotheses can be formulated and tested. In other words, the definition can be used to develop a plausible model of organizational structure in which the success of a firm depends on decentralization, good internal communication and entrepreneurial ability at the top.

Assessment of the strategy concept

Business behaviour is a complex phenomenon, and requires rigorous analysis. Rigorous analysis requires formal models. However plausible a set of propositions may appear, they are no substitute for a formal model. Those who reject formal models need a substitute which appears convincing. The concept of strategy is a very useful substitute. It enables the construction of a plausible discourse which appears to explain the behaviour of firms in terms of the strategies they employ. Unfortunately the appearance of explanation seems to be largely illusory. Within business and management studies, strategy has become an instrument of description rather than explanation.

If more energy had been expended in the past on developing formal models of business strategy, and less on plausible-sounding strategic rhetoric, then the business and management profession would by now have a stock of more plausible and useful formal models. In addition, if the critics of formal models had been more constructive in their criticisms, then they could have helped the modellers to improve their models. Instead, most critics of models have tended to repeat the same general arguments against formal models in contexts of different models, and make little attempt to engage with the specific strengths and weaknesses of any particular model. In this hostile intellectual environment, a policy of ‘no analysis of strategy without a formal model’ could make a substantial contribution to the future development of business studies as a rigorous discipline. In this context the concept of strategy would still have a role, but only a term that identified specific aspects of decision-making within a formal model.

Conclusion

This chapter has considered the social mechanisms that lie behind the innovation and diffusion of buzzwords in international management. It has focused on buzzwords that act as labels for concepts used to analyse complex social and economic systems. It has suggested that under certain circumstances the users of buzzwords may receive rewards — in terms of status and reputation within their professional community — merely by revealing a commitment to innovation rather than by demonstrating the proven worth of the innovations that they make.

The circumstances conducive to buzzwords prevail when members of a profession are uncertain about how best to analyse the field of study that they profess to research. Lacking confidence in the understanding afforded by familiar concepts, they believe that their subject will progress mainly through conceptual innovations. They accept that not all these innovations will be useful. Furthermore, they do not have any agreed formal criteria for distinguishing between useful innovations and useless ones. Thus there are no limits to the proliferation of concepts, and to the proliferation of new words to support them. Furthermore, because they attach little value to their existing body of theory, these professionals are content to relabel existing concepts when they believe that this will make an existing concept more acceptable to the constituency (e.g. business managers, politicians, the public) that they aim to serve.

Under these conditions, individual members of a profession have a strong incentive to use buzzwords, because they signal to others that they have a capability to innovate. Individuals who have not heard the buzzword before may mistake the adopter of the word for the innovator; if they recognize the word, they may assume that the adopter either knows the innovator, or knows someone who knows the innovator. Individuals who believe themselves to be very knowledgeable may be unimpressed by the use of a buzzword, but if other people do not consider these people to be knowledgeable, then they will have little influence, and no harm will be done to the adopter. Provided most people, including influential people, believe that no one really understands the subject very well, then on balance people who matter will still be impressed — and not just those who are gullible.

To maximize their professional reputation, innovators need to secure as many adopters as quickly as possible. Marketing their buzzword becomes a high priority; the greater the use of the word, the higher their status. There is little to be gained by criticizing other people's buzzwords, as this only draws attention to them; if anything, the incentive is simply to ignore other people's buzzwords, in the hope that their use will die out as other new words come along. The appropriate strategy is drop your own buzzword into conversation at every opportunity, and to attend as many events as possible (seminars, conferences, etc.) where it can be put to use.

The business and management studies profession affords an instructive case study in this respect. In particular, the concept of strategy, as developed in the post-war period, illustrates many of the features of a buzzword that has been introduced and diffused through mechanisms of this kind. A case study of how the word is used today suggests that the costs to the profession of rewarding buzzword innovation for its own sake have been very high. While it may have successfully advanced the careers of a small group of gurus, conceptual proliferation has not advanced understanding of the subject matter within the profession as a whole. Indeed, it seems to have had the opposite effect. As different members of the profession have attempted to promote themselves as innovative thinkers by consciously deploying buzzwords in their arguments, their arguments have become progressively more confused. When the same word is used by different authors in different contexts where it carries a slightly different meaning, the word itself loses identity. Versatility is achieved only at the expense of vacuousness.

A word that labelled a fundamental concept within a coherent model of a complex system could quite legitimately be used in many different contexts because these different contexts would be logically isomorphic. The model would provide a theoretical context within which the concept could be understood. But where a concept exists in isolation, outside the structure of any formal model, there is no fixed point of reference by which to establish its meaning, and as a result the word that labels the concept loses its meaning too. As a meaningless word it can be added to almost any proposition, for although it is redundant it does not actually change the proposition to which it is applied. This appears to have been the fate of ‘strategy’ within the business and management studies literature, where it now denotes nothing at all in most of the contexts in which it is used.

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