CROSSROADS—Strategy, Problems, and a Theory for the Firm

• Published in: Organization science (Providence, R.I.) R.I.), 2016-01, Vol.27 (1), p.222-231
• Main Authors: Felin, Teppo, Zenger, Todd R.
• Format: Article
• Language: English
• Subjects: governance; innovation; Needs analysis; Organization theory; Problem solving; Strategic aspects; strategy; Studies; Valuation; Value; Value creation
• ISSN: 1047-7039; 1526-5455
• DOI: 10.1287/orsc.2015.1022

In this paper we develop the outlines of a theory for the firm—a theory that guides a firm’s path to value creation, in response to the critique by von Hippel and von Krogh [von Hippel E, von Krogh G (2016) Identifying viable “need–solution pairs”: Problem solving without problem formulation. Organ. Sci. 27:207–221; henceforth Hippel–Krogh] of the problem-solving perspective as a theory of value creation. Hippel–Krogh argue (a) that problems and solutions cannot always be separated because they often emerge as problem–solution or need–solution pairs that are discovered serendipitously, and (b) that deliberately formulating or choosing a single, fixed problem restricts the firm from accessing the vast array of external problem solvers and restricts the firm from valuable reformulations of the problem and “rich landscape search.” Although Hippel–Krogh raise interesting and important arguments, we claim that they miss what is most central about the problem-solving approach: the comparative, organizational, and strategic aspects of the theory. However, their critique is also important because it draws attention to a critical void in the problem-solving perspective, namely, the need for firms to possess a theory to guide their efforts at value creation. We argue that this theory for the firm links problem solving with a broader theory of value creation, thus responding to the concerns raised by Hippel–Krogh. We discuss how firms theorize the process of value creation by articulating an overall architecture and bundle of problems around which each firm uniquely organizes and governs as a path to value creation. We provide two brief, informal examples (Starbucks and Apple) to illustrate our points, linking these examples to the need–solution landscape proposed by Hippel–Krogh. In all, we provide a broad sketch and outline of a theory of value creation as it relates to problem finding and problem solving while concurrently responding to points raised by Hippel–Krogh.