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The attention-based view (ABV) of the firm highlights the role of decision makers’ attention in firm behavior. The ABV vastly improves our understanding of decision makers’ focus of attention; how that focus is situated in an organization’s procedural and communication channels; and how the distribution of the focus of attention among decision makers participating in those procedural and communication channels affects their understanding of a situation, their motivation to act, and, ultimately, their behavior. Significant progress has been made in recent years in refining and extending the ABV. However, the role of individual differences in the capacity to read other people’s desires, intentions, knowledge, and beliefs – that is, the theory of mind (ToM) – has remained on the sidelines. The ToM is a natural complement to the ABV. In this study, we explore how the ToM allows for an understanding of the advantage that organizations have over markets within the ABV.

Entrepreneurs in a competitive economy face three fundamental problems. They need to search for and discover a business opportunity (Kirzner, 1973), evaluate it (Knight, 1921), and then seize the opportunity to reap entrepreneurial profits (Schumpeter, 1911) (Langlois, 2007). The problem that we address is how the ability to exploit business opportunities is influenced by entrepreneurial search and the economic organization of entrepreneurship (Arrow, 1962; Lippman & Rumelt, 2003b; Aghion et al., 2005; Foss, Foss, & Klein, 2007). In many cases, the discovery for a new business opportunity needs to be motivated by expected gains, since the search and evaluation of business opportunities is a costly, resource-consuming process (Denrell, Fang, & Winter, 2003; Nickerson & Zenger, 2004; Foss & Klein, 2005; Teece, 2007; Foss & Foss, 2008).¹ We show the critical role of expectations for understanding of the economic organization of entrepreneurship, and argue that transaction cost economics, with its insistence on bounded rationality, but farsighted contracting offers useful insights and presents rich opportunities for further theoretical and empirical research (cf. also Furubotn, 2002).

This is a, somewhat indirect, rejoinder to Boettke (2019, this volume, Chapter 1). Doing Austrian economics is low prestige: Austrian economics does not get published in high-prestige journals and Austrian economists are not employed by top universities. And yet, up until World War II Austrian economics was an important part of the international economics community. The author argues that Austrian economists made several theoretical innovations that could have placed them at the frontier of research in economics, and present a brief counterfactual history of a thriving Austrian economics based on those innovations. However, the actual history of the Austrian School is quite different. A particularly decisive factor that has made Austrian economics a fringe movement was the rejection of formal methods in theory and empirics. The author argues that Austrian economics is basically dying out as a voice in the conversation of modern economists.

We argue that the stakeholder and CSR literature can benefit from more systematic thinking about ownership. We discuss general notions of ownership in the economics and legal literature and the entrepreneurial notion of ownership we have developed in prior work. On this basis, we argue that stakeholder theory needs to deal more systematically with ownership as an economic function that can be exercised with greater or lesser ability, may be complementary to other economic functions, and works better when assigned to homogeneous groups. Some stakeholder groups are likely to lack what we call “ownership competence,” even if they have made relationship-specific investments, in part because of a diversity of interests. We also discuss CSR from the perspective of ownership and support Friedman’s original position, but with a twist. The point of Friedman’s paper is not that firms “should” maximize profits, but that managerial pursuit of “socially responsible” activities in a discretionary way imposes costs on owners. We suggest this problem is exacerbated with entrepreneurial managers who can devise new ways to prop up their self-interested actions with new creative CSR initiatives.

The authors argue that organization design needs to play a more active role in the explanation of differential performance and outline a set of ideas for achieving this both in theoretical and empirical research. Firms are heterogeneous in terms of (1) how well they do things, capturing persistent productivity differences, and (2) how they do things – and both reflect firms’ organization design choices. Both types of heterogeneity can be persistent, and are interdependent, although they have typically been studied separately. The authors propose a simple formal framework – the “aggregation function framework” – that aligns organization design thinking with the emphasis on performance heterogeneity among firms that is characteristic of the strategy field. This framework allows for a more precise identification of how exactly organization design may contribute to persistent performance differences, and therefore what exactly are the assumptions that strategy and organization design scholars need to be attentive to.

Porter's activity‐based view of the firm is a comprehensive strategic framework which analyzes firm‐level competitive advantage. Although Porter's activity‐based view is widely cited by academics, taught to students, and applied by practitioners, little is known about its intellectual roots. Given that a framework's intellectual antecedents not only determine its current content, but also its future development, this paper aims to examine the intellectual roots of Porter's activity‐based view and the value chain.

The paper examines Porter's writings in an effort to document his influences while developing the activity‐based view and value chain. Porter's and other scholars' explanations are found to be lacking, so the paper ventures further down paths first suggested by Porter and others.

Whereas Porter's five forces framework built on the existing industrial organization paradigm, the activity‐based view is not derived from any existing paradigms. While consultants of the 1970s impacted Porter's development of the value chain and the activity‐based view, its deeper roots lay in operations research, particularly activity analysis; and the work of Arch Shaw, who was the first to teach a business policy course at Harvard Business School. Porter's contribution is to bring the diverse threads together into a coherent whole which managers can apply to analyze and improve their competitive positions.

Following Porter, the authors argue that activities are a key link between resource holdings and strategic positions. Therefore, it is only when the activity‐based and resource‐based views are integrated that they provide a comprehensive explanation of firm value creation.

The paper is the first to critically examine the intellectual antecedents of the activity‐based view.

Makes the case that the classical theory of production, as developed primarily by Adam Smith, should be seen as a precursor of the modern capabilities view of the firm (Penrose, Richardson, Nelson and Winter, Teece, Langlois and others). Furthermore, based on an empiricist epistemology, Smith developed ideas that are close to modern notions such as routines and bounded rationality. Shows that his emphasis on knowledge, specialization and learning is characteristic of the capabilities view, but not of the contractual view. Discusses the intellectual link from Smith to other classicals, such as Babbage and Marx, to Marshall and such post‐Marshallians as McGregor, Andrews, Downie, Penrose, and Richardson. Argues that the classical‐capabilities view of the firm can be seen as a theory of firm boundaries. States that the make‐or‐buy decision may in fact hinge on production‐cost considerations, contrary to the spirit of standard transaction‐cost economics.

The role of knowledge, organizational learning and innovation as levers of competitive advantage is now a commonly acknowledged insight in research in international management, specifically in the emerging ‘knowledge-based view’. However, this view has not yet developed into a unifying framework and there are significant holes in the understanding of how knowledge may be turned into a source of competitive advantage for MNCs. In order to advance the knowledge-based view of the MNC – and particularly of the metanational company – we develop the notion of the MNC as a global knowledge system that links local knowledge structures and combines local knowledge elements that are complementary in order to achieve strategic advantage. These ideas are used to frame the changing environments, strategic intents and learning stances that characterize MNCs, and to derive a set of research challenges for MNC research.