Volume 6, No. 1 (Spring 2003)
This article provides a new synthesis between the strategic management literature and Austrian capital theory. The resource allocation process plays out in the context of differing subunit preferences, potentially resulting in tension and periodic conflict that may lead to dysfunctional relationships over time. Absent clearly understood and effective operational rules, the potential for heightened dysfunctional internal relationships will leada conglomerate organization to have a diminished resource base for achieving its future strategic goals. This article presents a set of resource-allocation rules based on the Hayekian theory of production. By developing an effective resource-allocation paradigm based on economic theory, the organization can gain market share resulting in increased profitability and continued success in the marketplace. The Hayekian traingle offers firms an objective mearsure reflecting environmental shifts by tracking interest-rate changes that affect consumer and production demand. Organizations can gain "first-more advantages" essential provide the competitive advantage vis-à-vis their rivals while maintaining harmonious relationship among subunits. Entrepreneurial innovation can also be exercised by "second movers" who imitate the "first movers," perhaps taking advantage of lessons learned. This kind of innovative imitation may well provide the greatest scope for entrepreneurial activity.
