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Choice Interactions and Business Strategy

IESE Business School, 08034 Barcelona, Spain
The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
pghemawat{at}iese.edu
levinthal{at}wharton.upenn.edu

Choice settings are strategic to the extent that they entail cross-sectional or intertemporal linkages. These same factors may impose daunting demands on decision makers. We develop a graph-theoretic generalization of the NK model of fitness landscapes to model the way in which policy choices may be more or less strategic. We use this structure to examine, through simulation, how fully articulated a strategy or set of policy choices must be to achieve a high level of performance and how feasible it is to offset past strategic mistakes through tactical adjustments (instead of alignment). Our analysis highlights the role of asymmetry in the interaction of strategic choices and in particular the degree to which choices vary in terms of being influential, dependent, or autonomous from other choices.

Key Words: strategic choice; activity systems; fitness landscapes; choice interactions; path-dependence
accepted: November 15, 2007.