Strategy research can be characterized by the attempt to describe and explain the existence, the boundaries, the organization, the behavior and the competitive success of firms. Economic theory provides the theoretical foundation for the dominant explanations of these issues, while at the same time characterizing the inherent research program and basic questions underlying these fundamental issues.
The recent focus of strategy research on understanding changing organizational arrangements within as well as between firms, and the increasing interest in explaining strategic behavior in uncertain and ambiguous competitive situations makes these dominant explanations partially problematic. A prominent response is the elaboration of an alternative conceptual approach, postulation the need for a knowledge-based theory of the firm. Organizational knowledge is identified as being essential for explaining how firms interpret and structure ambiguous situations, how firms change their basic structural patterns of activities and routines, as well as how firms behave by re-allocating resources and activities.
The present paper contributes to an in-depth understanding of knowledge as an important strategic resource, by first discussing the implicit assumptions characterizing the economic theory of the firm as well as an emerging alternative knowledge-based theory of the firm; second it deduces some major implications for answering the fundamental strategic issues identified; third it suggests how to integrate these two, partially contradicting approaches to strategy research; finally, the discussion leads to some implications for the actual scientific as well as managerial discourses on knowledge management.