Working Paper | HBS Working Paper Series | 2014

Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions in Grand Strategy

by Anoop R. Menon and Dennis A. Yao

Abstract

This paper proposes an approach for modeling strategic interactions that incorporates the costs to firms of changing their strategies. The costs associated with strategy modifications, which we term "repositioning costs," constitute a defining feature of strategic choice, which is particularly relevant to interactions involving grand strategies. Repositioning costs can critically affect competitive dynamics by making strategies "sticky" and, consequently, the implications of strategic interaction for strategic choice. And yet, while the organization and strategy literatures broadly recognize the importance of repositioning costs, game-theoretic treatments at the grand-strategy level with very limited exceptions have not focused on them. In this paper we argue for greater recognition of repositioning costs, provide a repositioning cost typology, and demonstrate the fertility of this approach with a simple model of inter-firm competitive interaction in which repositioning costs increase with the length of time that a firm has been executing its current strategy.

Keywords: Organizational Change and Adaptation; Strategy; Cost;

Citation:

Menon, Anoop R., and Dennis A. Yao. "Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions in Grand Strategy." Harvard Business School Working Paper, No. 14-103, April 2014.