Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • August 2017
  • Article
  • Management Science

A Formal Theory of Strategy

By: Eric J. Van den Steen
  • Format:Print
ShareBar

Abstract

What makes a decision strategic? When is strategy most important? This paper formally studies these questions, starting from a (functional) definition of strategy as “the smallest set of choices to optimally guide (or force) other choices.” The paper shows that this definition coincides with the equilibrium outcome of a “strategy formulation game,” in which such strategy endogenously creates a hierarchy among decisions. With respect to what makes a decision strategic and what makes strategy valuable, the paper considers the effect of commitment, reliability, and irreversibility of a decision; the presence of uncertainty (and the type of uncertainty); the number and strength of its interactions and the centrality of a decision; its level and importance; the development of capabilities; and competition.

Keywords

Strategy Development; Strategy; Decisions

Citation

Van den Steen, Eric J. "A Formal Theory of Strategy." Management Science 63, no. 8 (August 2017): 2616–2636.
  • Find it at Harvard

About The Author

Eric J. Van den Steen

Strategy
→More Publications

More from the Author

    • September 2021
    • Faculty Research

    Tesla Motors in 2021: Competition Revs Up

    By: Eric J. Van den Steen, Ramon Casadesus-Masanell and Karen Elterman
    • Strategy Science

    Birds of a Feather...Enforce Social Norms? Interactions Among Culture, Norms, and Strategy

    By: Hongyi Li and Eric J. Van den Steen
    • January 2021 (Revised March 2021)
    • Faculty Research

    Strategy and Strategic Thinking

    By: Eric Van den Steen
More from the Author
  • Tesla Motors in 2021: Competition Revs Up By: Eric J. Van den Steen, Ramon Casadesus-Masanell and Karen Elterman
  • Birds of a Feather...Enforce Social Norms? Interactions Among Culture, Norms, and Strategy By: Hongyi Li and Eric J. Van den Steen
  • Strategy and Strategic Thinking By: Eric Van den Steen
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College