Information, market imperfections and strategy

Abstract

In this paper we argue that the organization's search for market imperfections reflects the information dispersion in the economy. We describe, within a Bayesian framework, the relative importance of and the mechanisms by which externally- and internally-based informational rents arise endogenously. We argue that, rather than viewing the strategic planning process as one where the firm must pursue only one source of information, search should be viewed as evolving within a dynamically related system; progressing from externally-based to internally-based sources of rent as markets evolve.