Heterogeneous Resources and the Financial Crisis: Implications of Strategic Management Theory

Macroeconomic theory assumes that factors of production in the economy are homogeneous and fungible. As a result, it is poorly suited for analyzing and developing policy responses to the recent financial crisis. Theories of strategic management and organization, with their emphasis on heterogeneous resources and capabilities, are better positioned. We provide examples of how macroeconomic theory may lead policies astray, and how theories of strategic management provide insight into the nature and causes of the financial crisis and the appropriate policy response.