Heterogeneous resources and the financial crisis: implications of strategic management theory

The recent financial crisis and subsequent economic downturn are among the most important global economic events since the Great Depression of the 1930s (Elmendorf, 2009). In response to these events, macroeconomists have mustered their traditional theories to understand the causes of the crisis and, equally important, what might be done to help the economy recover more quickly. On op-ed pages, news talk shows and – apparently – in the highest halls of governments worldwide, discussions about fiscal and monetary policy intervention have dominated much of the conversation about the crisis and what to do about it (Coy, 2009), and have led to talk of a return to the ideas of John Maynard Keynes (Fox, 2008). Economic policy decisions today, derived mostly from traditional macroeconomic theories, may have implications for the economy for decades to come (Elmendorf, 2009). Thus, the stakes are high, since the prosperity – and even survival – of billions of people around the world depend on a healthy and growing world economy. In the midst of this obsession with macroeconomics, we would like to propose an alternative thesis: macroeconomics, by itself, is not well equipped to deal with the current crisis and, in particular, a sole reliance on macroeconomic theory is likely to slow rather than accelerate economic recovery. The reason for this is that mainstream macroeconomic theories, whatever their stripe, all adopt the assumption that factors of production, STRATEGIC ORGANIZATION Vol 7(4): 467–484 DOI: 10.1177/1476127009346790 © The Author(s), 2009 Reprints and Permissions: http://www.sagepub.co.uk/journalsPermissions.nav http://so.sagepub.com