See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/291798010

A general theory of entrepreneurship: The individual-opportunity nexus

Article  in  International Small Business Journal · January 2004

CITATIONS READS

21 5,949

1 author:

Per Davidsson
Queensland University of Technology
244 PUBLICATIONS   19,702 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Special Issue Journal of Business Research: Digital or not – the future of entrepreneurship and innovation View project

New ventures internationalization View project

All content following this page was uploaded by Per Davidsson on 27 April 2016.

The user has requested enhancement of the downloaded file.

05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 206

Reviews

is
International Small Business Journal
Copyright © 2004
SAGE Publications (London,

bj
Thousand Oaks and New Delhi)
DOI: 10.1177/0266242604043697
Vol 22(2): 206–216

Scott Shane, A General Theory of Entrepreneurship:

The Individual–Opportunity Nexus. Cheltenham: Edward Elgar
(New Horizons in Entrepreneurship), 2003. 352 pp.
ISBN 1–8437–6382–6, £69.95 (hbk).
The article ‘The Promise of Entrepreneurship as a Field of Research’ by Scott
Shane and Sankaran Venkataraman (2000) is no doubt one of the most interest-
ing, important and debated conceptual contributions in the field of entrepre-
neurship in recent years. In the book A General Theory of Entrepreneurship: The
Individual–Opportunity Nexus, Scott Shane – also one of the most productive and
cited researchers in the field – offers an elaboration of the themes outlined in the
preceding article.
Based on ideas originally presented by Venkataraman (1997), Shane defines
entrepreneurship as ‘an activity that involves the discovery, evaluation and
exploitation of opportunities to introduce new goods and services, ways of
organizing, markets, processes, and raw materials through organizing efforts that
previously had not existed’ (p. 4). As the central premise of the book Shane offers
‘that entrepreneurship can be explained by considering the nexus of enterprising
individuals and valuable opportunities . . . and by using that nexus to understand
the processes of discovery and exploitation of opportunities; the acquisition of
resources; entrepreneurial strategy; and the organizing process’ (p. 9). This
perspective on entrepreneurship and entrepreneurship research, which has roots
in Austrian economics as well as in Shane’s comprehensive experience from
empirical research on a broad variety of entrepreneurship issues, has a number
of interesting qualities:
• It directs attention to the problem of emergence; an element that is missing
in most established theories in economics and management.
• While pointing out that entrepreneurship research is one-legged without
consideration of the characteristics of the ‘opportunity’ (I would say
‘venture idea’, cf. Davidsson, 2003) that is being pursued, it retains a sound
interest in individuals because ‘opportunities themselves lack agency’ (p. 7).
However, this interest in the individual emphasizes their actions (entrepre-
neurship) and fit with the specific ‘opportunity’ rather than general charac-
teristics of entrepreneurs, thereby avoiding the dead end of ‘trait research’.
• Highlighting the partly overlapping processes of discovery and exploitation
the chosen perspective refutes – in line with empirical evidence – the view
that discovery is instantaneous and that entrepreneurship consists solely of
discovery.
• No mention is made of the age, size or ownership of the organizations
in which ‘opportunities’ are pursued. Hence, the stated domain includes

206
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 207

Book Reviews
independent as well as corporate entrepreneurship, and the suitability of
alternative modes of exploitation for given ‘opportunities’ is an important
research question.

Early criticism of the perspective outlined by Shane and Venkataraman (2000)

appeared in a ‘Dialogue’ in a later issue of The Academy of Management Review
(2001). One point of criticism concerned conceptual and empirical problems with
the very central concept of ‘opportunity’. Another concerned the primacy given
to opportunity and individual relative to the environment, which was decidedly
given a secondary role. It was also pointed out that the outcomes of entrepre-
neurship were not discussed as a central research question. Finally, there was a
concern that the article might erect barriers rather than fruitful collaboration and
cross-fertilization, in particular vis-à-vis strategy research (similarly, I have else-
where elaborated on the theme that there is a risk of an unproductive and unnec-
essary clash with the other main suggestion for redirection of entrepreneurship
research – William Gartner’s [1988] emphasis on entrepreneurship as the
creation of new organizations – while in actual fact the two perspectives are
compatible [Davidsson, 2003]).
In the book, Shane responds to several of these points. He retreats – albeit not
with perfect consistency – from the previous objective definition of opportunity
as profitable (which does not allow the study of ongoing processes of opportunity
discovery and exploitation) to viewing opportunity as ‘a situation in which a
person can create a new means-ends framework for recombining resources
that the entrepreneur believes will yield a profit’ (p. 18). While keeping ‘the
individual–opportunity nexus’ in the title of the book, Shane gives equal
emphasis to the environment in his over-arching model of the entrepreneurial
process (p. 11) and devotes two full chapters (6 and 7) to environmental influ-
ences. He also bridges to strategy by devoting Chapter 9 to the topic of entre-
preneurial strategy. However, there is a disappointing absence of a thorough
treatment of the outcomes of entrepreneurship. With Shane’s previous co-author
Venkataraman, I believe that a very important and distinct contribution entre-
preneurship research can make is to not stop at comparison of relative perform-
ance of ventures or firms, but also to study indirect outcomes and outcomes on
the individual and societal levels (Davidsson, 2003; Ventakaraman, 1997).
From a book with this pre-history and this title I would expect, more than
anything else, a theoretical elaboration of the previously introduced ideas. And
it starts out well. After an introduction to the central themes and premises in
Chapter 1, Shane deepens the analysis of opportunities in Chapters 2 and 3,
regarding their origin as well as how they are discovered. While also reviewing
the existing research Shane here clearly introduces new thoughts that can serve
as inspiration for new, important research to come. The latter chapters in the
book – on resource acquisition (Ch. 8), entrepreneurial strategy (Ch. 9) and the
organizing process (Ch. 10) also include theoretical elaboration, but except for
possible minor exceptions this does not concern the most central premise about
the individual–opportunity nexus. In the middle four chapters on the individual
and the environment the exposition definitely slants over more towards

207
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 208

International Small Business Journal 22(2)

becoming a comprehensive review of the existing literature, going through the
alleged separate effects sub-dimension by sub-dimension, similar to Storey’s
review of research on fundamental themes in small business research (Storey,
1994). Shane’s review is in many ways impressive. First, his encyclopaedic
mastery of the literature is truly admirable, and extends far outside of the realm
of narrowly dedicated ‘entrepreneurship journals’. Second – and related – he
shows, for a US-based author, an unusual awareness of and willingness to cite
research conducted in a broad range of countries. Third, there is a sound selec-
tivity in that he leans more heavily on more theory-driven and/or comprehensive
studies, giving less weight to research of questionable quality.
However, there is one minor and two major problems with this extensive
reviewing. The minor problem is that the repeated brief descriptions of the same
studies, when referred to several times, become a stylistic burden. The first major
problem is that the review is selective also in a not-so-sound sense. Rather than
providing a well-balanced review like Storey’s (1994), Shane systematically
chooses – much like economists tend to do – to mention only those studies that
support his argument. This becomes evident on several issues where the litera-
ture is, at best, inconclusive, such as the effects of unemployment (p. 64), locus-
of-control (p. 109) and planning (pp. 222–3), as well as the issues of risk-taking
(p. 103) and venture growth (p. 209). On all of these issues the unwary reader
may be led to believe that the empirical evidence is much more consistent than
it really is.
The second major problem with Shane’s extensive reviewing of the existing
literature is that the perspective of entrepreneurship he supports is in many ways
radically different from the perspective on entrepreneurship that underlies much
of the research he cites. His fresh perspective on entrepreneurship emphasizes
the interacting explanations for the processes of emergence of new and (at least
to some extent) innovative economic activity regardless of organizational or
ownership context. In sharp contrast, most of the research he cites employs little
of a process view, generally assumes additive effects rather than interactions, and
uses the status of self-employment or the entry of new independent businesses –
innovative as well as imitative but with the latter in marked majority – as the
operationalization of ‘entrepreneurship’. Adding Shane’s selectivity to this
fundamental clash of perspectives there is the risk that his review provides
neither a balanced account of the literature on ‘entrepreneurship = starting and
running one’s own firm’ nor valid support for his theoretical arguments, which
concern a phenomenon that does not necessarily require independent (owner-
ship) status or the creation of a new company (e.g. p. 224).
Having said this it must be emphasized that Shane never claims to provide an
unbiased review of the literature. Neither is he unaware of the gap between his
theoretical delineation of the entrepreneurship phenomenon, and the opera-
tionalizations that dominate the existing literature (p. 5). However, by using the
existing literature to support his fresh perspective he takes on a mission imposs-
ible – the relevant research simply does not exist yet. At the same time he may
have done a disservice to his own cause, for it is precisely the lack of research on
the central aspects of his (and Venkataraman’s) perspective on entrepreneurship

208
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 209

Book Reviews
that makes this book so important for potentially redirecting empirical entre-
preneurship research toward studies that can make more of a distinct and
valuable contribution to social science at large as well as to policy making.
In a book with this somewhat pretentious title I would have preferred to find
even deeper theoretical elaboration on the central premise (cf. above). Rather
than the implicit suggestion that the empirical evidence is already there I would
also have appreciated – from this very experienced empirical researcher – further
elaboration on how research can be designed to truly address these issues
(alternatively I could rephrase this as a suggestion to readers to read with extra
care the nine pages [261–9] that Shane admittedly does devote to the topic of
future research). Returning to Shane’s graphical model of the entrepreneurial
process I am left hungry for more on the interactions or fit between the indi-
vidual(s) and the opportunity with respect to making discoveries and deciding to
try to exploit them, and how these exploitation efforts are conducted. Similarly,
the interactions between characteristics of the ‘opportunity’ and the environment
are highlighted here but not penetrated so much in the remainder of the book.
Nevertheless, in the form Shane chose to give it, A General Theory of Entre-
preneurship is undoubtedly a very important contemporary book in the field of
entrepreneurship. It should be mandatory reading for PhD students who enter
the area, and can be warmly recommended to those who already are ‘entrepre-
neurship researchers’. I am less convinced that it will or should be widely read
in, say, 10 years time. If Shane is successful at convincing followers about the
relevance of his theoretical framework this book will be widely cited in the future,
but rarely read cover to cover. This is because the very research it inspired made
large parts of its current contents obsolete as best empirical evidence available.
Few books have similar potential.

References
Academy of Management Review (2001) ‘Dialogue Section’, Academy of Management
Review 26(1): 8–16.
Davidsson, P. (2003) ‘The Domain of Entrepreneurship Research: Some Suggestions’, in
J. Katz and D. Shepherd (eds) Advances in Entrepreneurship, Firm Emergence and
Growth, Vol. 6, pp. 315–72. Oxford: Elsevier/JAI Press.
Gartner, W. B. (1988) ‘ “ Who is an Entrepreneur” is the Wrong Question’, American
Small Business Journal 12(3): 11–31.
Shane, S. and Venkataraman, S. (2000) ‘The Promise of Entrepreneurship as a Field of
Research’, Academy of Management Review 25(1): 217–26.
Storey, D. J. (1994) Understanding the Small Business Sector. London: Routledge.
Venkataraman, S. (1997) ‘The Distinctive Domain of Entrepreneurship Research: An
Editor’s Perspective’, in J. Katz and J. Brockhaus (eds) Advances in Entrepreneurship,
Firm Emergence, and Growth, Vol. 3, pp. 119–38. Greenwich, CT: JAI Press.

Per Davidsson
Jönköping International Business School (JIBS), Sweden

209
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 210

International Small Business Journal 22(2)

Anthony P. Ellison, Entrepreneurs and the Transformation of the
Global Economy. Cheltenham: Edward Elgar, 2002. 320 pp.
ISBN 1–8406–4819–8, £69 (hbk).
This book has a great title, which could attract many subscribers to this journal.
They may hope to learn, for example, about the many entrepreneurs who have
established companies that have transformed the global economy. The potential
reader may be further encouraged by the marketing material on the cover:
Anthony Ellison cuts through conventional neo-classical interpretations to expose the
indispensable contribution of entrepreneurs in driving the market process and, in
particular, in accomplishing the deregulation of the transportation, trade, tele-
communications and financial regimes both in North America and across the globe.
Entrepreneurs have an important role in any economy, but in this seminal study, the
author argues that they have played a crucial part in shaping the contemporary global
market.
Unfortunately, both title and marketing material are highly misleading. While
one or two entrepreneurs such as Bill Gates and Paul Allen get a passing
mention, the book tells us little about entrepreneurs or entrepreneurship.
The author sets out to explain policy relating to the deregulation from the
1970s onwards of the North American transport industry. In addition to a
detailed review of transport policies, it covers regulatory policies for tele-
communications, electricity, the financial sector and international trade. In doing
so, it offers many interesting insights into the evolution of, and policies towards,
the railways, air services, and the Internet through to discussion of the Washing-
ton consensus, the role of the IMF and World Bank and economic restructuring
in Russia.
While attempting to explain deregulation, the book becomes an exercise in
political economy, assessing the contribution of alternative economic theories to
both explaining, and contributing to, the process through which a more liberal,
market-based global economy has emerged. In doing so, it outlines and critiques
the views of those (both individuals and institutions) who have opposed deregu-
lation, privatization and globalization. It also raises and discusses questions
relating to, for example, the role of economists in the pay of the state, what makes
an economic theory acceptable and influential, the origin of beliefs and ideology
and the influence of political structure and cultures.
In addition to Marxist views and those of democratic socialists, the neo-
classical approach to market failure and the role of the state is heavily criticized.
The application of economic engineering as practised via traditional welfare
economics is seen almost as a form of Soviet planning. In contrast to the ideal
world of perfect competition, the importance of contestable markets,
institutional change, property rights and disequilibrium brought about by
endogenous technological change and entrepreneurial endeavour are empha-
sized. By focusing on these issues, the book begins to paint a more realistic
picture of the working (and perhaps benefits) of deregulated market economies.
The argument is that the economy is not driven by perfect markets allocating

210
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 211

Book Reviews
resources in a pareto optimal fashion. Rather deregulation and free markets
(even if leading to temporary monopolies) improve efficiency and productivity
via competition, which brings about innovation and Schumpeter’s process of
creative destruction.
However, ultimately, business entrepreneurs play a limited role in economic
transformation. While endogenous within the economic system (in contrast to
neo-classical theories which see them as an exogenous variable), they are seen as
responding more or less automatically (if unpredictably) to opportunities created
by deregulation. Rather the focus of the book is on entrepreneurial bureaucrats
and politicians (and, indeed, academic economists), who brought about changes
in the regulatory environment. It is these entrepreneurs rather than individuals
such as Bill Gates and Paul Allen who are seen as the drivers of economic trans-
formation.
The story and analysis may be interesting and, as claimed in the marketing
material, it may be a seminal study. However, if it is, it is difficult to recognize.
To understand it, the reader requires a good grounding in the technicalities of
economic theory (marginal cost pricing, pareto optimality, the Austrian school,
etc., etc.), political economy, philosophy and scientific method. Without these,
most readers will get little return from the effort needed to read it.
This reviewer at least, found much of the text heavy going and impenetrable.
It would benefit from fewer diversions, more focus on the key arguments and
improved structure with simple things such as more chapter sub-headings and
summary conclusions (e.g. at the end of chapters). Indeed, without the market-
ing blurb, it would have been very difficult to identify what the book is trying to
achieve.
While the marketing material is somewhat misleading, in one important
respect it is very helpful:
This book will be of interest to academics and researchers of public sector economics,
globalisation and deregulation as well as transport economists.
Accurately, it does not suggest that it is of relevance to those interested in entre-
preneurship. It is unlikely many reading this review would find this text essential
reading.

Ron Botham
University of Glasgow, UK

Chris Steyaert and Daniel Hjorth (eds), New Movements in

Entrepreneurship. Cheltenham: Edward Elgar, 2003. 384 pp.
ISBN 1–84376–219–6, £69.95 (hbk).
It was with great interest that I started to read the book New Movements in Entre-
preneurship, edited by Chris Steyaert and Daniel Hjorth. I was, of course, curious
to know the direction this young field of research will take in the future. My
interest was further aroused when reading the introduction to the book and

211
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 212

International Small Business Journal 22(2)

finding that the editors had great ambitions – to allow space for reflection on the
development of the field, in addition to an openness to different approaches to
the study of entrepreneurship – and they had succeeded in gathering an inter-
esting group of authors including not only scholars from North America, but also
from other parts of the world.
The book is based on the contributions to the first ‘Movements in Entrepre-
neurship’ workshop organized by the Entrepreneurship and Small Business
Research Institute (ESBRI) in Sweden, which took place in June 2001, and to
which scholars were invited to indicate where and how they saw developments
in the field of entrepreneurship taking place and to contribute to this movement.
The book’s starting point is that entrepreneurship as an academic field can no
longer be excused due to its ‘liability of newness’ – entrepreneurship is now on
its way to becoming a more mature research field, theoretically, empirically,
methodologically, and educationally. The book New Movements in Entrepre-
neurship tries to relate to this ongoing movement in four different ways: moving
the field, moving concepts, moving knowledge, and moving economies.
Part one of the book – moving the field – includes three chapters in which the
authors discuss how entrepreneurship research can be grasped, understood and
developed. In Chapter 2, Harold Welsch and Jianwen Liao argue that there is a
need for a balance in entrepreneurship research between exploration of new
ideas and exploitation of existing knowledge. To achieve this balance, we need a
stronger emphasis on exploitative research. There is a lack of replication, inte-
gration and synthesis studies in entrepreneurship research, and the authors
suggest several strategies in order to redress this situation. In Chapter 3, Alain
Fayolle focuses his discussion on developing the ‘entrepreneurial situation’
concept, and in order to study the dynamics and the evolution of an entrepre-
neurial situation, the author argues for the use of a constructivistic paradigm and
inductive longitudinal approaches. Finally, in Chapter 4, the lack of a unified
ontology and epistemology makes it difficult, according to Page West III, to
examine cross-level relationships in entrepreneurship and to generalize findings
at one level of analysis to other levels. West suggests that an information process-
ing view could be fruitful for the integration and generalizability of research
across analysis levels.
Part two – moving concepts – includes four chapters in which the authors
struggle with concepts that are ‘moving’ as well as authors who try to move
concepts within the field. In Chapter 5, Carin Holmquist paves the way for
moving towards a wider concept of entrepreneurship. Through a discussion
about ‘neglected’ aspects of entrepreneurship such as collective, female,
temporary and non-business entrepreneurship, she argues that entrepreneurship
is a multifaceted and complex phenomenon, and in order to be free of
conventional images of entrepreneurship and to understand its complexity,
researchers need to move from the entrepreneurial actor to the entrepreneurial
action. Still on the subject of entrepreneurial actions, Monica Lindgren and
Johann Packendorff employ project management concepts in Chapter 6 and
argue that entrepreneurial actions are similar to temporary projects. Lindgren
and Packendorff conceptualize entrepreneurship as formed by collective efforts

212
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 213

Book Reviews
constituted in social networks. In Chapter 7, William Gartner, Nancy Carter and
Gerald Hills make us aware that the meaning we attribute to concepts and the
way we use them will form the basis of how we research and understand entre-
preneurship. They take the concept ‘opportunity’ as a starting point and argue
that opportunities are not only ‘discovered’ or observed by entrepreneurs but
that in many cases opportunities are ‘enacted’, i.e. opportunities become
apparent through the way in which entrepreneurs make sense of their experi-
ences. Thus, they indicate a move away from entrepreneurship as a rational
economic concept to a question of the way individuals make sense of their experi-
ences. Part two ends with Chapter 8, in which Denise Fletcher approaches entre-
preneurship from a social constructivist perspective and presents a view of
entrepreneurial activities as dynamic, constantly emerging, realized, shaped and
constructed by social processes.
Part three – moving knowledge – focuses on the movement towards the
creation of knowledge-based entrepreneurship, and the four chapters in this
section of the book cover different aspects of the emergence of knowledge-based
entrepreneurship. In Chapter 9, Scott Shane develops a framework for the under-
standing of cross-industry variation and highlights the importance of universities
as a source of invention. In his empirical study he seeks to explain why universi-
ties are more likely to develop patented inventions in lines of business in which
natural trajectories in process innovations are important while product inno-
vation trajectories are relatively unimportant. In Chapter 10, Helle Neergard
takes the perspective of new technology-based companies and discusses the link
between organizational growth and managerial role transition in rapidly
changing environments. She argues that successful managerial transition relates
to the founding entrepreneurs’ ability to handle managerial challenges and, in
particular, their own role transitions in moving through organizational growth
phases. Bart Van Looy, Koenraad Debackere and Petra Andries take a broader
view in Chapter 11 and look at the regional context and how regional growth can
be stimulated by creating the relevant networks between knowledge-creating
institutions, established businesses and start-ups, and the network of professional
enterprises, in addition to the creation of an infrastructure as a framework for
such interactions. Finally, in Chapter 12, Peter Dobers continues this regional
focus by describing how one region, the city of Stockholm, is attempting to
mobilize energy for the creation of an IT image.
Part four – moving economies – includes four chapters indicating that entre-
preneurship consists of more than creating growth and jobs in society – it creates
people’s lives. In Chapter 13, Torben Bager looks at entrepreneurship in a global
context. Taking ethnic businesses as an example, he demonstrates the importance
of trust-based social relationships for globalization and conceptualizes different
network patterns in the globalization process. In Chapter 14, Patricia Greene,
Nancy Carter and Paul Reynolds explore the relationship between ethnicity and
new venture creation. Based on the US Entrepreneurial Dynamics Panel Study,
they found that the rate of start-up activities is related to ethnic group affiliation
and gender differences. The authors argue for a teleological explanation, which
views the minority entrepreneurs in relation to their group affiliation in addition

213
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 214

International Small Business Journal 22(2)

to a dialectical explanation, which considers the minority entrepreneurs as being
in a conflict relationship with the majority society. In Chapter 15 Maria Aggestam
and James Keenan focus on post-communist Poland during the transition period
of the 1990s and, in particular, the entrepreneurial mindsets of managers and how
managers of three newly privatized Polish companies have coped with the turbu-
lent environment. The authors suggest that the managers can be regarded as
‘vessels’ and ‘vaults’ of intellectual capital mobilized toward newness. In the final
chapter, Chapter 16, Daniel Hjorth and Chris Steyaert discuss how entrepre-
neurship is treated as being mainly related to economy, which therefore limits
our ways of seeing and conceiving it.
This book did not entirely live up to my high expectations. A problem with
books based on workshop or conference contributions is that, even though the
editors have a clear view of the aims of the book and what they wish to achieve,
they are restricted to the contributions made at the conference. As a conse-
quence, the book contains a huge variety of topics, definitions and methodo-
logical approaches – which is okay because that is what the editors wish to
achieve. However, the chapters also display a great variety in terms of quality,
and in some cases it is rather difficult to identify what is ‘new’ in the movements
discussed.
Nevertheless, the book is worthwhile reading for entrepreneurship scholars –
many chapters provide intriguing reading. The openness to topics, definitions and
approaches in this book highlights the field of tension within entrepreneurship
research. In this respect, the editors have fully achieved their objective of proving
that there is not only one form of entrepreneurship but many. This book clearly
shows that multiplicity in entrepreneurship is not only important but should be
encouraged, as it provides a fertile ground for creativity. Therefore, the dream
of a unified field of entrepreneurship research can be questioned.

Hans Landström
Institute of Economic Research, Lund University School of Economics and
Management, Sweden

Richard Lynch, John Diezemann and James Dowling, The Capable

Company: Building the Capabilities that make Strategy Work. London:
Blackwell Publishing, 2003. 232 pp. ISBN 1–4051–1182–8,
£22.99 (pbk).
This book, written by three business consultants, is clearly targeted at CEOs and
managers. The stated ambition of the authors is to provide managers with a
‘systematic way to translate strategy into capabilities and projects’. The under-
lying premise of the book is that the problems managers face is not one of
strategy formulation but rather one of strategy execution. The authors believe
that while some managers can intuitively build competitive advantage, most
managers would benefit from using a systematic process. To this end they seek
to describe such a process.

214
05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 215

Book Reviews
The authors divide their process into four stages, which they label ‘Set Direc-
tion’, ‘Align Capabilities’, Accelerate Change’ and ‘Deliver Value’. These stages
form the structure of the book. To the authors business capabilities are ‘what the
company needs to be able to do to execute strategy’ and organizational capabili-
ties are ‘how the organization achieves its business capabilities’. In Part I, ‘Setting
Direction’, the authors begin by focusing on those that set direction, arguing that
good leaders are characterized by the following seven abilities: ‘monitor external
and internal change forces’, ‘identify key capabilities’, ‘denounce old capabilities
no longer required’, ‘sponsor initiative’, ‘keep track of critical assignments’, ‘look
for alignment issues and take decisive action when problems occur’ and ‘monitor
results’. In Chapters 3 and 4 they present a number of tools that managers might
use to communicate strategy and to make strategy ‘visible’ within the organization.
In Part II, ‘Delivering Value’, the authors shift their focus to how capable
companies create value. The focus of the two chapters in this section is on how
the organization can build and develop its ‘value exchange’ with customers.
Specifically the authors focus on the organization’s ‘infrastructure and super-
structure’ and the relationships between the company and its customers. In Part
III, ‘The Development and Alignment of Capabilities’, the authors use the ‘archi-
tecture’ metaphor to suggest ways that managers can ensure that organizational
processes support the execution of strategy. The authors argue that capable
companies align financial management, strategic planning processes and IT to
business needs.
In the final part of the book, Part IV ‘Accelerating Change’, the authors outline
how managers can use a scorecard approach to keep track of how they are
performing. They then argue that capable companies maintain a ‘lightweight and
highly effective planning process’. They provide a summary of how managers can
align strategy with change agendas. Overall the book offers a summary of many
different tools used (or sold?) by management consultants. The authors believe
that their contribution is to focus on business and organizational capabilities.
Specifically they believe they have identified a planning or management process
that managers can recreate, and in doing so, create competitive advantage.
I have a number of problems with this book. My first concern is that the
authors draw heavily on the current techniques and tools used by management
consultants but make little reference to contemporary research in the field of
strategy. The unfortunate result of this is that, for me, the model presented
is in essence a ‘dressed-up’ top down, linear strategy formulation–strategy
implementation model. Furthermore the authors appear to assume a rational
approach to the strategy making process – ignoring alternative explanations of
how strategies emerge in organizations. Also, there is little reference to the
factors that might constrain strategy choice. For example, the small and medium-
sized businesses that are the research context for many readers of this journal are
typically constrained by physical and human resources, and as such, implement-
ing the processes outlined in this book will not be a feasible option.
My second major issue is that the authors do not make a persuasive argument
for how they developed this model. I assume that in making their prescriptions
to practising managers, the authors are drawing on their collective experience of

215
 05 ISB 22(2) Reviews (ad/d) 25/2/04 8:40 am Page 216

International Small Business Journal 22(2)

working as consultants. Surprisingly the authors do not outline the nature of their
work experience and how this might have informed their judgements as to the
appropriateness of their model. Additionally, in presenting the material
the authors make extensive reference to successful companies, implying that the
success of these organizations reflects the factors identified by the authors.
Researchers and seasoned managers know that it is very difficult to identify the
factors that explain organizational success. By the end of the book I was still
wondering whether the authors had in fact identified a process that explains the
success of some organizations. For example, in Chapter 10, there is a short case
study of a start-up in the retail sector. The case suggests that the success of the
retail business reflects the ability of the firm to employ an ‘architectural design’
approach. As the case company is not identified, the success of the business could
be explained by other factors such as industry growth.
My third problem with the book is the writing style of the authors. The authors’
style is to provide examples from successful companies; to illustrate the text with
copious numbers of figures and tables; to include some quizzes for managers; to
reference and draw from the material of authors that will probably be familiar to
some readers (e.g. Warren Bennis and Steve Covey on leadership); to start each
chapter with short quotes from well-known authors such as Jack Welch, Warren
Buffet, Sun Tzu and Abraham Lincoln; and to finish each chapter with a
summary that describes the important characteristics of the ‘capable company’.
While such an approach may appeal to the target audience, I found the ideas
in the book surprisingly inaccessible. I fear that the practising manager will feel
the same. The book suffers from having multiple authors, with neither the story
nor the style flowing from chapter to chapter. Specifically, the book is laden with
technical jargon, which is not always explained; the authors assume a knowledge
and familiarity with planning techniques, tools and models such as the scorecard
approach, customer relationship management and enterprise resource planning
which I suspect many managers will not have; and there are no less than 94 tables
and figures, some of them quite complex, in the 190 or so pages of text. Overall
it is difficult to grasp what it is the authors are arguing and how the material
presented relates to this argument.
In many ways the authors try to do too much in this book. The book could be
a practical explanation of how to use current management consultancy techniques;
or it could be a ‘work book’ for practising managers offering a step-by-step
approach to building competitive advantage; or it could even be, as the authors
suggest, a ‘second language’ for describing strategy. Regrettably, as is, it fails to
be any of these. While the intent of the book, the promise of a ‘systematic way
to translate strategy into capabilities and projects’ will appeal to many managers,
the execution of this intent, the book, will disappoint and frustrate the reader.

Colm O’Gorman
UCD Business Schools, Dublin, Ireland

216

View publication stats