• Academy olfylanagement fleview. 1986, Vol. 11, No. 4, 791-800.

Types of Competition andthe Theory of Strategy:

Toward an Integrative FrameworkJAY B. BARNEY

University of California, Los Angeles

Three concepts of competition, each reflecting different research tra-ditions in microeconomics, are discussed: Industrial Organizationcompetition. Chamberlinian competition, andSchumpeterian competi-tion. The implications of each for normative theories of strategy arediscussed, and a single framework which describes the types of com-petitive forces a firm is likely to face over time is suggested.

Research in strategy usually is aimed at devel-oping normative theories which firms can applyin choosing strategies that generate high returnson investments (Henderson, 1979; Porter, 1980).Much of this research rests on the observationthat the nature and character of the competitiveconditions facing a firm determines a firm's stra-tegic opporiunities, as well as the return poten-tial of exploiting those opporiunities. This empha-sis on the strategic implications of competitionsuggests a close link between the developmentof normative theories of strategy and the aca-demic discipline of microeconomics (Caves &Porier, 1977; Porier, 1981). For of all the behav-ioral sciences, microeconomics is most closelylinked with the study of competition and competi-tive behavior among firms (Hirshleifer, 1980).

Unforiunately, the concept of competition is notunambiguous as it is used m microeconomics.Different microeconomic research traditions usethis concept in subtly different and interdependentways. Apparent differences between alternativetheories of strategy may reflect subtle differencesin the concept of competition they employ. Thesedifferences, in turn, may reflect different micro-economic research traditions upon which differ-ent strategy theorists draw. Theoretical debateand integration in the area of business strategycan be greatly facilitated if these different usages

of the concept of competition are defined andtheir interrelationships are described. The pur-pose of this paper is to isolate the strategicallyrelevant ways in which the concept of competi-tion has been used in microeconomics, and tooutline the implications each has for the develop-ment of a normative theory of strategy. In trac-ing these implications, a general frameworkwithin which different concepts of competitioncan be integrated into the theory of strategywill be suggested.

While the concept of competition is used by alarge number of microeconomists in a variety ofdifferent ways, most usages of this concept thateither have been already used by strategy theo-rists, or seem likely to be used in the near future,seem to reflect one of three broad research tradi-tions in microeconomics: industrial organization(IO) economics (Bain, 1956, 1968; Mason, 1939),Chamberlinian economics (Chamberlm, 1933),and Schumpeterian economics (Nelson & Winter,1982; Schumpeter, 1934, 1950). Of these three con-ceptions of competition, the IO economic versionhas been most completely incorporated into cur-rently popular theories of strategy. This integra-tion has been accomplished by Porter (1974,1980), Caves (1980), Caves and Porier (1977), andSpence (1977, 1979), among others. However,both Chamberlinian and Schumpeterian notions

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of competition represent logical and empiricalalternatives to the more widely applied IO con-cept of competition. Indeed, these other researchtraditions may help overcome many of the limita-tions of the IO model cited even by IO propo-nents (Porter, 1981) in developing normative the-ories of strategy. In this sense, these three conceptsof competition are not logically contradictory, butrather, taken together, form a more completepicture of the competitive forces facing firms.

The analysis of the concept of competition, asit is used in microeconomic research, begins witha brief review of the IO, Chamberlinian, andSchumpeterian research traditions, with specialreference to the character of the competitiveforces that are thought to influence firms in each.Also the implications for normative theories ofstrategy for each of these three concepts of com-petition are discussed. Finally, some ways inwhich these three different conceptions of com-petition can be integrated into a single frame-work describing the types of competitive forcesfacing a firm over time are suggested.

Industrial Organization CompetitionThe concept of competition in industrial orga-

nization economics, and its implications for nor-mative theories of strategy, have been reviewedpreviously (Caves, 1980; Porier, 1981). Thus, wethe key points of these reviews will be brieflysummarized here.

The basic concept of competition employed inIO economics is fundamentally unchanged sincethis model was initially developed by Mason(1939) and Bain (1956, 1968). In this model, returnsto firms are determined by the structure of theindustry within which a firm finds itself. The keyattributes of an industry's structure that arethought to have an impact on firm returns include(Porier, 1981) the existence and value of barriersto entry (Bain, 1956), the number and relativesize of firms, the existence and degree of productdifferentiation in the industry, and the overallelasticity of demand for the industry (Porier, 1980).Industries with large barriers to entry, with asmall number of firms, with a large degree of

product differentiation, or low demand elasticityare characterized by firms earning higher retumsthan firms in industries without these attributes.Mason and Bain's insights into the relationshipbetween the structural characteristics of indus-tries and performance of the firm have come tobe known as the structure, conduct, and perfor-mance paradigm, for firm conduct (i.e., strategy)and performance are presumed to follow directlyfrom an industry's structural attributes (Porier,1981).

The IO model was developed originally toassist government policy makers in formulatingeconomic policy. By focusing on the structuralcharacteristics of industries, policy makers couldanticipate those industries where firm returnswill be greater than a socially optimal fully com-petitive level (Hirshleifer, 1980). With a list ofthe structural attributes that reduce competitionin an industry, policy makers can design regula-tions and other remedies that will result in sociallyoptimal levels of intra-industry competition.Given this strong policy orientation, it is not sur-prising that much of the research in IO microeco-nomics has focused, first, on testing the empiri-cal validity of the structure, conduct, and perfor-mance paradigm, and second, on understand-ing the policy implications of this theoreticalapproach (Caves, 1980).

In their attempt to use IO thinking to develop anormative theory of competitive strategy, strat-egy theorists have turned the original policyobjectives of this model upside down. For, in-stead of seeking to assist policy makers in reduc-ing retums of the firm to a fully competitive level,strategy theorists have sought to develop mod-els to assist firms in obtaining greater than nor-mal economic returns on their business invest-ments (Porier, 1980). Within the context of thestructure, conduct, and performance paradigm,the appropriate focus of firms seeking to obtainhigher than normal economic returns is appar-ent. Firms seeking to obtain high returns on theirstrategic investments should focus on creatingand/or modifying the structural characteristics oftheir industry to favor high returns. Thus, such

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firms should attempt to create high barriers toentry, should reduce the number of firms in theirindustry, should increase product differentiation,or reduce demand elasticity (Porter, 1980). Firmsthat successfully accomplish one or several ofthese tasks will find themselves protected fromreturn-reducing competitive entry, and can enjoysustained periods of superior financial perior-mance.

In applying the IO framework in developing anormative theory of strategy, it soon becomesapparent that different groups of firms canattempt to alter or exploit different structural attri-butes of the same industry. In this manner, differ-ent strategies of firms can generate returnsgreater than what would be expected m per-fectly competitive conditions. This observationhas led to the development of the concept ofstrategic groups (Caves & Porter, 1977). A strate-gic group is a set of firms that are attempting tomodify or exploit similar structural characteris-tics of a given industry. Recently, empincal workby Hatten and Schendel (1976) and Harrigan(1985), among many others, has tended to verifythe existence, and competitive importance, ofthese strategic groups.

Chamberlinian Competition

Both IO economics and Chamberlinian eco-nomics seek to develop explanations of the con-duct of the firm (i.e., strategy) and performance.However, where IO economics begins with afocus on industry structure and then moves toconduct and performance, Chamberlinian eco-nomics begins with a focus on the unique assetsand capabilities of individual firms, and thentraces the impact of these idiosyncratic organiza-tional traits on the strategies firms pursue andretums to those strategies. For Chamberlin (1933)and his contemporaries (Robinson, 1933), competi-tion in industries always goes forward betweenfirms with different, though perhaps overlapping,resources and characteristics. Certain of theseresource and asset differences may allow somefirms to implement strategies that alter an indus-try's structure in ways that uniquely benefit these

firms. For this reason, firm heterogeneity canrepresent an important source of competitiveadvantage for firms (Barney, 1985; Demsetz,1973).

Some of the key differences between firms thatcan lead to differences in the performance offirms cited by Chamberlin (1933) include: techni-cal know-how, reputation, brand awareness,and the ability of managers to work together.Patents and trademarks were the two differencesmost closely analyzed by Chamberlin (1933).

Because firms in an industry or group typi-cally have unique, but overlapping, resourcesand capabilities, competition within an industryhas many of the characteristics of perfect compjeti-tion, as it has been described in neoclassicalmicroeconomics (Hirshleifer, 1980), as well asmany of the characteristics of a monopoly. Cham-berlin called this type of competition monopoiisficcompefifion.

Chamberlin was able to show that industriescharacterized by monopolistic competition alsowill be characterized by competitive equilibriain which there will be a distribution of economicreturns to firms. In other words, at least somefirms in these industries can obtain sustainedperiods of superior financial performance byexploiting their unique assets and capabilities.Chamberlin's work suggests an important con-nection between monopolistic competition andthe theory of strategy, for the objective of norma-tive theories of strategy is to specify ways firmscan obtain this level of economic performance(Porter, 1980).

Though perhaps less well developed in thestrategy literature than the industry structureimplications of IO economics, the strategic impli-cations of Chamberlin's analysis of firm individu-ality in competition are no less important. Giventhat differences between the skills and abilitiescontrolled by firms can lead to differences inretums from implementing strategies, Chamber-lin's logic implies that firms should seek to choosestrategies that most completely exploit their indi-viduality and uniqueness. By differentiatingthemselves in this manner, firms may be able toobtain relatively high levels of economic return

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from implementing strategies. This is fundamen-tally the message of strategy theorists like Learned,Christensen, Andrews, and Guth (1969), Lenz(1980), Kotler (1976), and Stevenson (1976), whostrongly urge firms to choose strategies that ex-ploit their individual and unique strengths andcapabilities, while avoiding their weaknesses.This type of analysis suggests that any organiza-tional assets that can have a positive impact onthe ability of firms to implement strategies arepotential strengths that should be exploited whenstrategic choices are made. Such strengths arethe distinctive competencies cited by numerousauthors (e.g., Thompson & Strickland, 1980).

Notice that the view of competition developedby Chamberlin does not contradict the viewsdeveloped by IO economists. Indeed, in manyways, these two models, though they have differ-ent emphases, are strongly complementary.Industry structure has a strong effect in determin-ing which of a firm's unique skills and assets canbe exploited when choosing a strategy. Also,within IO economics, there is a recognition thatfirms can differ in terms of the strategically rele-vant skills and capabilities they control, and thatthese differences partially determine the conductof the firm. Indeed, Bain's (1968) discussion ofatomistic competition with product differentiationin many ways parallels Chamberlin's discussionof competition among heterogeneous firms. Andthe strategic implications of these two argumentsare precisely the same; that is, firms should im-plement strategies, including product strategies,that cannot be duplicated by rivals. However,this is a broader reading of IO economics thanmost previous efforts to translate the IO modelinto a normative theory of strategy would sug-gest. Porter (1981), for example, argued that IOeconomics can only help firms describe the struc-ture of their industry. This view fails to recognizethose parts of IO economics which focus on theidiosyncratic attributes of different organizations(Bain, 1968) which can be used by firms to de-scribe their unique strengths and capabilities.Later in this paper, the complementarity of thesetwo models is used to develop an integrated

framework of the types of competition that firmsface over time.

Among strategic theorists and practitioners, theimportance of combining Chamberlinian analy-ses of firm individuality with IO analyses of indus-try structure when choosing strategies is widelyacknowledged. The widely applied WOTS-UP("weakness, opportunities, threats, and strengthsunderlying planning") and SWOT ("strengths,weaknesses, opportunities, and threats")(Thompson & Strickland, 1980) approaches tostrategic management are examples of such anintegration of these different conceptions of com-petition. Even those strategy theorists who focusalmost exclusively on industry structure in strate-gic choice acknowledge that the analysis of afirm's unique skills and assets can and should playsome role. Porter (1980, pp. 6—7, italics added),for example, argued.

Firms will each have unique strengths and weak-nesses in dealing with industry structure, andindustry structure can and does shift graduallyover time. Yet understanding industry structuremust be the starting point for strategic analysis.

For these authors, applying IO concepts tocharacterize industry structure suggests whichcategories of strategies a firm should consider(i.e., barriers to entry, product differentiation,etc.), while Chamberlinian logic suggests whichparticular strategies, within those broad catego-ries, firms should choose to implement, that is,strategies that exploit a firm's unique skills,resources, and distinctive competencies. Thus,an application of Chamberlin's logic would assistfirms in deciding, for example, which particularbarrier to entry or which particular type of prod-uct differentiation it should implement.

The concept of a strategic group also hasimportant implications within a Chamberlinianframework. For although Chamberlin beginswith the assumption that firms control uniquebundles of assets, capabilities, and resources,he does observe that these bundles may overlap,and thus certain firms may pursue similar strate-gies. Firms with such overlapping capabilitiesand similar strategies can be thought of as strate-

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gic groups (Caves & Porter, 1977). For Chamber-lin, firms rarely enjoy a state of pure monopolywhere they uniquely control a set of valuableresources. Rather, relations between firms arealmost always partly monopolistic and partlycompetitive. This overlap of organizational re-sources within the Chamberlinian frameworksuggests the possibility that strategic groups inan industry will exist.

Schumpeterian Competition

While both IO and Chamberlinian conceptionsof competition have, to some extent at least, beenapplied in the development of normative theo-ries of strategy, the concept of competition con-tained in Schumpeterian economics has resistedsuch translation. Moreover, even those aspectsof IO (Bain, 1968) and Chamberlinian logic thatare similar to Schumpeter's view of competitionalso have resisted translation into strategic think-ing. This is not because Schumpeterian competi-tion is somehow a less "real" form of economiccompetition than either IO or Chamberliniancompetition. Rather, IO and Chamberlinian eco-nomics have been translated into theories of strat-egy because both these models presume a levelof stability in the competitive dynamics facing afirm sufficient to allow a firm to anticipate com-petitive threats and opportunities, and then torespond to these opportunities appropriately.These are models where strategic planning andother strategic management efforts are veryappropriate. Competition, as it is characterizedby Schumpeter (1950), is not so stable and cer-tainly less predictable. Though classic strategicmanagement techniques can be applied in re-sponding to and anticipating Schumpeteriancompetition, such efforts are likely to be lessdirectly applicable, and their results less predict-able.

Schumpeter's (1950) original objective was todescribe the process of economic developmentin Western economies. In this effort, Schumpetercame to focus on major revolutionary technologi-cal and product market shifts, and to dismiss asrelatively unimportant, in the long run, price and

other competitive actions of firms within a rela-tively stable industry. This was not to suggestthat such competition did not exist, but ratherthat it was of secondary importance when describ-ing the evolution of an economy through history.Thus, Schumpeter (1950, pp. 82-83) argued that.

Capitalism, then, is by nature a form or methodof economic change and not only never is butnever can be stationary. The fundamental impulsethat sets and keeps the capitalist engine in motioncomes from the new consumers' goods, the newmethods of production or transportation, the newmarkets, the new forms of industrial organizationthat capitalist enterprise creates. This process ofCreative Destruction is the essential fact aboutcapitalism.

For Schumpeter, these revolutionary innova-tions in product, market, or technology can onlybe imperfectly anticipated by firms. Sometimesfirms in an industry may survive a revolutionaryinnovation to become important actors in a suc-ceeding industry. It may even be the case thatinvestments made by a currently successful firmwill themselves generate a Schumpeterian re-volution. Other times, a revolutionary innova-tion will have the effect of displacing all cur-rently competing firms. Moreover, in the competi-tive setting envisioned by Schumpeter, whenmajor innovations do appear, their ultimateimpact may not be known for some time, at whichpoint it may be too late for older firms with oldertechnologies and skills to compete in new mar-kets requiring new skills. On the other hand,guessing too early that a given innovation willbecome dominant may jeopardize a firm's long-term survival by betting on a technology or mar-ket that turns out not to be dominant.

Schumpeter's fundamental insights into thecharacter of revolutionary competition havespawned a great deal of research in an attemptto describe reactions of firms facing competitiveuncertainty that cannot be fully reduced throughthe application of strategic management tech-niques (Alchian, 1950; Nelson & Winter, 1973,1974, 1982; Winter, 1971, 1975). Recent develop-ments in organizational theory also can be tracedto their Schumpeterian roots (Hannan & Free-man, 1977; McKelvey, 1982).

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Despite this literature, with few exceptions(Barney, 1985; Lippman & Rumelt, 1982; Rumelt&. Wensley, 1980) the implications of Schum-peterian competition for normative theories ofstrategy remain relatively unexplored. Someindication of how a Schumpeterian view mightbe translated into strategic theory can be seen inthe work by Nelson and Winter (1982) whichemphasizes the advantages and costs of follow-ing a product innovation policy, in which case afirm seeks to create technological revolution, ver-sus a product imitation strategy, in which case afirm allows others to absorb the risk of innova-tion at the cost of a first mover advantage. Also,Hannan and Freeman's (1977) analysis of appro-priate organizational responses under differentenvironmental conditions has potential strategicimplications. However, both Nelson and Winter'sand Hannan and Freeman's models presumethat firms possess, ex ante, relatively completeinformation about the future of their competitiveenvironment. This assumption is inconsistent withSchumpeter's original analysis, a point acknowl-edged by Nelson and Winter (1982). The lack ofcomplete ex ante information, and the strategicuncertainty it implies, creates an important rolefor luck in defining the returns firms obtain fromtheir strategizing efforts (Barney, 1985; Lippman& Rumelt, 1982). For after a firm has engaged instrategic management efforts and reduced thelevel of competitive uncertainty it faces to theextent possible, then the uncertainty remainingin its competitive environment is irreducible. Anyadvantages or disadvantages unforeseen shiftsin the environment create for a firm are primar-ily a manifestation of its good or bad luck. Ofcourse, the concept of luck is difficult to incorpo-rate into normative theories of strategy, for lucktypically is not subject to managerial manipula-tion.

Despite the obvious difficulties in culling straight-forward strategic management implications fromthe Schumpeterian model, it nevertheless mustbe admitted that Schumpeterian competition isan empirically valid form of competition thatshould be integrated with more traditional IO

and Chamberlinian concepts in the developmentof a normative theory of strategy. For example,applying the Chamberlinian concept of competi-tion in a Schumpeterian context, one could con-clude that certain firms in an industry may havethe unique skills required to be the source ofrevolutionary changes in that industry (Peters &Waterman, 1982). Other firms may have theunique ability to rapidly adapt to whateverrevolutionary changes might occur (Meyer, 1982;Starbuck, 1983). Firms that possess either of theseorganizational capabilities may have a greaterlikelihood of survival in industries threatened Toyrevolutionary Schumpeterian changes than firmswithout these capabilities. Also, Schumpeterianchanges in an industry may have the effect ofaltering an industry's, or strategic group's, struc-tural attributes, which in turn can have an impacton the performance of the firm (Porter, 1980). Thissuggests a close relationship between Schum-peterian competition and IO competition, for theIO model suggests those classes of revolutionary-changes that might lead to Schumpeterian shiftsin an industry, that is, changes in an industry'sunderlying structural attributes. However, aslong as some irreducible uncertainty remains inan industry, firms will be unable to anticipateperfectly which particular changes in an indus-try will cause a revolution, or which firm or firmswill be the sources of this change.

Toward an Integration oi Conceptsoi Competition

Key attributes of the three conceptions of com-petition that have been reviewed are summarizedin Table 1. Notice that in all cases, the unit ofanalysis traditionally has included the industry.This is consistent v/ith the policy orientation ofmuch of microeconomics, and represents one ofthe most significant challenges in translating theseconcepts from microeconomics into the moreapplied and firm-oriented discipline of strategy.

It already has been suggested that these threeforms of competition are highly interrelated.Indeed, IO economists have begun to include

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Table 1A Summary of the Characteristics of Industrial Organization, Chamberlinian. and SchumpeterianConcepts of Competition

Unit of Analysis

Core Concepts

Micro-Economic Authors

Strategy Theonsts

IOCompetition

industry

structureconductperformance

Bain, 1956Bam, 1968Mason, 1939

Porter, 1980Caves & Porter, 1977

ChamberlinianCompetition

industry/firm

monopolistic compsetition:competition betweenheterogeneous firms

Chamberlin, 1933Robinson, 1933

Kotler, 1976Learned et al., 1969

SchumpetenanCompetition

industry/economy

the engine of creativedestruction

Schumpeter, 1939Schumpeter, 1950Nelson & Winter, 1982

Lippman & Rumelt, 1980Barney, 1985

both the individuality of the firm and irreducibleuncertainty in their models of the conduct andperformance of the firm (Bain, 1968). Certainly,at any given point in time a firm may face allthree types of competition. Below, how IO andChamberlinian competition can be integratedwithin the context of Schumpeterian competitionto create a single framework describing the dif-ferent types of competition a firm is likely to faceis discussed. This integrative framework suggestsa developmental model of competition within anindustry which firms can use to describe the dif-ferent types of competition they face within anindustry over time.

From the point of view of the character of thecompetitive forces facing firms, industries beginas a result of Schumpeterian revolutions in mar-kets or technologies or consumer demands, andso on. The sources of a Schumpeterian revolu-tion cannot, by definition, be perfectly antici-pated, though after the fact they usually can bedescnbed. This revolutionary change defines thecharacter of competition in an industry by defin-ing the technological and market bases of com-petition, the organizational resources and assetsthat are strategically valuable, and the organiza-tional resources and assets that are strategicallyirrelevant. By defining what skills and abilitiesare strategically valuable, a Schumpeterian

revolution also defines which firms are likely tobe successful early on, which firms must modifytheir resource base to become successful, andwhich firms are likely to not survive.

If it were possible to anticipate a Schum-p)eterian revolution with certainty, then most firmswould be able to plan to respond accordingly byacquiring the appropriate resources and imple-menting the necessary strategies. However,Schumpeterian revolutions only can be imper-fectly anticipated, even by firms whose innova-tions in product or technology turn out to createthem. Because they only can be imperfectlyanticipated, the effects of Schumpeterian revolu-tions of defining some organizations' abilities andassets as newly valuable, while simultaneouslydefining other organizations' abilities and assetsas no longer valuable, are partly stochastic innature.

Firms that have what turn out to be newlyvaluable skills and assets are, to some extent,lucky. These lucky firms may be able to retaintheir resource and skill advantages for a sub-stantial period of time, thereby becoming domi-nant actors in the newly defined industry. Ofcourse, after the fact, it always will be possibleto "explain" how the superior strategic manage-ment skills of successful firms allowed them toanticipate Schumpeterian changes that other

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firms could not anticipate, and thus to "explain"how these firms were able to implement strate-gies that lead to their success. However, as longas there is some irreducible uncertainty in a firm'scompetitive environment, good fortune and luckplay a role in determining the extent of a firm'sfinancial success after a Schumpeterian revolu-tion has occurred.

All this is not to suggest that strategic manage-ment and planning efforts are irrelevant withinSchumpeterian competition. Firms that fail toengage in these activities will not anticipate thatwhich was anticipatable about a Schumpeterianrevolution. Such firms, if they are to be success-ful, must rely to a greater extent on their goodfortune and luck. On the other hand, firms thatdo engage in these strategic management effortswill be able to reduce the competitive uncer-tainty they face to the extent possible, and there-fore, can obtain some advantage in preparingfor the future. However, as long as the natureand character of a Schumpeterian revolutioncannot be perfectly anticipated, then such strate-gic management efforts cannot be expected toalways generate advantages for a firm.

While successful firms in this competitive con-text must be partially lucky, firms with what turnout to be nonvaluable assets are, to some extent,unlucky (Barney, 1985). These firms will need toengage in a struggle to obtain those resourcesand skills that will allow them to successfullycompete in a new industrial environment. Firmsthat are particularly flexible may have a competi-tive advantage when adapting to rapidly chang-ing environmental conditions. Firms that do notor cannot change are not expected to survive(Hannan & Freeman, 1977).

After a Schumpeterian revolution has definedthe competitive bases of a new industry, includ-ing which firms do and which firms do not con-trol strategically valuable assets and abilities,IO and Chamberlinian competition become morerelevant strategically, although Schumpeterianshocks which affect, but do not displace, anindustry are also important features of the com-petitive landscape which firms face. Normatively,

the industry analysis apparatus derived from theIO model suggests that firms should attempt toimplement barriers to entry, product differentia-tion, and so on, to either protect or create nicheswithin which they can obtain above normal eco-nomic retums. The Chamberlinian model sug-gests that these strategies should be implementedby exploiting the unique strategically relevantskills and resources controlled by firms, that is,their distinctive competencies. Firms without stra-tegically valuable skills must either acquire themor face extinction.

Interfirm rivalry, as described by Porter (1980),will continue within these industries, perhaps forrelatively long periods of time. Firms will con-tinue to jockey for positions which capitalize ontheir competitive advantages. This will continueas long as the bases for competition originallydefined by the Schumpeterian revolution eitherremain stable or evolve predictably. However,neither IO nor Chamberlinian strategies usuallywill protect firms from incompletely anticipatableSchumpeterian revolutions that have the effectof redefining the fundamental bases of competi-tion in an industry. If and when these revolu-tions occur, what were viable IO and Chamber-linian strategies may become suddenly irrele-vant.

Conclusion

Competition, a concept that is central to nor-matively oriented strategic thinking, also is a con-cept that can mean different things at differenttimes to different firms. By isolating three of themost common usages of this concept in microeco-nomics, the different types of strategies that dif-ferent types of competition imply have beenexplored. This analysis has indicated that theseconceptions of competition can be integrated intoa single developmental framework. This frame-work can be used to develop integrated theoriesof strategy. Such integrated theories of strategyare important, for most firms, at any given pointin time, face both IO and Chamberlinian competi-tion and live under the constant threat of eitherSchumpeterian shocks or revolutions. Moreover,

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the impact of previous Schumpeterian revolu-tions on an industry's current structure can beprofound. Strategies that deal with all of these

problems simultaneously must be developed inorder to increase the likelihood that firms willsurvive and prosper over time.

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Jay B. Barney {Ph.D., Yale University) is Assistant Pro-fessor of Management in fhe Graduate School ofManagement, University of California, Los Angeles.Correspondence regarding this article may be sent tohim at: 6319 Graduate School of Management, Univer-sity of California, Los Angeles, CA 90024.

Support for this research was provided by US-JapanFriendshipCommission. Comments by and discussionswith William Quchi, William McKelvey, J.C. Spender,Richard Rumelt, Lynn Zucker, Marshall Myer, RobertSpich, and members of the Organizational EconomicsSeminar at UCLA were helpful in the development ofthis paper.

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