Optimal Strategy and Business Models: A Control Theory Approach

Peter Johnson, Nicolai Juul Foss

    Research output: Contribution to journalJournal articleResearchpeer-review


    This study picks up on earlier suggestions that control theory may further the study of strategy. Strategy can be formally interpreted as an idealized path optimizing heterogeneous resource deployment to produce maximum financial gain. Using standard matrix methods to describe the firm Hamiltonian, it is possible to formalize useful notions of a business model, resources, and competitive advantage. The business model that underpins strategy may be seen as a set of constraints on resources that can be interpreted as controls in optimal control theory. Strategy then might be considered to be the control variable of firm path, suggesting in turn that the firm's business model is the codification of the application of investment resources used to control the strategic path of value realization.
    Original languageEnglish
    JournalManagerial and Decision Economics
    Issue number8
    Pages (from-to)515–529
    Number of pages15
    Publication statusPublished - Dec 2016

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