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Edited by Giovanni Battista Dagnino
Chapter 20: The Role and Impact of Computer Simulation Modeling in Competitive Strategy Research
J. Richard Harrison and Gordon Walker For decades, business and military leaders have utilized computer simulations to understand and anticipate strategic dynamics in the process of formulating and evaluating competitive strategy (Reibstein and Chussil, 1999). Academic researchers also have a history of using simulation methodology to study competitive strategy. They develop formal models of organizational processes, including strategic behavior, and use simulations to explore the competitive implications of the models. The first effort of this nature was by Cyert and March (1963), who developed a simulation model of price and output. In their model, pricing strategy is influenced by the price behavior of competitors. Another prominent example of the early application of computer simulation to competitive strategy is Nelson and Winter (1982), who developed models of Schumpeterian competition and used simulations to examine the implications for technological innovation and industry concentration. In spite of these early contributions, however, a relatively small proportion of research in competitive strategy is based on computer simulations. We believe that this methodology has the potential to contribute more to the understanding of competitive strategy. In this chapter, we will describe computer simulations, discuss some of the recent applications of simulations to competitive strategy, and consider how we think computer simulations could help to advance agendas in several current areas of strategic theory and research. COMPUTER SIMULATIONS Theories of competitive strategy frequently describe organizational outcomes such as performance as the result of the interactions of multiple interdependent processes operating simultaneously. Even when the individual processes can...
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