THE FOUR THEORIES OF PROFIT UNDER COMPETITION AND THEIR INTERACTIONS: AN ABBREVIATED SUMMARY.

Theories about what causes profit have played a central role in the development of the strategy field. Virtually all of these theories can be fit into one or more of the following four categories, according to the type of causal mechanism that they rely upon most heavily: collusion-based mechanisms, competence-based mechanisms, governance-based mechanisms, and flexibility-based mechanisms. While much research has been focused on developing and testing theories about the "main effects" of each of these individual types of causal mechanisms when applied in isolation from each other, far less attention has been focused on understanding the "interaction effects" of these causal mechanisms, where multiple pathways to profitability are combined together simultaneously. Are their interaction effects positive (mutually reinforcing or amplifying) or negative (mutually dampening or undermining)? In other words, is the combined joint effect of any given combination of these four profit-generation mechanisms equal to, greater than, or less than the sum of the separate parts? Using techniques of formal economic modeling, the present paper takes a first step toward developing a general theory that makes predictions about the answers to these questions, and also about the "boundary conditions" under which the main effects of these profit-generation mechanisms will have a positive effect on profit. The models developed herein predict ten propositions about the main effects and the two-way and three-way interaction effects. The implications of these ten propositions for the future of strategic management research, practice, pedagogy, and theory are discussed. [ABSTRACT FROM AUTHOR]