ABSTRACT
The strategy literature borrows many of its elements from economics and the theory of the firm for its organization and development, specifically firms as belonging to industries and utilizing resources to sustain competitiveness. In this way the firm satisfies the ‘rents’ of the various contracted stakeholders and also generates an appropriable surplus for those investing in the firm as residual claimants. Our argument in this chapter is that strategy is concerned with arbitraging, in its broadest sense, stakeholder relations where new information informs adaptation where the purpose is to sustain operational and financial leverage for liquidity and recapitalization for solvency. With this in mind we argue that firm-based strategy, focused on manipulating resources and global value chains, can be viewed as leveraging financial returns to generate additional earnings capacity. In an era of shareholder value where managerial and investor interests align, this cultural purpose is amplified because product and service development, the sale of output and manipulation of corporation finance are all directed towards sustaining liquidity and capitalization. In this respect strategy is not simply a ‘productionist’ venture, that is, extracting earnings out of product and services sold for immediate consumption, but ‘financialized’, when, in a credit-based economy, ongoing asset trading and the extraction of holding gains are a substitute for cash surplus earned from selling goods and services.
