Clarifying the Dominant Logic Construct by Disentangling and Reassembling its Dimensions

Date01 October 2020
AuthorAlexander Engelmann,Barbara Kump,Christina Schweiger
Published date01 October 2020
DOIhttp://doi.org/10.1111/ijmr.12227
International Journal of Management Reviews, Vol. 22, 323–355 (2020)
DOI: 10.1111/ijmr.12227
Clarifying the Dominant Logic Construct
by Disentangling and Reassembling its
Dimensions
Alexander Engelmann, Barbara Kump1and Christina Schweiger2
Department of Strategy & Innovation, WU – Vienna University of Economics & Business, Welthandelsplatz 1,
Building D5, Vienna, 1020, Austria, 1Department of Global Business and Trade, WU – Vienna University of
Economics & Business, Welthandelsplatz 1, Building D1, Vienna, 1020, Austria, and 2Department of Human
Resources & Organisation, FHWien der WKW Vienna University of Applied Sciences for Management and
Communication, Waehringer Guertel 97, Vienna, 1180, Austria
Corresponding author email: alexander.engelmann@wu.ac.at
Since its introduction, Prahalad and Bettis’s concept of dominant logic has informed
a variety of scholarly conversations in management and strategy research. However,
scholars have interpreted dominant logic in different ways, emphasizing different as-
pects, such as managerial mindsets, administrative tools and management functions, as
defining elements. Similarly, empirical studies have captured various aspects, such as
meanings of entrepreneurs, observable strategic decisions and business model similar-
ity, as indicators of dominant logic. Consequently, the concept lacks analytical clarity,
and it is difficult to compare or generalize findings from this diverse set of studies.
The aim of this review is to improve conceptual clarity by analysing, comparing and
evaluating the existing interpretationsand assessments of dominant logic in 94 studies.
In the first part of the review, by disentangling the interpretations of the concept, we
showthat dominant logic consists of four defining dimensions: (i) shared mental models;
(ii) values and premises; (iii) organizationalpractices; and (iv) organizing structures. In
the second part, we reassemble dominant logic into an integrative model and theorize
about how these dimensions operate in concert to produce a firm’s dominant logic.
Thus, our main contribution is a clarification and synthesis of the literature, which
comes with implications on how future research can conceptualize and operationalize
dominant logic more consistently.
Introduction
More than three decades ago, Prahalad and Bettis
(1986, p. 491) introduced the concept of domi-
nant logic, which they defined as ‘a mindset or a
worldview or conceptualization of the business and
the administrative tools to accomplish goals and
make decisions in that business’. Their aim was to
complement the extant economic perspectives on the
relationship between diversification and firm perfor-
mance by adding a cognitive explanation. Since then,
the concept has been further refined (e.g. Bettis and
Prahalad 1995; Bettis et al. 2011; Cˆ
ot´
eet al. 1999;
von Krogh and Roos 1996) and associated with a
diverse set of variables, such as technological change
(Zyglidopoulos 1999), entrepreneurial identity
construction (Downing 2005), joint venture success
(Guidice and Mero 2007) and dynamic managerial
capabilities (Kor and Mesko 2013). Empirically,
dominant logic has been linked with a variety of
outcomes, such as strategic acquisitions (Cˆ
ot´
eet al.
1999), joint venture decisions (Lampel and Shamsie
2000), entrepreneurial firm performance (Obloj et al.
2010) and attention to stakeholders (Crilly and Sloan
2012). Moreover, methodological reflections have
addressed opportunities to empirically operationalize
dominant logic (e.g. Laukkanen 1994; Phillips
et al. 2008; Schraven et al. 2015). All these studies
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C2020 The Authors. International Journal of Management Reviews publishedby British Academy of Management and John
Wiley & Sons Ltd. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street,
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324 A. Engelmann et al.
underscore the richness of the concept and its impact
on the scholarly conversations in management and
strategy research.
What is striking when examining the literature,
however, is the plethora of interpretations and
empirical approaches to investigating dominant logic
– although most researchers have used Prahalad
and Bettis’s (1986) original definition. For example,
some researchers interpret a firm’s dominant logic as
‘habitual modes of functioning based on prior suc-
cesses and failures’ (Cˆ
ot´
eet al. 1999, p. 921); others
describe it as ‘a system of expectations, beliefs, and
priorities that are embedded in the firm’s routines,
procedures, and resource commitments’ (Kor and
Mesko 2013, pp. 235–236); still others suggest that it
consists of sensemaking, choices, learning and rou-
tines (Obloj et al. 2010). Similarly, empirical studies
include different phenomena, such as the decision-
making patterns of globally distributed business units
(Lampel and Shamsie 2000), shared orientations
toward childcare in firms (Kossek et al. 1994) and
business model similarity between subsidiaries
and headquarters (Monteiro 2015) – all of which
are interpreted as indicators of a firm’s dominant
logic.
The success of the concept is not surprising, given
its intuitive nature, providing scholars and practition-
ers with an appealing term for describing an organi-
zation’s unique ways of operating. However, the con-
cept also comes across as vague and ambiguous. It
seems that researchers have seized upon the room for
interpretation that Prahalad and Bettis’s (1986) orig-
inal definition left, by choosing at their own discre-
tion what actually constitutes dominant logic (cogni-
tive schemas, management tools, attitudes, etc.) and
where to look for it empirically (verbal statements
of managers, annual reports, investment decisions,
etc.). The obvious drawback is a lack of shared un-
derstanding of dominant logic, which impairs both its
analytical clarity as a theoretical concept and its pre-
dictive powerin empirical studies. Because dominant
logic continues to inform important conversations,
for example in entrepreneurship (Su and Wang2018),
family businesses (Lumpkin and Brigham 2011) and
strategic resource management (Combs et al. 2011;
Matysiak et al. 2018), it is particularly timely to elu-
cidate the extant perspectives on the concept and its
inner workings.
In this paper, we carry out a systematic literature
review to take stock of the vast number of theoretical
and empirical studies building on Prahalad and
Bettis’s (1986) original ideas. Our main purpose is to
disentangle how scholars have used dominant logic
by identifying, classifying and interrelating existing
interpretations and assessments of the concept. Our
systematic analysis of the interpretations reveals
more than 70 concepts referring to dominant logic.
These can be categorized into four constituent dimen-
sions of dominant logic that inform us about where it
can be found empirically: (i) shared mental models;
(ii) values and decision premises; (iii) organizational
practices; and (iv) organizing structures. A closer
look shows that all of them are covered by Prahalad
and Bettis’s (1986) original definition. Hence, even if
the existing terminological confusion would suggest
the opposite, the interpretations and corresponding
empirical approaches seem to revolve around a co-
herent core. To elaborate on this core, wedepart from
our analysis of the literature and reassemble the four
dimensions into an integrative model of dominant
logic.
Our main contribution is a clarification and
synthesis of the literature, as well as a revised
conceptualization of dominant logic that is in
line with its original definitions and which would
facilitate further theoretical development. By delving
into its cognitive and manifested aspects, we go
beyond previous perspectives on dominant logic
by theorizing about how exactly the identified
dimensions can be integrated. We arguethat, because
the dimensions operate in concert, alignment across
the four dimensions is an integral feature of dominant
logic – an aspect that has been neglected in previous
research. Building on this argument, we call for a
more rigorous application of the concept in empirical
studies and provide concrete suggestions on how to
capture the four dimensions of dominant logic, both
separately and in combination. Taken together, our
synthesis of the literature facilitates a more theoret-
ically and empirically sound application of dominant
logic in the future and contributes to elevating the
concept from a vague metaphor to a more tangible
construct.
Before we describe the processes of literature re-
view and analysis, we begin with a brief introduction
to dominant logic. The main body of our paper is
split into two parts. First, we disentangle dominant
logic into the four defining dimensions and describe
the ways in which the concept has been captured
empirically. Second, we reassemble the dimensions
and provide an integrative model of dominant
logic. We then discuss implications for theory and
empirical assessment, as well as avenues for future
research.
C2020 The Authors. International Journal of Management Reviews publishedby British Academy of Management and John
Wiley & Sons Ltd.
A Literature Review on Dominant Logic 325
The concept of dominant logic
The origin of the concept of dominant logic lies in
strategic cognition, a field that focuses on the linkage
of organization members’ cognitive structures with
strategic choices and actions (for reviews, see Kaplan
2011; Narayanan et al. 2011). Along with other re-
searchers in the 1980s and 1990s (e.g. Porac et al.
1989; Reger and Huff 1993; Walsh 1995), Prahalad
and Bettis (1986) explored ways in which economic
approaches to strategic issues (such as firm diversifi-
cation) can be enriched with an additional cognitive
perspective. Therefore, they introduced the dominant
logic as ‘the way in which managers conceptualize
the business and make critical resource allocation de-
cisions’ (Prahalad and Bettis 1986, p. 490). More pre-
cisely,they argued that the difficulties of managing di-
versified firms not only arise from industry structures
or the number of distinct businesses, but also from
organizations’ cognitive structures, which are deter-
mined by the knowledge and experienceof the corpo-
rate management team. These cognitivestr uctures are
not purely ‘invisible’in the sense of latent managerial
thinking; they are also embodied in a firm’s ‘visible’
infrastructure and administrative tools, such as the
choice of key individuals and processes of budget-
ing, control or compensation (Bettis and Wong 2003;
Grant 1988). Hence, the notion of dominant logic
covers both invisible (cognitive) and visible aspects.
In their 1995 article, Bettis and Prahalad published
a ‘retrospective and extension’, where they high-
lighted the role of dominant logic as an information
filter and provided a newtheoretical g rounding within
the theory of complex adaptive systems. This broader
view of dominant logic detached the concept from the
context of diversification and suggested that it is an
emergent property of human systems, predisposing
a firm to certain kinds of strategic problems and in-
teracting ‘with organizational systems and structures
in a complex way‘ (Bettis and Prahalad 1995, pp. 8–
9). Although cognition remained an important carrier
of dominant logic, this quotation also highlights its
embeddedness in practices and structures.
Von Krogh and Roos (1996) critically reflected
on Bettis and Prahalad’s development of the con-
cept and added two important attributes to bolster its
system-theoretical underpinning. The first attribute,
self -refe rence , means that social systems tend to inter-
pret upcoming issues by relying on prior knowledge
and experience. This tendency makes the dominant
logic enduring and history-dependent. The second at-
tribute, scale, implies that the dominant features of a
particular logic can be found at different levels within
an organization (e.g. individual, group, unit, orga-
nization). One important aspect related to scale is
self-similarity, meaning that similar patterns become
visible across different scales.
The idea that human systems operate based on a
shared, underlyinglogic is not unique to Prahalad and
Bettis’s concept, but is also at the core of the institu-
tional logic view (Friedland and Alford 1991; Thorn-
ton et al. 2012). According to this perspective, so-
cietal institutions (e.g. family, religion, government,
market) shape how social actors interpret the world
due to shared ‘underlying assumptions, deeply held,
often unexamined, which form a framework within
which reasoning takes place’ (Horn 1983, p. 1). The
institutional logic and the dominant logic views ap-
proach a similar phenomenon from different perspec-
tives. The institutional logic view assumes that firm-
level logicsoriginate from larger systems of meaning,
such as the state, markets or professions (Thornton
et al. 2012). This perspective is primarily concerned
with field-level logics, such as the fields of finance
(Lounsbury 2002), healthcare (Scott et al. 2000) and
higher education (Washington and Ventresca 2004).
In contrast, the dominant logic perspective, in Praha-
lad and Bettis’s sense, starts from an individual firm’s
shared cognitions and its history, chosen paths and
experiences with success and failure. Indeed, a domi-
nant logic is partly derivedfrom institutional features,
but it is mostly firm-specific, meaning that certain el-
ements of a concrete firm will be similar across firms
in the same industry (Spender 1989), but other ele-
ments will be individual to the firm (Cˆ
ot´
eet al. 1999).
Hence, dominant logic is a phenomenon that origi-
nates from managers’ cognition and emerges within
organizations.
Many scholars in the field have contributed to im-
proving the precision and rigour of the notion of dom-
inant logic, be it through clearer theorizing (Bettis
and Wong 2003; Boisot and Li 2005; von Krogh and
Roos 1996), sound empirical studies (e.g. Bouwen
and Steyaert 1990; Cˆ
ot´
eet al. 1999; Obloj et al. 2010)
or methodical considerations (e.g. Laukkanen 1994;
Schraven et al. 2015; van Rekom et al. 2006). Due to
a lack of shared understanding, however, the literature
on dominant logic is still ambiguous. The aim of this
review is to discern the perspectives that exist and
provide an integrative perspectiveon dominant logic.
Hence, we ask: How is dominant logic interpreted
and operationalized in the literature?
C2020 The Authors. International Journal of Management Reviews publishedby British Academy of Management and John
Wiley & Sons Ltd.

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