Understanding Theory Development Papers - long, wonkish

Good theory seeks to explain why.  I do not recall who wrote the paper where I first read that, but I do recall they were far more convincing and eloquent than I am on the topic.  The idea of theory as why, though, is ubiquitous in science - indeed, it's the entire point of using a science-grounded research model.  Why do some things happen and others not, why are some choices made and some not, why are some beliefs long held while others are easily disposed, etc.  Good theory certainly also includes the who and the what with the why.  Good theory recognizes the when and the where which provide context around the why.  But, ultimately, theory is about the why.

For business academics and practitioners, the why of a thing helps us make decisions.  What strategies should be chosen, how should we staff/budget a process, with what urgency should we undertake an objective, etc.  One can answer these questions without a clear sense of why, but the answers themselves gain more potency when backed with a sound why.  Good theory explains why.

In business literature, theory development papers appear in many forms.  For purposes of this essay, I will divide them into two broad categories: theory making (model development) and theorizing (proposition development).  While the choice to categorize this way is mine, I draw from far more informed thinkers on this subject.  Readers interested in additional reading are recommended to Sutton andStaw’s, “What Theory is NOT” (1995) or Weick’s rejoinder, “What Theory is Not,Theorizing is” (1995).  Both of these can be found in JStor either through an academic library or through JStors reader program.  The work of these authors, and others, helped me arrive at the categorizations I provide for you below.

Theory Making (Model Development)

This category of papers is lesser in quantity, but greater in importance than the subsequent category.  Here an author seeks to advance a comprehensive framework to the why of their question.  Once established and supported, these papers become the foundation for future research and, ultimately, influence the layout and content of textbooks.  For the graduate students in my Strategy Seminar, you read a number of seminal theory papers.  Each of these papers attacks a topic and seeks to provide a fundamental “why” explanation to their core question.  For example:

Michael Porter sets out to explain WHY some industries are inherently more profitable than others.  His five forces emerge as a tool to identify the what and when, but his underlying explanation of WHY this occurs is the reason his industrial organizational (IO) economics perspective serves as a foundation for most business strategy texts.

Jay Barney sets out to explain WHY some firms in an industry have a competitive advantage over others.  While his resource based view (RBV) offers a number of tests to identify whether an advantage is present (valuable, rare, inimitable, and non-substitutable), that he is able to explain why these things provide a sustainable advantage is why the RBV perspective is another dominant foundation for strategy texts.

DiMaggio and Powell, and to be fair Meyers and Rowan and a few others working at the same timeframe, set out to explain WHY different elements of a system (e.g. firms in an industry, individuals in a profession, publicly traded firms in a market, etc.) gradually become more similar over time.  In their work, DiMaggio and Powell establish three isomorphic forces.  Not only do they explain what they are, but they explain WHY they work.  Their institutional theory framework, while not as overt in texts, provides the important counter-point to Barney’s work, helping us understand (collectively) why two firms are both similar and different at the same time.

Ultimately, as business practitioners, we often get bogged down with the who, what, where and when.  After all, those are the action items.  Those seem, at a glance, to be the ingredients of a strategy.  They seem to be the questions which drive our jobs.  It’s not that the why is unimportant.  Rather, in the process of a business education, you often internalize the why and thus think less about it.  So, when you read a theory development paper, you may find yourself frustrated at times and wonder “so what?”  But that’s kind of the point – once you understand the WHY, you can begin answering the WHAT.

Theory development papers will usually offer some form of model.  Many will do so explicitly (theFive Forces model as an example), others will do so implicitly (Barney doesn’t give you an RBV model, but his VRIN concepts lend themselves to a model).  Don’t mistake the model for the theory.  The model helps you visualize the elements, the links and the sequences  between the links.  The theory, though is often hidden in-between the boxes of the model (or the arrows themselves).  The theory is the why, it is the attributions and mechanisms by which the model happens.  When reading a theory development paper, it is often easiest to remember the model.  But, if you can get your head around the why – you can probably re-create the model without memorizing it.  Read for the why!

Theorizing (Proposition Development)

The more common form of theory paper is the theorizing, or proposition development paper.  These papers do not inherently seek to create a theory, usually they apply a theory to a specific environment or context.  Proposition development papers seek to use the logic of a theory to explain the specific occurrences of a phenomenon.  Once done, they typically propose situations where we would expect evidence of theory-phenomenon fit to manifest.  Sounds messy?  It’s actually pretty straight forwards.

In my paper, Kicking up Dust: Growth as an Irrational MarketResponse, I provide an example of a proposition paper.  The paper extends from an observation I made at a conference I once attended.  Researchers at that conference were presenting their findings on some strategy research.  Their study used two performance metrics: sales growth and firm profitability.  Their hypothesis were written in such a way that both metrics were affected similarly by similar causal agents.  One might, therefore, expect that their two metrics would be highly, positively correlated.  But, they weren’t.  There was a zero correlation between sales growth and firm profitability in their reasonably large, comprehensive data set.  That a zero-correlation manifested didn’t really bother me, what really set me off is that no one in that room (myself included) talked about it.  Why would we advance two things as equally good (sales growth and firm profitability), study them side by side, and never comment on a null relationship between them?

The answer, to me, seemed to lie in Institutional Theory.  I didn’t have to develop institutional theory, Meyers and Rowan, Dimaggio and Powell, Scott and others had already done that decades earlier.  What I set out to do in my paper was to explain (a) what the phenomena of interest was and (b) why institutional theory was likely a good basis.  In other words, why was institutional theory the right WHY for my question.  Once I did that, I had to suggest what conditions would serve as evidence as to whether institutional theory was the right why.  That’s where the propositions come in.  If institutional theory is the right way to think about this problem, this is the evidence we should expect to see.

That’s the point of a theorizing paper.  Sometimes theorizing comes before theory development as one is beginning to make sense out of something.  Most often, though, theorizing comes after the emergence of a theory and during the application of that theory towards an event.  In proposition papers, we ask "does this theory apply here?"  It’s a paper that sets out with the purpose: “if Theory-A explains event X, how would it work and what would it look like?”

Bringing it all together – A Word of Caution

We don’t ever act with certainty and we don’t ever know completely if a theory is right.  We can’t PROVE theory, but we can (and do) try to DISPROVE it.  That will be an important point I return to in a future post regarding interpretation of statistics in a research paper.  Theories are ultimately guesses, but that severely understates their relevance.

When we have to decide, we usually face a number of possible choices.  Our belief in why something is happening makes some of the choices in our choice set more preferable than others.  Good theory lends confidence to our beliefs and, likely, results in our making better decisions (at least better informed decisions).

But, theories evolve as our knowledge evolves.  Good theories stand the tests of time, the best theories evolve and modify as knowledge evolves over time.  As an example, Michael Porter first published his Five Forces model in the 1970’s.  The economic basis of his model precedes that by several decades.  That theory group (IO) has stood up to scrutiny over decades.  It has led influenced the content of hundreds of textbooks (and that’s probably an understatement), guided thousands of research studies and influenced the emergence of business models used to this very day.

Elements within IO have evolved as our knowledge evolved.  Porter’s positioning strategies (e.g. cost leadership vs. differentiation) have experienced tweaks and clarifications.  The core theory (the big why) is largely unchanged – but we know a lot more about how that why influences who, what, where and when.

Unlike the physical sciences, the social sciences generally lack a grand theory.  Rather than starting from Relativity and moving forwards, social sciences have, of necessity, dozens of competing/complementary theory.  Business research, founded on social science traditions, faces problems that do not lend themselves well to a single theory.  The systems theory of organizations in action is probably our closest grand theory, while it often answers the big why – it doesn’t do such a good job of helping a practitioner come to the specific who, what, where and when decision. 

Instead, we have dozens of mid-range (or mid-level) theories.  Some pairs of theories help to understand the tensions within a system.  For instance, RBV and Institutional Theory seem conflicting at a glance, but rather combine to help make sense of the paradox of similarity and dissimilarity existing side by side in two firms.  Some theories work in conjunction.  So, while IO helps us to understand why one industry is more profitable than another, RBV helps us understand why some firms in the more preferable industry over/under perform other firms in the same industry.  Some theories occupy similar domains and given a specific context, one theory may be more relevant than another (while each may be right in a different context).

For the business practitioner, understanding theory helps in sense making.  Once you understand the core problem (and the likely WHY explanation), it becomes a lot easier to hone in on the more logical fitting who, what, where, and when.  Business is complex, muddled and ambiguous.  It’s easy to get drowned in data or feel like everything is random.  Grounding yourself in a theory framework helps you get a handle on things; the clutter of parts starts to make sense together.  The more business theories you really understand, the easier you can shift to the right framework for the right situation.  Assuming you have interpreted the situation correctly, this should lead to more effective decision making and more efficient action.