Abstract for: Applying System Dynamics to Overcome Unsuccessful Success Factor Research
In order to cope with the vast range of ambiguous, multi-causal and multi-faceted potential causes for firm success, managers tend to look for critical success factors as a reduced number of essential factors that determine future business success. Although scholars have been serving this need for more than four decades, the insights derived from empirical research on critical success factors have low impact on strategy in practice. We take this phenomenon to discuss potential causes and propose to complement empirical methods with the dynamic feedback perspective of System Dynamics modeling. In the present paper we first portray benefits and limitations of both empirical methods and System Dynamics regarding critical success factor research. We then take a PIMS-based case example to contrast and combine the two methods. We compare insights from the PIMS study to observations from a System Dynamics-based strategy project conducted by PA Consulting Group for a large European automobile manufacturer. We discuss differences in the analysis of the two studies and conclude that empirical success factor research could overcome its practical shortcomings when accompanied by firm-specific System Dynamics modeling based on the main characteristics of System Dynamics models, including feedback processes, time delays, and non-linearity.