"Even within the same industry, modern concepts of business strategy severely complicate comparisons between rates of R&D expenditure by large and small corporations. The percentage of sales revenue spent by a small specialist automobile manufacturer on R&D may exceed that of a mass manufacturer, simply because a strategy of serving a relatively small number of enthusiasts may require relatively more R&D than one of serving a large number of buyers with only average interest in the product. When two enterprises differ markedly in size and rate of R&D expenditure, thety may also differ so much in business strategy an din economic function as not to be comparable."
-Rosenberg & Birdzell, How the West Grew Rich, p. 287.
So why does so much strategy research fail to recognize that strategy is endogenous?
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