The Essence of Strategic Leadership: Managing Human and Social Capital

A new type of strategic leadership is required to help firms successfully navigate the dynamic and uncertain environment in which they compete today. The strategic leadership needed in 21st century firms is involved with building company resources and capabilities with an emphasis on intangible human capital and social capital. Human capital is the firm’s repository of valuable knowledge and skills; social capital provides access to critical resources. Both are significant contributors to achievement of a competitive advantage. Leaders must effectively manage these important resources for the firm. Management of these resources involves evaluating current resource stocks and making changes such as adding (e.g., developing or acquiring externally) and deleting (e.g., layoffs) human resources and external relationships. To create value, the resources must be configured to develop capabilities that can be leveraged in ways to create competitive advantages. The dimension of strategic leadership we describe here is called effectuation. This new type of approach to leadership has important implications for management scholars and practitioners.

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Michael A Hitt
R Duane Ireland
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