Resource Allocation: a Hayekian Paradigm for Maritime Conglomerates

Resource allocation, a ubiquitous process in organizations, represents a curious dilemma for strategic leaders. Although the expressed purpose of allocating resources is to position organizational subunits for the future, the relevant management literature recognizes that funds are given, in many cases, based on past performance. The implied algorithm is “past success leads to future success.” This approach may be effective during evolutionary time periods, but it can be ineffective during dramatic shifts in the marketplace. This is especially true for conglomerate organizations interacting with numerous task environments representing multiple and differing industry sectors. The resource allocation process in a conglomerate organization is critical to the enterprise’s ability to undergo strategic adaptation to realign the corporate mission and strategic goals during environmental shifts. The focus of this article is to respond to the question, “How should a conglomerate organization decide to allocate resources to its subunits?” The resource allocation process is embedded in a series of events beginning with activities in the task environment and ending with the organization’s strategic adaptation efforts (Figure 1). This conceptual scheme attempts to sequence the activities or processes through which firms adapt to compete in a changing task environment.