Firm Dynamics and Social Physics

This paper attempts to present a dynamic theory of the firm for wealth creation in an integrated, holistic, and dynamic way based on social physics as rationale for a dynamic model of firm performance. In the theory, firm performance (effect) is determined by the firm power and the industry power to dig out the market profit potentials during any given period of time, depending on the strategic change modes (cause) that represent the ways a firm adapts itself to or creating the industry driving forces based on the firm competence at the starting point of time (initial condition). In this paper, I presented some contingency views on the strategic change modes, defining the value chain Ⅱ, business paradigm, and business paradigm fit.