The problem solving perspective examines the role of a firm’s focal problem in strategic decisions. Firms organize around a problem that can be profitably solved and then organize according to the exogenous information properties of the problem. Given its information focus, the theory has been part of the knowledge-based view of the firm (KBV) and been used to study innovation. But a firm’s chosen problem should, in principle, dictate a wide range of decisions throughout any firm, not just knowledge-management in technology firms. Moreover, as a reason for being chosen at the very founding of a firm, the focal problem can also be regarded as the purpose of the firm. Recently, a separate literature on corporate purpose has emerged, in response to questions about firms’ role in society. We propose that the problem solving perspective can address questions that the corporate purpose literature has surfaced, including resolving conflicts among stakeholders (i.e., whether shareholders should always be prioritized) and explaining empirical findings that a strong sense of purpose improves firm performance. We use a case study, Tesla Motors, Inc., to illustrate how problem solving as corporate purpose can inform theory and practice.
