Asymmetric rivalry within and between strategic groups

Our study examines asymmetric rivalry within and between strategic groups defined according to the size of their members. We hypothesize that, owing to several forms of group‐level effects, including switching costs and efficiency, strategic groups comprising large firms expect to experience a large amount of retaliation from firms within their group and accommodation from the group comprising smaller firms. Small firms, on the other hand, expect to experience a small amount of retaliation from the group comprising large firms and no reaction from the other firms in their group. We estimate the effect of group‐level strategic interactions on firm performance. Our analysis reveals that the rivalry behavior within and between groups is asymmetric, which supports the dominant‐fringe relation between firms, as described in our hypothesis. Copyright © 2013 John Wiley & Sons, Ltd.     

Asymmetric rivalry between strategic groups: response,speed of response and ex ante vs. ex post competitive interaction in the spanish bank deposit market

The objective of this study is to examine asymmetric rivalry between strategic groups in a given industry. Two research hypotheses argue for the existence of asymmetric rivalry in the sense that strategic groups of small companies have a greater degree of response but a slower speed of response to the actions of strategic groups of large companies, than vice versa. To test this, we use an ex post approach that examines the news releases published on the strategic actions and reactions of firms. A third hypothesis compares ex ante competitive expectations with ex post asymmetric rivalry between strategic groups. To test this, we compare ex post news on actions/reactions with an ex ante approach that estimates conjectural variations. The empirical application carried out on bank deposits in the Spanish market defines strategic groups in terms of size due to the historical and institutional conditions of the industry (deregulatory change). The results obtained show that rivalry patterns between strategic groups in terms of company size can be predicted as asymmetric in the sense that smaller bank strategic groups have a greater degree of response (Stackelberg ‘leader–follower’ competitive interaction), and a slower speed of response to the actions of larger bank strategic groups than is found the other way around. Moreover, ex ante expectations of aggressiveness on the part of larger strategic groups characterize greater ex post reactions from the smaller‐size strategic groups. Therefore, the size distribution of strategic groups is valuable to research on complex industries with deregulation changes. Copyright © 2005 John Wiley & Sons, Ltd.     

An evolutionary perspective on strategic group emergence: a genetic algorithm‐based model

We develop a simulation model to examine conditions under which strategic groups emerge and their performance difference persists. In our model, mobility barriers, strategic interactions among high performers, dynamic capabilities (the mechanisms that allow winners to continue to survive), and boundary of rivalry are put together to derive their joint implications for the evolution of strategic groups. Not surprisingly, our model behavior shows that mobility barriers and strategic interactions play an important role in sustaining intergroup performance difference. However, the extremely high level of mobility barriers is shown to impede the emergence of strategic groups. We also find that dynamic capabilities and boundary of rivalry are as essential as mobility barriers in understanding the emergence and stability of strategic groups. When dynamic capabilities are absent or when rivalry is extended over firms with dissimilar strategies, strategic groups are less likely to exist. These findings can serve as a guideline for empirical research to probe why strategic groups exist sometimes and why they do not at other times. Copyright © 2002 John Wiley & Sons, Ltd.     

Firm,strategic group,and industry influences on performance

A long‐standing debate has focused on the extent to which different levels of analysis shape firm performance. The strategic group level has been largely excluded from this inquiry, despite evidence that group membership matters. In this study, we use hierarchical linear modeling to simultaneously estimate firm‐, strategic group‐, and industry‐level influences on short‐term and long‐term measures of performance. We assess the three levels' explanatory power using a sample of 1,165 firms in 12 industries with data from a 7‐year period. To enhance comparability to previous research, we also estimate the effects using the variance components and ANOVA methods relied on in past studies. To assess the robustness of strategic group effects, we examine both deductively and inductively defined groups. We found that all three levels are significantly associated with performance. The firm effect is the strongest, while the strategic group effect rivals and for some measures outweighs the industry effect. We also found that the levels have varying effects in relation to different performance measures, suggesting more complex relationships than depicted in previous studies. Copyright © 2007 John Wiley & Sons, Ltd.     

Competitive positioning within and across a strategic group structure: the performance of core,secondary, and solitary firms

Drawing from economic and cognitive theories, researchers have argued that firms within an industry tend to cluster together, following similar strategies. Their positioning in strategic groups, in turn, is argued to influence firm actions and firm performance. We extend this research to examine performance implications of competitive positioning not just among but also within groups. We find that performance differences within groups are significantly larger than across groups, suggesting that some firms within groups develop better resource or competitive positions. We also find that secondary firms within a group outperform both core firms within the group and solitary firms, the latter being those not belonging to any multifirm strategic group. This suggests that secondary firms may be able to effectively balance the benefits of strategic distinctiveness with institutional pressures for similarity. We conclude that the primary implication of strategic groups does not relate to the ability of firms to create stable, advantageous market segments through collusion. Instead, strategic groups represent a range of viable strategic positions firms may stake out and use as reference points. Moreover, our results concerning secondary firms indicate that firm positioning within a group structure can have performance implications. Copyright © 2002 John Wiley & Sons, Ltd.     

Rivalry,strategic groups and firm profitability

An analysis of the U.S. pharmaceutical industry during the period 1963–82 finds that a substantial decline in industry profitability is not explained by changes in the number and size distribution of firms, in segment interdependence and in strategic distance. In contrast, declining industry profitability is strongly associated with increasing rivalry. This increasing rivalry is associated with changes in strategic group structure and a concomitant shift from within group rivalry to between group rivalry.     

Playing dirty or building capability? Corruption and HR training as competitive actions to threats from informal and foreign firm rivals

Research summary : We examine why a firm takes specific competitive action in nonmarket and resource‐market spaces, particularly when it perceives threats from informal and foreign competitor groups, respectively. We address this question by combining insights from competitive rivalry, strategic groups, and nonmarket strategy literatures in an emerging economy context. Specifically, we theorize how threats from informal and foreign rival firms in an emerging market influence a firm's engagement in corruption activities and its investments in HR training, respectively. We also argue that the likelihoods of such focal firm actions against competitor group threats differ, contingent on the focal firm's market and resource profiles. Results from the empirical analyses, with survey data from the Indian IT industry, provide broad support to our hypotheses. Managerial summary : Based on a World Bank dataset on the Indian IT industry, this study finds that corruption and HR training are pursued by firms in emerging economies as mindful strategies against specific types of rivals—informal and foreign firm rivals, respectively, and are not pursued simply as culturally‐based practices. Multinational companies may need to understand that domestic firms in emerging countries will engage in corruption strategically to reduce their costs and time to market of their products/services. Therefore, multinational firms may need to devise suitable strategies other than corruption to reduce their costs and time to market if they wish to compete with firms in emerging economies for customers who don't care about ethical issues and will buy a cheaper product/service that is delivered quickly. Copyright © 2015 John Wiley & Sons, Ltd.     

STRATEGIC GROUPS AND RIVALROUS FIRM BEHAVIOR: TOWARDS A RECONCILIATION

This research examines the question of whether rivalry is greater between or within strategic groups by utilizing more direct, dynamic and fine-grained measures of rivalry. Examining the competitive actions of firms in different strategic groups to determine if competitive responses were more likely to occur from firms in the same strategic group, or from firms in different strategic groups, the research found that competitive responses cannot be predicted by strategic group membership. Importantly, however, strategic group membership is a predictor of the manner by which firms compete with one another, or the frequency with which they undertake competitive actions, cut prices, instigate warfare and imitate rivals. © 1997 by John Wiley & Sons, Ltd.     

Compensation strategy: does business strategy influence compensation in high‐technology firms?

Drawing on the strategic employee group concept, this study empirically examines whether a firm's innovation strategy influences compensation systems for strategic employee groups in the high‐technology industry. We focus on compensation packages for R&D employees who play a critical role in successful implementations of innovation strategy. Using compensation data for middle‐level managers and professional employees from 237 firms in the high‐technology industry, we found that a firm's strategic intention to pursue innovation has a significant influence on the relative pay level, compensation time horizon, and stock option vesting period lengths of this strategic employee group. Copyright © 2006 John Wiley & Sons, Ltd.     

Management heterogeneity,competitive interaction groups,and firm performance

One of the fundamental problems in strategic management is to map a heterogeneous set of firms in an industry into subsets of firms within which firms are homogeneous in their conduct and performance. The strategic group concept provides an answer to this intriguing question. Researchers in strategic group theory argue that firms within the same strategic group are behaviorally similar and thus tend to compete more fiercely within the group than across groups. In this paper, we focus on the question whether firms within the same group show similar decision‐making characteristics. Strategic‐choice theorists argue that top management teams in firms have substantial discretion in determining the future strategic contour of firms. Upper‐echelon theorists also argue that top managers are the strategists who set the direction of firms and the pace of competition in the industry. Further, they argue that top management team characteristics are an important element that determines the market niche in which a firm competes and the strategic direction a firm follows. Based on these arguments, we expect that there will be a significant link between grouping of firms by the patterns of competitive interactions and grouping of firms by top management team heterogeneity. Moreover, we argue that the closer the TMT heterogeneity of a firm is to the dominant heterogeneity in the competitive interaction group, the better it performs. Copyright © 2000 John Wiley & Sons, Ltd.     

GETTING TO KNOW YOU: A THEORY OF STRATEGIC GROUP IDENTITY

This paper develops a theory of strategic group identity that explains how strategic groups emerge in an industry and how they can affect firm behaviors and outcomes. In so doing, it provides a theoretical basis for the existence of strategic groups. We argue that managers cognitively partition their industry environment to reduce uncertainty and to cope with bounded rationality. Social learning theory and social identification theory are used to describe how cognitive groups coalesce into meaningful substructures and how a group-level identity emerges. We describe the ways in which macro level factors condition the development of groups and their identities. We introduce the notion of a strong identity, which characterizes any group sufficiently recognized and attended to by members to affect individual action. Groups with ‘weak identities’ are no more than transient agglomerations of firms and do not exist in any meaningful sense. These ideas are developed into propositions that describe the conditions under which groups with strong identities are likely to emerge. A second set of propositions describes their transformation over time. Identity strength is linked to both positive and negative outcomes in a final set of propositions. We show how strategic groups with strong identities can affect firm performance, resolving a longstanding problem which has plagued strategic groups research and conclude by suggesting some approaches for measurement and future research. © 1997 by John Wiley & Sons, Ltd.     

Strategic factor markets,scale free resources,and economic performance: The impact of product market rivalry

This paper analyzes how scale free resources, which can be acquired by multiple firms simultaneously and deployed against one another in product market competition, will be priced in strategic factor markets, and what the consequences are for the acquiring firms' performance. Based on a game‐theoretic model, it shows how the impact of strategic factor markets on economic profits is influenced by product market rivalry, preexisting competitive (dis)advantages, and the interaction of acquired resources with those preexisting asymmetries. New insights include the result that resource suppliers will aim at (and largely succeed in) setting resource prices so that the acquiring firms earn negative strategic factor market profits—sacrificing some of their preexisting market power rents—by acquiring resources that they know to be overpriced. Copyright © 2014 John Wiley & Sons, Ltd.     

Strategic groups as subsets of strategic scope groups in the Belgian brewing industry

This research report proposes a distinction between strategic scope groups and strategic groups whereby strategic groups are delineated within strategic scope groups. A strategic scope group (SSG) includes firms within an industry that define their business using a four-dimensional ‘strategic space’ consisting of buyer types, product types, geographical reach and level of vertical integration, in a similar way. Within each SSG there may be several strategic groups (SGs). An SG includes firms within an SSG that deploy their resources in a similar way and that compete in the same way. While all firms within an SSG may compete against each other, firms within the same SG compete against each other in a similar way. Within the brewing industry in Belgium five SSGs could be identified. These SSGs differ statistically significantly on a risk-adjusted return on assets measure. SGs themselves did not differ on this performance measure. One may therefore conclude that mobility barriers between SSGs are higher than they are between SGs. © 1997 by John Wiley & Sons, Ltd.     

RESOURCE AND MARKET BASED DETERMINANTS OF PERFORMANCE IN THE U.S. BANKING INDUSTRY

This paper explores the implications of studying industry competitive patterns at the level of resource accumulation and the relationship between resource endowments and firm performance outcomes in the U.S. banking industry. It uses the strategic group framework to evaluate two models of rivalry and performance and concludes by discussing the implications of the findings for competitive analysis, strategic group theory and the banking industry.     

A FRAMEWORK FOR ANALYZING CHANGES IN STRATEGIC PERFORMANCE

In this paper we present a framework for analyzing changes in strategic performance. Traditional measures for comparing the strategic performance across firms or over time have been return on investment (ROI) and its component ratio, return on sales (ROS). We decompose the ROS ratio into four separate ratios that capture the impact of changes in a firm's productivity, price recovery, product mix and capacity utilization on its profitability. These ratios help to highlight the micro sources of strategic success or failure. They can be used to assess changes in the performance of a firm compared to itself over time, or to other firms in its industry group. This framework can also be used to evaluate changes in the dynamic performance of an industry as a whole. We illustrate the use of these ratios with a 4-year analysis of the performance of a large manufacturing company. We also demonstrate how the technique can be applied to an industry with an evaluation of the performance of U.S. telecommunications firms between 1975 and 1987, a period during which the industry experienced a progressive increase in competitive pressure.     

Value creation and value capture with frictions

We use a formal value‐based model to study how frictions—incomplete linkages in the industry value chain that keep some parties from meeting and transacting—affect value creation and value capture. Frictions arise from search and switching costs and moderate the intensity of industry rivalry and the efficiency of the market. We find that firms with a competitive advantage prefer industries with less, but not zero, frictions. We show that rivalry interacts nontrivially with other competitive forces to affect industry attractiveness. Firm heterogeneity emerges naturally when we introduce resource development. Heterogeneity falls with frictions, but the sustainability of competitive advantage increases. Overall, we show that introducing frictions makes value‐based models very effective at integrating analyses at the industry, firm, and resource levels. Copyright © 2011 John Wiley & Sons, Ltd.     

Skew and heavy‐tail effects on firm performance

Research summary : Most strategic management studies adopt an average‐centered view that uses the central tendency to explain between‐group variation in performance (i.e., performance differences between business units, firms, industries, and countries). In this study, we explain within‐group variation using a variance‐centered view that focuses on the peripheral characteristics of performance distributions as defined by skew and heavy tails (i.e., variance and kurtosis). Drawing on performance feedback theory, we hypothesize that successful firms tend to develop a positive skew in their performance distributions, which we call a “positive skew effect” in this study, and that heavy tails moderate this effect. Our analysis of the performance of a group of foreign affiliates provides general support for our hypotheses at both the firm and segment (industry and country) levels. Managerial summary : Managers of multi‐business firms use various approaches to improve the aggregate performance of their business units. Some expand the range of upper performance outliers (exploration) or reduce the range of lower outliers (downsizing); others improve the performance of current business units (exploitation). We find that firms with superior performance tend to have a balanced mix of the three approaches. We also find that segments (countries and industries) with higher mean performances provide environments that facilitate the entry of productive firms and the exit of unproductive firms and provide environments in which incumbents can further improve their performance by learning from others. We observe that successful firms and segments have a positive skew in their performance distributions, which we call a “positive skew effect.” Copyright © 2016 John Wiley & Sons, Ltd.     

Strategic groups: Theory,research and taxonomy

This paper discusses the concept of strategic groups, focusing upon the importance of intra-industry strategic groupings in understanding differences across firms within an industry. The problems involved in identifying strategic groups within industries are examined through a comprehensive review of recent studies. It is demonstrated that much of the research has used surrogates for elements of a firm's strategic direction, e.g. vertical integration, product range, R & D expenditure, to suggest bases by which creative and sustainable groups are formed. The authors argue that certain theoretical concepts such as mobility barriers, isolating mechanisms and controllable variablesprovide much firmer bases for identifying strategic groups within industries. Thus, taxonomies for understanding the nature of strategic group formulation can be developed. Implications of the strategic group concept for such strategic issues as the structure-performance linkage, firm mobility, patterns of rivalry, industry evolutionand firm growthare then examined. The paper concludes by indicating fruitful directions for strategic group research in the context of the strategic management field.     

The contingent effects of political strategies on firm performance: A political network perspective

Research Summary: We examine the performance impact of corporate political strategies by analyzing the relationships among firms and various government institutions. While a firm's political connections to a focal government with decision‐making authority enhance performance, connections to a rival government competing with the focal government harm performance, particularly when the rivalry is intense. Firms can neutralize the negative effect from this political rivalry by using direct or indirect connections to a constraining government with power over the focal government. We find support for our conjectures based on an analysis of interactions among Chinese steel firms and the central and provincial governments in acquisition decisions during the industry's consolidation period of 1999–2010. Managerial Summary: Firms invest in political capital in order to influence public policies in their favor. However, the government is a not a monolithic entity and the relationships among various government institutions can alter and even reverse the effects of a firm's political strategy. This research shows that a firm's political connections can be both an asset and a liability. That is, although firms benefit from their connections to governments with decision‐making authority, they can be caught in the crossfire when there is a rivalry between governments. Furthermore, our research suggests that firms can cope with the negative impact from political rivalry by taking advantage of the structural relationships within the political system and influencing governments that have constraining power.     

Ecological investigation of firm effects in horizontal mergers

Using an ecological lens, we extend strategic management and industrial organization theory to investigate the performance effects of horizontal mergers. We theorize that firms differ in their ability to benefit from horizontal mergers; that the products involved in the merger differ in their ability to attain and sustain any increase in performance above their premerger level; and that resource niches in which each product competes differ in terms of competitive constraints. We then test these predictions using longitudinal data specified at the product–market level, a unit of analysis that is less influenced by aggregation bias than are industry, firm, and even line-of-business level data. Our findings demonstrate how organizational ecology, when coupled with strategic management and industrial organization economic theories, can enrich our understanding of horizontal mergers. Copyright © 2001 John Wiley & Sons, Ltd.