Information technology as competitive advantage: the role of human,business, and technology resources

This paper investigates linkages between information technology (IT) and firm performance. Although showing recent signs of advance, the existing IT literature still relies heavily on case studies, anecdotes, and consultants’ frameworks, with little solid empirical work or synthesis of findings. This paper examines the IT literature, develops an integrative, resource-based theoretical framework, and presents results from a new empirical study in the retail industry. The findings show that ITs alone have not produced sustainable performance advantages in the retail industry, but that some firms have gained advantages by using ITs to leverage intangible, complementary human and business resources such as flexible culture, strategic planning–IT integration, and supplier relationships. The results support the resource-based approach, and help to explain why some firms outperform others using the same ITs, and why successful IT users often fail to sustain IT-based competitive advantages. © 1997 by John Wiley & Sons, Ltd.     

Does Strategic Planning Enhance or Impede Innovation and Firm Performance?*

Does strategic planning enhance or impede innovation and firm performance? The current literature provides contradictory views. This study extends the resource‐advantage theory to examine the conditions in which strategic planning increases or decreases the number of new product development projects and firm performance. The authors test the theoretical model by collecting data from 227 firms. The empirical evidence suggests that more strategic planning and more new product development (NPD) projects lead to better firm performance. Firms with organizational redundancy benefit more from strategic planning than firms with less organizational redundancy. Increasing R&D intensity boosts both the number of NPD projects and firm performance. Strategic planning is more effective in larger firms with higher R&D intensity for increasing the number of NPD projects. The results reported in this study also consist of several findings that challenge the traditional views of strategic planning. The evidence suggests that strategic planning impedes, not enhances, the number of NPD projects. Larger firms benefit less, not more, from strategic planning for improving firm performance. Larger firms do not necessarily create more NPD projects. Increasing organizational redundancy has no effect on the number of NPD projects. These empirical results provide important strategic implications. First, managers should be aware that, in general, formal strategic planning decreases the number of NPD projects for innovation management. Improvised rather than planned activities are more conducive to creating NPD project ideas. Moreover, innovations tend to emerge from improvisational processes, during which the impromptu execution of NPD activities without planning spurs “thinking outside the box,” which enhances the process of creating NPD project ideas. Therefore, more flexible strategic plans that accommodate potential improvisation may be needed in NPD management since innovation‐related activities cannot be planned precisely due to the unexpected jolts and contingencies of the NPD process. Second, large firms with high levels of R&D intensity can overcome the negative effect of strategic planning on the number of NPD projects. Specifically, a firm's abundant resources, when allocated and deployed for NPD activities, signal the high priority and importance of the NPD activities and thus motivate employees to acquire, collect, and gather customer and technical knowledge, which leads to creating more NPD projects. Finally, managers must understand that managing strategic planning and generating NPD project ideas are beneficial to the ultimate outcome of firm performance despite the adverse relationship between strategic planning and the number of NPD projects.     

Organizational alignment as competitive advantage

In explaining financial performance variance, strategic management researchers and industrial organization economists have emphasized industry factors, market share, generic strategy, and strategic group membership, whereas organizational contingency theorists have emphasized alignments involving environment and internal structure. This study integrates these perspectives, testing the financial performance consequences of organizational alignments, in context with the effects of industry, market share, and strategy. In an empirical study in two manufacturing industries, it is shown that some organizational alignments do produce supernormal profits, independent of the profits produced by traditional industry and strategy variables. The results are consistent with the resource view of the firm: to the extent that alignments result from skill rather than luck, it is reasonable to regard alignment skill as a strategic resource capable of generating economic rents. The article suggests that, by focusing on industry and competitive strategy variables, contemporary industrial organization and strategy research has understated the role of organizational factors in producing sustainable competitive advantage.     

Performance differences among strategic group members

Whether and why members of the same strategic group would experience different performance results has received little attention in previous research. These questions are addressed in this paper. First, conventional theory on the relationship between firm performance and strategic group membership is reviewed. Then a theory is developed as to how historical differences among strategic group members may result in performance differences. An empirical analysis of risk and return relationships is conducted, centered on the nature of environmental change characterizing the industry. The empirical setting throughout is the U.S. pharmaceutical industry over the period 1963–82.     

How does the partner type in R&D alliances impact technological innovation performance? A study on the Korean biotechnology industry

The number of strategic alliances for R&D activities in the biotechnology industry is sharply increasing. Some studies show that each alliance partner type has different alliance motives, resources and capabilities, organizational structures and cultures, and degrees of competition with partners, which can lead to different performances of strategic alliances. In this regard, this study conducts an empirical analysis of the different impact of each type of alliance partner on technological innovation performance and finds the moderating effect of absorptive capacity and potential competition by categorizing strategic alliances for R&D activities in the biotechnology industry into three types: vertical-downstream alliances, vertical-upstream alliances, and horizontal alliances. This study analyzed 206 Korean biotechnology firms and their strategic alliances for a total of 292 R&D activities. The results of the analysis showed that vertical alliances have a positive impact on technological innovation performance, while horizontal alliances have an inverted U-shaped relationship with technological innovation performance caused by the effect of competition. Additionally, it was confirmed that the R&D intensity of biotechnology firms has a moderating effect of increasing the impact of vertical-upstream alliances on technological innovation performance.     

The impact of formalized strategic planning on financial performance in small organizations

The relationship between formality of planning procedures and financial performance was examined for a sample of small U.S. banks. Small banks without formal planning systems performed equally with small, formal planners. Regardless of formality, each set of banks placed equal emphasis on all aspects of strategic decision-making except formalized goals and objectives. Results suggest that managers responsible for strategic planning activity in smaller organizations do not appear to benefit from a highly formalized planning process, extensive written documentation, or the use of mission and goal identification as the beginning of a strategic planning process.     

The value of formal planning for strategic decisions: A comment

In an earlier paper in the SMJ, Armstrong (1982) conducted a review of the empirical evidence relating to the question of whether formal planning for strategic decision-making pays off, or more concisely whether strategic planning pays. Armstrong found that the evidence was equivocal. He also found that the methodological purity of a number of the 12 studies, which he claimed to constitute the totality of the evidence, was in doubt. For that reason he assessed the rigour of the studies relative to a framework previously proposed by Terpstra (1981). Using this framework he found that the studies rated poorly.     

Planning and financial performance of small,mature firms

This article develops a classification scheme of planning process sophistication in small firms, categorizes small firms according to planning process sophistication, and examines the relationship between planning process sophistication and the financial performance of a select group of small, mature firms. The study overcomes several methodological shortcomings of prior research on strategic planning and firm performance. Multivariate analysis of variance is used to identify statistically significant differences between the financial performance data of firms that employ structured, strategic plans and those that do not. The results confirm previous research on strategic planning and financial performance. Finally, recommendations are made for future research.     

Learning to plan and planning to learn: resolving the planning school/learning school debate

This paper resolves the long‐standing debate between the two dominant process schools in strategy. Analysis of the planning practices of 656 firms shows that formal planning and incrementalism both form part of ‘good’ strategic planning, especially in unstable environments. Environment neither moderates the need for formal planning nor the direction of the planning/performance relationship, but does moderate firm planning capabilities and planning flexibility. In unstable environments planning capabilities are far better developed and formal plans more amenable to change. The planning/performance relationship is, however, moderated by planning duration: at least four years of formal planning are required before external performance associations are noted. Copyright © 1999 John Wiley & Sons, Ltd.     

Cognitive diversity among upper-echelon executives: implications for strategic decision processes

Diversity among executives is widely assumed to influence a firm's strategic decision processes, but empirical research on this linkage has been virtually nonexistent. To partially fill the void, we drew upon three separate studies to examine the impact of executive diversity on comprehensiveness of strategic decision-making and extensiveness of strategic planning. Contrary to common assumptions of researchers and executives, our results suggest that executive diversity inhibits rather than promotes comprehensive examinations of current opportunities and threats, and inhibits rather than promotes extensive long-range planning. In light of the cumulative research showing that firm performance is related to both comprehensiveness and extensiveness, our results provide evidence for an indirect connection between executive diversity and firm performance. © 1998 John Wiley & Sons, Ltd.     

Planning and financial performance among small firms in a growth industry

This paper examines the relationship between planning process sophistication and the financial performance of a select group of small firms in a growth industry. Multivariate analysis of variance is used to identify statistically significant differences between firms that employ sophisticated plans and those that do not. The results support previous research on strategic planning and financial performance.     

Do strategic groups exist? an economic framework for analysis

This paper offers a framework and methodology for resolving the question regarding the existence of strategic groups. We say that a strategic group exists if characteristics of the group affect firm performance independently of firm-level and industry-level effects. We argue that group-level effects are a byproduct of strategic interactions among members, and develop an empirical testing model, based on the ‘New Economics of Industrial Organization,’ to distinguish true group effects from spurious effects. From this model, we derive a series of logically consistent propositions, suggesting that while strategic interactions are critical for a group-level effect on profits, mobility barriers are necessary to preserve both groups and their effects over time. A review of prior empirical studies of strategic groups suggests that the inconclusive nature of prior research has been due more to the lack of a theoretical foundation for empirical analysis than to the nonexistence of groups. To the extent that our methods have been employed, there is limited evidence that a rigorous search for strategic groups may prove fruitful. © 1998 John Wiley & Sons, Ltd.     

How Much Does Ownership Form Matter?

Research summary : Previous studies have emphasized firm and industry effects on variation in firm performance, but the relationship between forms of ownership and firm performance has been the focus of limited research. This article examines the extent to which ownership form (i.e., public or private ownership) and ownership structure (including diffused ownership and blockholding) affect firm performance. The results of an analysis of 30,525 European Union (EU) firms indicate that form of ownership is an important explanatory factor in the difference in performance among firms. These results underscore the need to study firms characterized by different ownership arrangements and to provide empirical evidence for the study of firm ownership in strategic management. Managerial summary : Motivated by growing evidence on the involvement of different types of owners in the strategies of firms, we studied the extent to which a firm's ownership form (type of legal incorporation, such as public and private ownership forms) and ownership structure (diffused ownership and blockholding) affect its performance. Our study of more than 30,000 firms from the European Union shows that ownership form differences explain some of the performance differences between firms. Our results also indicate that firms with different ownership forms are differently affected by their competitive environment. Overall, the study suggests that choosing the right ownership form can have important strategic consequences. Copyright © 2017 John Wiley & Sons, Ltd.     

Managing Supplier Involvement in New Product Development: A Multiple‐Case Study*

Existing studies of supplier involvement in new product development have mainly focused on project‐related short‐term processes and success factors. This study validates and extends an existing exploratory framework, which comprises both long‐term strategic processes and short‐term operational processes that are related to supplier involvement. The empirical validation is based on a multiple‐case study of supplier collaborations at a manufacturer in the copier and printer industry. The analysis of eight cases of supplier involvement reveals that the results of supplier–manufacturer collaborations and the associated issues and problems can best be explained by the patterns in the extent to which the manufacturer manages supplier involvement in the short term and the long term. The results of this study reveal that the initial framework is helpful in understanding why certain collaborations are not effectively managed yet conclude that the existing analytical distinction among four different management areas does not sufficiently reflect empirical reality. This leads to the reconceptualization and further detailing of the framework. Instead of four managerial areas, this study proposes to distinguish between the strategic management arena and the operational management arena. The strategic management arena contains processes that together provide long‐term, strategic direction and operational support for project teams adopting supplier involvement. These processes also contribute to building up a supplier base that can meet current and future technology and capability needs. The operational management arena contains processes that are aimed at planning, managing, and evaluating the actual collaborations in a specific development project. The results of this study suggest that success of involving suppliers in product development is reflected by the firm's ability to capture both short‐ and long‐term benefits. If companies spend most of their time on operational management in development projects, they will fail to use the leverage effect of planning and preparing such involvement through strategic management activities. Also, they will not be sufficiently able to capture possible long‐term technology and learning benefits that may spin off from individual projects. Long‐term collaboration benefits can only be captured if a company can build long‐term relationships with key suppliers, with which it builds learning routines and ensures that the capability sets of both parties are aligned and remain useful for future joint projects.     

Strategic planning in a turbulent environment: evidence from the oil majors

The long‐running debate between the ‘rational design’ and ‘emergent process’ schools of strategy formation has involved caricatures of firms' strategic planning processes, but little empirical evidence of whether and how companies plan. Despite the presumption that environmental turbulence renders conventional strategic planning all but impossible, the evidence from the corporate sector suggests that reports of the demise of strategic planning are greatly exaggerated. The goal of this paper is to fill this empirical gap by describing the characteristics of the strategic planning systems of multinational, multibusiness companies faced with volatile, unpredictable business environments. In‐depth case studies of the planning systems of eight of the world's largest oil companies identified fundamental changes in the nature and role of strategic planning since the end of the 1970s. The findings point to a possible reconciliation of ‘design’ and ‘process’ approaches to strategy formulation. The study pointed to a process of planned emergence in which strategic planning systems provided a mechanism for coordinating decentralized strategy formulation within a structure of demanding performance targets and clear corporate guidelines. The study shows that these planning systems fostered adaptation and responsiveness, but showed limited innovation and analytical sophistication. Copyright © 2003 John Wiley & Sons, Ltd.     

Don't Trust Trust: A Dynamic Approach to Controlling Supplier Involvement in New Product Development

Prior literature stresses the importance for manufacturers to use formal and informal controls to coordinate collaborative new product development activities with suppliers. In doing so, the existence of trust between manufacturers and suppliers is believed to play a key role because it enables manufacturers to reduce investments in formal controls and rely more on less costly informal controls. Manufacturers and suppliers don't suddenly trust each other though: trust typically grows over time as the partners get to know each other. Trust may also decrease if manufacturers overuse formal controls or if suppliers underperform. These fluctuations in trust over the course of supplier–manufacturer relationships complicate the so‐called trust–control nexus and raise important questions about the impact of trust on the efficiency and effectiveness of formal and informal controls as coordination mechanisms. Therefore, this study examines how manufacturers should balance formal and informal controls over time to reap the full benefits of collaborative product development with suppliers. For that purpose, a conceptual and system dynamics model are developed, which incorporate the links among formal and informal controls, trust, and the supplier's development performance. In an empirical validation in the context of the shipbuilding industry, the results reject the notion that manufacturers must lessen formal controls and increase informal controls with trust. Instead, it is most efficient and effective to invest always in formal controls, particularly process control, to coordinate supplier involvement in new product development. These results have important theoretical and managerial implications: Informal controls are not as profitable as expected.     

Using rewards in implementing strategy

Corporations often find it difficult to carry out their strategies because they have executive compensation systems that measure and reward performance in a way that ignores or even frustrates strategic thinking, planning, and action. In particular, reward systems rarely emphasize the long run adequately, nor are they well coordinated with the methods and objectives of other management systems. This article describes three methods that can be used to match rewards with accomplishment of strategic goals: the weighted-factor method which weights various performance measurements according to strategic objectives, the long-term evaluation method, which ties compensation to goals achieved over a multiyear period, and the strategic funds deferral method which varies from the conventional financial accounting model for the measurement of performance. The article recommends that all three methods be combined into a single system in which the rewards for senior managers throughout the company are determined by the three methods in different proportions according to those factors that constitute successful performance in their positions.     

Strategic groups as reference groups: Theory,modeling and empirical examination of industry and competitive strategy

Previous studies on strategic groups have mainly focused on their static characteristics in order to test the theory of strategic groups and intraindustry performance differences (Porter, 1979; Cool and Schendel, 1988; Fiegenbaum and Thomas, 1990). In contrast, this study takes a longitudinal, dynamic perspective and describes the forces driving strategic group membership and structural evolution. It proposes that a strategic group acts as a reference point for group members in formulating competitive strategy. A partial adjustment model of strategic mobility is then developed which incorporates the idea of a strategic group as a reference group. It models strategic change in an industry both within and across strategic groups. The model is tested in the context of an in-depth industry analysis of the more significant firms in the insurance industry over the 1970-84 time period. The results suggest that strategic groups act as reference points for firm strategies and that predictions of future firm strategies and industry/group structures may also be successfully derived.     

The impact of grand strategy and planning formality on financial performance

An empirical study involving 97 manufacturing firms that averaged $20 million in annual sales yielded a strong positive correlation between the degree of planning formality and firm performance. Additionally, interactive analysis disclosed that this relationship pervaded various grand strategies; the implication being that formalized strategic planning was consistently a positive factor associated with high levels of organizational performance.     

Research notes and communications co-ordinating mechanisms,consensus between marketing and manufacturing groups,and marketplace performance

This exploratory study investigated the relationship among use of various co-ordinating mechanisms, degree of consensus between marketing and manufacturing groups, and marketplace performance reputation. Consensus between marketing and manufacturing groups on key competitive strengths, company goals, and implementation actions was measured in 15 firms in the carpet industry. Those firms which made more frequent use of planning techniques (formal forecasting procedures, management-by-objectives linked to performance appraisal, and a written strategic plan) experienced higher levels of interdepartmental consensus. Consensus between departments was strongly related to marketplace performance reputation.