INDUSTRY AND STRATEGIC GROUP DYNAMICS: COMPETITIVE STRATEGY IN THE INSURANCE INDUSTRY, 1970–84

This article focuses upon dynamic aspects of strategic groups in the context of the US insurance industry from 1970–84. It examines the longitudinal structure of industry strategic groups and identifies the strategic patterns followed by these strategic groups over time. the mobility rates of firms between strategic groups are also assessed. It appears that three dominant groups are present throughout the period of the study while other group positions emerge and disappear over time. the evidence suggests that the quantum theory of strategic adaptation (i.e. dramatic and concerted change) satisfactorily models the processes of strategic group change. And, a low level of firm mobility is found to exist between strategic groups consistent with the presence of inertia and mobility barriers.     

A TEST OF PERFORMANCE SIMILARITY AMONG STRATEGIC GROUP MEMBERS IN CONFORMING AND NON-CONFORMING INDUSTRY STRUCTURES

Empirical tests have produced mixed support for a membership-performance link in strategic groups, perhaps due to incomplete treatment of industry forces. We argue that strategic group concept is more useful for explaining performance differences among firms in some industries (where conditions favour conformity in firm conduct) than others. Using three industry structure constructs as criteria, 47 four-digit SIC industries are classified into ‘conforming’ or ‘non-conforming’ industry samples. Firms are then clustered into strategic groups in a separate treatment for each sample. Performance differences among groups are tested under conforming and non-conforming industry conditions. Tests confirm membership effects on ROA and ROE are significantly stronger in ‘conforming’ industries, where stronger regression relationships between conduct variables and performance also obtain.     

New Institutional Economics' contribution to strategic groups analysis

Rather than consider the two broad strands of strategic group research—performance‐based and behavior‐based studies—as competing approaches, we argue that they relate to complementary levels of analysis. We present a four‐level framework for analyzing structures within industries drawn from New Institutional Economics (NIE) which covers different approaches to strategic group formation from institutional isomorphism and embeddedness through to the firm‐level effects of certain resource deployments. We apply an institutional approach to a case study of the Australian banking industry and supplement this with a quantitative approach based around key strategic variables. This analysis suggests that distinct groups have emerged due to the institutional environment and the different regulatory environments experienced by various banks in the industry. Copyright © 2007 John Wiley & Sons, Ltd.     

Pay dispersion among the top management team and outside directors: Its impact on firm risk and firm performance

Two key groups central to improving firm performance are the top management team (TMT) and the board of directors. Executives undertake strategic actions, whereas board members fulfill their resource provision and monitoring roles. Drawing on tournament theory and equity theory, we propose that high pay dispersion among outside directors and the TMT is positively associated with strategic risk, whereas high (low) TMT pay dispersion and low (high) outside director pay dispersion are positively associated with firm performance. Our predictor is the unexplained component of horizontal pay dispersion, or the residual of pay dispersion resulting from regressing pay on observable firm, industry, period, and individual characteristics. Our results highlight the importance of unexplained pay dispersion for TMTs, but not for boards of directors, in improving firm performance.     

When Do Outsider CEOs Generate Strategic Change? The Enabling Role of Corporate Stability

When academic researchers, business commentators, and boards of directors have debated the merits of hiring new CEOs from outside the firm, the implicit or explicit assumption typically made is that outsider CEOs will provide an advantage in achieving strategic change. In this study, we challenge this assumption by employing a duality perspective on stability/change, and we provide an original conceptual framework to posit that it is the presence of corporate stability (ordinary succession, a long‐tenured predecessor CEO, and good firm performance) that allows outsider CEOs to generate a greater degree of post‐succession strategic change. We use extensive longitudinal data from US airline and chemical industries between 1972 and 2010 to test our hypotheses, and we discuss how our supportive findings challenge long‐standing assumptions regarding the outsider succession–strategic change relationship, and we advocate embracing the non‐intiutive notion that stable (unstable) conditions can be enablers (barriers) of strategic change for outsider CEOs.     

Strategic Groups,Frontier Benchmarking and Performance Differences: Evidence from the UK Retail Grocery Industry*

ABSTRACT In this paper we seek to advance the theory and practice of strategic group theory by means of powerful benchmarking tools that allow the composition of strategic groups on the basis of empirically derived production function frontiers. The relative performance of firms is assessed based on multiple inputs and outputs and as a result, firms are associated with different segments of the efficient frontiers. These segments constitute strategic facets and are used in the current paper as strategic group variables. The strategic facets are composed by outlier firms in the sense that they satisfy the Pareto dominance criterion when compared with other firms. Such advancement offers significant advantages compared to the ‘average’ firm that is used traditionally as a basis to define strategic groups. The proposed methodology for the formation of strategic groups has been applied on a panel of data from the grocery industry in the UK in the period 1987–93. The results of the study confirmed the existence of three stable strategic groups and one with a more volatile membership. Performance differences were also identifiled both between and within strategic groups using as criteria traditional accounting methods and also the relative efficiency indices obtained from the benchmarking methodology applied to the panel of data.     

Firm-strategic behavior with industry-demand externalities

This paper investigates the effects of industry-demand externalities on the firm's strategic decision making, with an industry-demand externality being defined as a change in industry demand resulting from the efforts of a particular firm to develop, advertise or price a particular product. Profit-maximization models of the firm's strategic behavior that incorporate industry-demand externalities created by a particular firm and the competitive responses of its rivals reveal that the presence of such an externality serves as an incentive for the firm to engage in the form of strategic behavior that generates the externality.     

Intra-industry structure and the response toward rivals

This paper is a study of the pricing behavior of airline monopolists toward potential entrant carriers from different strategic groups. The results suggest that formerly regulated carriers price lower when faced by potential entrants from the newly certified carrier group than they do when they face only potential entrants from their own group. These results are consistent with the heretofore-untested hypothesis from Caves and Porter (1977) and Porter (1979) that rivalry is greater across groups than within groups.     

Economic uncertainty,oil prices,hedging and U.S. stock returns of the airline industry

This paper examines the impacts of economic policy uncertainty and oil price shocks on stock returns of U.S. airlines using both industry and firm-level data. Our empirical approach considers a structural vector-autoregressive model with variables recognized to be important for airline returns including jet fuel price volatility. Empirical results confirm that oil price increase, economic uncertainty and jet fuel price volatility have significantly adverse effect on real stock returns of airlines both at industry and at firm level. In addition, we also find that hedging future fuel purchase has statistically positive impact on the smaller airlines. Our results suggest policy implications for practitioners, managers of airline industry and commodity investors.     

STRATEGIC ENTRY DETERRENCE: RECENT DEVELOPMENTS IN THE ECONOMICS OF INDUSTRY

Abstract. This paper reviews the recent developments in the economics of industry with respect to strategic entry deterrence. Starting from Bain's (1956) classical analysis, a simple two-stage game between an incumbent firm and a potential entrant is used to present the general structure of the entry deterrence problem. Commitments, credible threat and sub-game perfection are illustrated in this context. The various strategic variables that an incumbent firm can use to bar entry are discussed. The issue of whether a group of incumbents can non-cooperatively deter entry is taken up and some empirical evidence is reviewed.     

Exploring the interaction of firm-level change and national institutional environments in shaping employment and union relations: a comparative case study of four European airlines

Drawing on the example of the airline industry, this paper explores in a longitudinal comparative case study the question of how firm-level changes and national institutional environments interact in shaping employee and union relations. Adding to previous research in comparative institutional analysis and comparative employment relations, we illustrate that the way in which industry pressures and national-level effects play out to influence employee and union relations depends on firm-level changes, mainly in the form of firm growth, acquisitions and the foundation of new subsidiaries. We show in particular that depending on firm-level changes, the very same firm might engage differently with a given institutional context at different points in time. Hence, our work illustrates the importance of firm growth, acquisitions and the foundation of new subsidiaries in explaining the shifting interaction between the firm and its institutional environment, and its implications for changing employee and union relations within firms.     

A dynamic oligopoly game of the US airline industry: Estimation and policy experiments

This paper studies the contribution of demand, costs, and strategic factors to the adoption of hub-and-spoke networks in the US airline industry. Our results are based on the estimation of a dynamic game of network competition using data from the Airline Origin and Destination Survey with information on quantities, prices, and entry and exit decisions for every airline company in the routes between the 55 largest US cities. As methodological contributions of the paper, we propose and apply a method to reduce the dimension of the state space in dynamic games, and a procedure to deal with the problem of multiple equilibria when implementing counterfactual experiments. Our empirical results show that the most important factor to explain the adoption of hub-and-spoke networks is that the sunk cost of entry in a route declines importantly with the number of cities that the airline connects from the origin and destination airports of the route. For some carriers, the entry deterrence motive is the second most important factor to explain hub-and-spoke networks.     

Cooperation with a multiproduct corporation in a strategic managerial delegation

We consider an industry composed of a multiproduct corporation that adopts corporate social responsibility (CSR) as a strategic managerial delegation and examine the profit-incentive to form a cooperative group. We find that competition is an equilibrium for any degree of substitutability and yields the highest CSR, which is increasing in the degree of substitutability. We also show that full cooperation is an equilibrium for lower substitutability but induces no CSR, whereas partial cooperation with one uniplant firm is an equilibrium for higher substitutability but yields lower CSR than that under competition. Therefore, cooperation might reduce strategic CSR activities, whereas competition will encourage higher CSR but yield lower industry profits.     

High‐commitment HR practices,employee effort,and firm performance: Investigating the effects of HR practices across employee groups within professional services firms

In this study, the authors examine the relationship between high‐commitment HR practices and firm performance in professional services firms through the mediator of employee effort. In addition, they contribute to the debate in the field of strategic HRM on whether high‐commitment HR practices should be used across all employee groups within a firm. Their study's results show that high‐commitment HR practices positively relate to firm performance through employee effort for two employee groups within professional services firms. Further, they found that the relationship between effort and performance is contingent on the value of the employee group to firm competitive advantage, suggesting that companies may only want to expend the effort and resources on building a high‐commitment HR system for employee groups that are clearly tied to creating firm competitive advantage. © 2011 Wiley Periodicals, Inc.     

Limits to global sourcing?: Strategic consequences of dependency on international suppliers: Cluster theory,resource-based view and case studies

This paper argues for the inclusion of an analysis of industry clusters when making decisions about global or local sourcing. Suppliers are viewed as valuable resources that can contribute to a firm's competitive advantage. Two contrasting case studies illustrate that, contrary to common expectations, a high global sourcing quota does not necessarily improve a firm's competitiveness. Rather, there may be limits to global sourcing, if a firm is unable to become a preferred customer of its strategic suppliers. Achieving preferred customer status is easier for firms located in the same regional or national cluster than it is for foreign firms attempting to access a remote supplier. This paper contributes a new and more differentiated approach to global sourcing decisions by integrating the cluster concept. Furthermore, our findings enrich the discourse of strategic management by supporting the view that resources which enable a firm to achieve sustainable competitive advantages can be located beyond its legal boundaries.     

How Strategic Groups Act Competitively Within and Across Markets

Our study analyzes rivalry within and across markets of size‐defined strategic groups in the banking industry. We consider that, owing to group‐level effects, like efficiency and funding, the degree of rivalry of size‐defined strategic groups depends on whether the competitor is acting in the same or in a different market and whether the competing firms are within the same strategic group or in different groups. We estimate the effect of group interactions within and across loans and deposits markets on firm performance in the Spanish banking industry. We find evidences of rivalry as described in our hypotheses. Copyright © 2017 John Wiley & Sons, Ltd.     

Strategic Groups and Inter-Firm Networks In International High-Tech Industries

Strategic partnering and the analysis of strategic groups are two issues which enjoy a growing interest from industrial economists as well as from strategic management scholars. This contribution focuses on two related topics in the discussion on strategic group formation. the first subject addresses the relevance of strategic groups for understanding industry heterogeneity. the other topic covers the question whether companies from particular strategic groups establish strategic links with each other, or whether intra-group rivalry leads to inter-firm cooperation across strategic groups. Although it appears neglected in the literature the possible linking of the analysis of strategic groups with corporate network studies could generate further understanding of the process of strategic group formation. the present contribution focuses on the international information technology industry in order to study the possible symmetry of the structure of strategic group formation and parallel inter-firm networks of strategic partnering empirically.     

Strategic Alliances in the Aviation Industry: An Analysis of Turkish Airlines Experience

SUMMARY

This paper investigates antecedents of success/failure in strategic alliances, which is implemented by airline companies as a response to globalization and liberal government policies. The relationship between Turkish Airlines and Qualiflyer Group, the largest airline alliance in Europe until its collapse in 2001, has been taken as a case study to present the question in terms of matching the goals, partner selection, alliance management, and areas of cooperation. Two factors at the macro-level and four factors at the micro-level are found to be important to succeed in strategic airline alliances.     

企业战略管理理论演进的内在逻辑与实现路径分析

企业为什么能够盈利以及怎么获得超过行业平均利润的经济租金是战略管理领域研究的基本永恒问题,企业所拥有资源和能力如何与其所处环境相匹配成为其解决思路。通过回顾相关理论,概况总结了企业战略管理的三个发展阶段：古典战略理论、新古典战略理论与产业创新战略理论。在此基础上,以企业是否动态权变适应环境,划分企业战略管理为静态战略管理和动态战略管理阶段,进而总结出企业动态战略的运作模式,认为战略管理的最终目的就是为了向顾客传递价值并吸引那些有需要和有购买力的顾客。     

Differences in RBV strategic factors and the need to consider opposing factors in turnaround outcomes

The resource‐based view‐related empirical literature has focused on one‐industry–one‐focal‐resource studies to provide support for its core tenets. We complement that literature with a first empirical analysis of multiple strategic factors, including opposing factors, and covering multiple industries, based on a recent survey of turnaround professionals. We focus on two issues. First, we explore what factor characteristics correlate to differences in the level of impact on firm performance that different types of factors have. Second, we explore the balance between opposing strategic factors (i.e., beneficial versus detrimental factors) relating to which turnaround outcome occurs. Copyright © 2008 John Wiley & Sons, Ltd.