Modeling the dynamics of strategic fit: a normative approach to strategic change

This study develops and tests a dynamic perspective on strategic fit. Drawing from contingency and resource‐based arguments in the strategy and organizational theory literatures, we propose a distinctive analytical approach to identify environmental and organizational contingencies that should predict changes in a firm's strategy and the performance implications of such changes. We test our model using extensive longitudinal data from over 4000 U.S. savings and loan institutions during a period when many S&Ls considered changing strategic direction. The findings support our model of dynamic strategic fit. Specifically, we find that (1) the timing, direction, and magnitude of strategic changes can be logically predicted based on differences in specific environmental forces and organizational resources, and (2) organizations that deviated from our model's prediction of dynamic strategic fit (i.e., changed more or changed less than our model prescribed) experienced negative performance consequences. We conclude by discussing the implications of our approach and findings for future research on strategic fit and strategic change. Copyright © 2000 John Wiley & Sons, Ltd.     

Innovations and the role of complementarities in a strategic theory of the firm

In the resource‐based view of strategy and in evolutionary economics, complementary assets play a crucial role in explaining sustainable competitive advantages and innovations. Despite the apparent importance of complementary assets for the understanding of corporate strategy, their creation and the associated managerial problems have been much less discussed. We believe this to be a major weakness in the strategic theory of the firm. Interestingly, problems of coordination and cooperation are center stage in the contract‐based theories of the firm, and we try to integrate some of their insights into a resource‐based perspective. Specifically, we show how complementary assets raise the need for strategic direction by a firm's top management. Moreover, complementary assets magnify internal incentive problems, and their management has an impact on the innovativeness of a firm. Lastly, complementary assets play a crucial role in the internal appropriation of innovative rents. We demonstrate the fruitfulness of our integrated framework by relating some of our findings to the literature on corporate strategy, industry evolution, and organizational structures. Copyright © 2007 John Wiley & Sons, Ltd.     

Group influence activities and the performance of strategic initiatives

This study examines relationships between group influence activities and the performance of strategic initiatives. Theory suggests that the strength of these relationships is contingent upon the degree of exploration inherent in an initiative's goals. An analysis of 96 initiatives in three large firms supports the moderating role of exploration for the use of formal authority and coalition building, demonstrating that these group influence activities are more important to performance in more exploratory initiatives. Although the direct relationship between rational justification and initiative performance is significant, there is no evidence of the moderating effect for this form of influence. The results show how groups associated with strategic initiatives use different forms of influence to reduce the investment and political uncertainties that limit initiative performance. Copyright © 2011 John Wiley & Sons, Ltd.     

Environmental context,managerial cognition,and strategic action: an integrated view

This study addresses an apparent disconnect between two views of strategic action: the ‘economic view,’ which contends that industry structure is the primary influence on strategic action, and the ‘cognitive view,’ which suggests that managerial cognition drives strategic action. We argue that this disconnect has created artificial boundaries between the two perspectives and has limited our ability to develop holistic explanations of strategic action. In response, we develop an integrated model that answers two questions: 1) Does industry context affect managerial cognition? 2) Does managerial cognition mediate the relationship between industry context and strategic responses to environmental changes? To examine these questions, we study the relationship between industry velocity, the structure of top management's cognitive representation of the environment, and the speed of response to environmental events. We find that industry velocity influences the structure of cognitive representations, which in turn influence the speed of response to environmental events. These results support our contention that both industry and cognition variables are critical in developing explanations of strategic actions. These results have implications for our understanding of the development of top managers' beliefs, the relationship between beliefs and action, and the nature of the complex relationship between industry context, managerial cognition, and strategic action. Copyright © 2008 John Wiley & Sons, Ltd.     

Organizational control as antidote to politics in the pursuit of strategic initiatives

In contrast to the contingency approach advanced by most prior work, we suggest a complementary perspective on organizational control and its relationship with performance. We argue that the simultaneous use of behavior and outcome control capitalizes on their respective advantages, and is therefore more effective than a sole reliance on either control type. Moreover, with organizational control seeking alignment between individual and organizational goals, the benefits of such a complementary approach may be more pronounced in a context characterized by high levels of organizational politics, or the pursuit of individual at the expense of organizational goals. Our analysis of strategic initiatives pursued by 184 European corporations provides support for both a complementary approach to organizational control and a contingency effect of organizational politics. Copyright © 2014 John Wiley & Sons, Ltd.     

Vision salience and strategic involvement: Implications for psychological attachment to organization and job

Managers' perceptions of their involvement in strategic planning were hypothesized to be positively related with their feelings of organizational commitment, job satisfaction, and job involvement. Further, it was also hypothesized that the relationship between strategic involvement and these work-related attitudes would be enhanced to the extent that the managers' felt that a salient strategic vision was guiding the company. We tested these two hypotheses using a sample of upper level managers in a large corporation undergoing a major strategic transformation. With the exception of finding no evidence that vision salience moderated the positive relationship between strategic involvement and job involvement, both hypotheses were supported. With regard to managers' psychological attachment to the organization, the results suggest that there are advantages afforded by involving them in the strategy making process, and that these advantages are magnified to the extent that the involvement occurs within the context of a salient strategic vision.     

Probing the unobtrusive link: dominant logic and the design of joint ventures at General Electric

Prahalad and Bettis (1986) have proposed that the successful management of highly diversified firms can be attributed to the concept of a corporate “dominant logic” that guides all of its business units. We argue that dominant logic addresses the problem of balancing the needs of business units against those of the corporation as a whole. We also suggest that the presence of a clear and consistent dominant logic must lead to a high degree of consistency in the strategic moves that are undertaken by each of the business units within the diversified firm. Based on a study of the joint ventures initiated by General Electric between 1984 and 1993, we show that the design of these ventures follows a pattern that is consistent with the presence and influence of dominant logic. Finally, we demonstrate that the early failure of joint ventures can generally be linked to a shift away from this dominant logic. Copyright © 2000 John Wiley & Sons, Ltd.     

Location,governance, and strategic determinants of japanese manufacturing investment in the united states

A firm's decision to manufacture abroad depends on location, governance, and strategic factors. Governance factors are firm-specific. In spite of this, most empirical studies of foreign direct investment (FDI) have been conducted at the industry level (making it impossible to look at firm-specific determinants), and only a handful have considered governance, location, and strategic factors simultaneously. This paper is the first large sample study of the determinants of foreign direct investment at the product and firm-level. It examines the impact of location and governance factors, and of four types of strategic interactions, on a Japanese firm's propensity to manufacture in the U.S. The results support the view that foreign direct investment is explained by location, governance, and strategic variables. Economies of scale and trade barriers encourage Japanese FDI in the U.S. The larger a Japanese firm's R & D expenditures, the greater the probability it will manufacture in the U.S., but this is not the case for advertising expenditures. Some strategic factors are also important: Japanese firms with medium domestic market shares have the highest propensity to invest in the U.S. There is evidence of follow-the-leader behavior between firms of rival enterprise groups, but none of ‘exchange-of-threat’ between American and Japanese firms. Japanese investors are also attracted by concentrated and high-growth U.S. industries.     

The role of incentives and communication in strategic alliances: an experimental investigation

This paper experimentally examines the determinants of the deviation between potential and realized value creation in strategic alliances. To better understand how decision making in alliances may influence success, we use an experimental design that juxtaposes two important factors that affect alliance members' decisions: economic incentives and communication. The evidence from our experiment sheds light on the relative impact of each, and more importantly, how both factors interact to explain successful outcomes. Copyright © 2009 John Wiley & Sons, Ltd.     

Why strategic factor markets matter: “New” multinationals' geographic diversification and firm profitability

This study examines firm profitability differences among “new” multinational enterprises (NMNEs) pursuing geographic diversification into two distinct types of geographic locations based on the development of strategic factor markets. Building on strategic factor markets theory, we propose that firm‐specific advantages of NMNEs contribute differentially to firm profitability because they evolve differently given strategic factor market differences in host compared to home countries. Using a sample of Korean manufacturing MNEs during the 1993–2003 period, we find that geographic diversification into resource‐poorer host countries has a positive relationship with firm profitability, whereas geographic diversification into resource‐richer host countries has a U‐shaped relationship with firm profitability. Our study demonstrates why strategic factor markets—an important and often overlooked contextual factor—matter in exploring rationales for geographic diversification. Copyright © 2014 John Wiley & Sons, Ltd.     

Enterprise logic: explaining corporate attention to stakeholders from the ‘inside‐out’

Why are some firms more effective than others at addressing stakeholder concerns? Conventional stakeholder theories focus on variables in the external environment and cannot adequately explain variance across firms operating in the same context. Our matched‐pair study of eight global corporations goes inside the firm and investigates the role of managerial cognition on corporate attention to stakeholders. We find that top management's conceptualization of the firm's relationship with society—which we name enterprise logic—prompts distinct foci of attention and potentially constrains how well a single firm can simultaneously attend to multiple stakeholders. These findings highlight the value of an ‘inside‐out’ perspective, centered on managerial cognition, in explaining why some firms address stakeholder concerns more effectively than their peers. Copyright © 2012 John Wiley & Sons, Ltd.     

Reciprocity and R&D search: Applying the behavioral theory of the firm to a communitarian context

We propose that the behavioral theory of the firm perspective on R&D search requires modification when applied to “communitarian” cultures such as Japan because reciprocity and embeddedness can influence the search decision. When performance exceeds aspirations, communitarian‐oriented firms are more inclined to use their privileged position to help their less fortunate stakeholders by engaging in additional R&D search that should yield greater payoffs for these stakeholders in the future. Our results indicate that while Japanese firms engage in “problemistic” search in a manner similar to what has been found in other contexts, they respond differently when performance exceeds expectations. We find that as performance rises above aspirations, communitarian‐oriented firms raise R&D search to a greater extent than do firms that lack a communitarian orientation. Copyright © 2013 John Wiley & Sons, Ltd.     

Institutional theory in business marketing: A conceptual framework and future directions

Institutional environments exert significant effects on organizational behavior, structure, strategy, governance, and process. To gain competitive advantage, managers are striving for legitimacy while maintaining efficiency. In line with this thinking, we propose the developmental process of institution-driven and legitimacy-embedded efficiency, and emphasize the confluence of legitimacy and efficiency in the context of business marketing. We then highlight several promising directions for further research on the development of institutional theory and its application in business marketing. Finally, we present a brief summary of each paper in this special issue.     

From products to services and back again: Towards a new service procurement logic

This paper explores patterns in the process of buying complex services. While there is currently hype about a service-dominant logic, there are also indications of a diametrically opposed logic implying the objectification of services; a goods-dominant logic. This paper investigates how buyers of different kinds of services relate to these logics and how the degree of objectification of services varies during different stages of the procurement process. By highlighting the buyers' perspectives and how services are transformed over time, the paper expands on the current knowledge of service-dominant logic. The paper is based on individual and focus group interviews with buyers at eighteen large industrial firms.     

Cultural variations in strategic issue interpretation: relating cultural uncertainty avoidance to controllability in discriminating threat and opportunity

We investigate cultural variations in the strategic issue labels of threats and opportunities. In a survey of 276 American and international respondents, we investigate the sensitivity of issue attributes that discriminate between threat and opportunity. We find that the cultural value of uncertainty avoidance (UA) had a significant effect: Compared to low UA cultures, individuals from high UA cultures were significantly more sensitive to controllability in perceiving strategic issues. However, other cultural value dimensions (individualism, masculinity, power distance) did not have similar effects. Our results point to the need to link specific cultural dimensions to specific aspects of strategic issue analysis. Copyright © 2003 John Wiley & Sons, Ltd.     

Using meta‐analytic structural equation modeling to advance strategic management research: Guidelines and an empirical illustration via the strategic leadership‐performance relationship

This paper demonstrates how meta‐analysis can be combined with structural equation modeling (MASEM) to address new questions in strategic management research. We review this integration, describe its implementation, and compare findings from bivariate meta‐analyses, a direct‐effect structural equations model, and two mediating frameworks using data on the strategic leadership and performance relationship. Results drawn from 208 articles that collectively included data on 495,638 observations demonstrate the new insights available from MASEM while also suggesting a revision to conventional thinking on strategic leadership. Whereas some theories posit that boards of directors influence firm performance through monitoring and disciplining the top management team, MASEM provides more support for the view that boards mediate the top management teams' decisions. Implications for applying MASEM in strategic management are offered. Copyright © 2014 John Wiley & Sons, Ltd.     

Toward a behavioral theory of real options: Noisy signals,bias, and learning

Research Summary: We develop a behavioral theory of real options that relaxes the informational and behavioral assumptions underlying applications of financial options theory to real assets. To do so, we augment real option theory's focus on uncertain future asset values (prospective uncertainty) with feedback learning theory that considers uncertain current asset values (contemporaneous uncertainty). This enables us to incorporate behavioral bias in the feedback learning process underlying the option execution/termination decision. The resulting computational model suggests that firms that inappropriately account for contemporaneous uncertainty and are subject to learning biases may experience substantial downside risk in undertaking real options. Moreover, contrary to the standard option result, greater uncertainty may decrease option value, making commitment to an investment path more effective than remaining flexible. Managerial Summary: Executives recognize the need to make uncertain investments to grow their business while mitigating downside risk. The analogy between financial options and real corporate investments provides an appealing method to consider the practical challenge of such investment decisions. Unfortunately, the “real options” analogy seems to break down in practice. We identify how a second form of uncertainty confounds real options intuition, leading managers to overestimate the value of uncertain investments. We present a behavioral real options model that accounts for both forms of uncertainty and suggest how uncertainty interacts with behavioral bias in the option execution/termination decision. Our model facilitates assessment of the conditions under which investments in uncertain opportunities are usefully considered as real options, and provides a means to evaluate their attractiveness.