Convergence across alternative methods for forming strategic groups

We studied the convergence of three different methods for identifying group structure (strategic groups) in a single competitive environment. Using a version of the MTMM matrix, we tested the convergent validity of the concept of strategic groups in a mature, geographically delimited competitive environment. We find significant evidence of convergence between competitive structures identified using archival and perceptual data as well as those identified using archival measures of strategy and direct measures of competitors. There is limited evidence of convergence between competitive structures identified from perceptual and direct measures. Taken as a whole, these results are consistent with the emerging theory of strategic groups. We conclude that strategic groups are a theoretical construct and not a methodological artifact, as is suggested by some authors. © 1997 John Wiley & Sons, Ltd.     

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.     

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.     

Method for identifying strategic objectives in strategy maps

This paper describes a simple tool for identifying strategic objectives as part of the design of strategy maps, based on the balanced scorecard, and meant to be used in organisations to establish performance indicators. To design the tool, a number of companies that implemented the balanced scorecard were analysed, in order to obtain their methodologies to create strategy maps. Three types of methods were found, different from each other in the way the strategic objectives are defined. By studying the benefits and drawbacks of the three methods, a simple, method was obtained. Basically, the method identifies general and specific strategic objectives and uses a modified SWOT (strengths, weaknesses, opportunities, threats) analysis. This paper also makes an analysis of the type of strategic objectives that the studied companies defined as part of the balanced scorecard implementation process.     

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.     

From autonomous strategic behavior to emergent strategy

This study develops a model of emergent strategy formation at a large telecommunications firm. It integrates prominent traditions in strategy process research—strategy as patterned action, as iterated resource allocation and as practice—to show how emergent strategy originates as a project through autonomous strategic behavior, then subsequently becomes realized as a consequence of mobilizing wider support to provide impetus, manipulating strategic context to legitimate the project by constructing it as consonant with the prevailing concept of strategy, and altering structural context to embed it within organizational units, routines, and objectives. The study theorizes the role of “practices of strategy articulation” in emergent strategy formation, and explains why some autonomous strategic behavior becomes “ephemeral” and disappears rather than enduring to become emergent strategy. Copyright © 2013 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.     

Examining the effect of complexity in strategic group knowledge structures on firm performance

A developing stream of research in the strategy field explores the competitive structure of industries from the perspective of industry participants. This work has demonstrated that managers develop strategic group knowledge structures in order to make sense of their competitive environment. This study extends this line of research by examining the complexity evident in the strategic group knowledge structures developed by firms' top management teams and assessing the relationship between complexity in these knowledge structures and subsequent firm performance. Specifically, we examine the complexity of top managers' knowledge structures regarding their competition using a sample of 76 top management teams from banks in three U.S. cities. Using hierarchical regression, we find a significant relationship between the complexity of cognitive strategic groups and subsequent firm performance. These results suggest that the structure of the cognitive templates that top managers use to understand their environment and the actions of their competitor influence the degree of strategic success of their firm. Copyright © 2002 John Wiley & Sons, Ltd.     

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.     

Hybrid strategic groups

The notion of strategic groups has recently emerged as a critical perspective for uncovering firms' strategic postures/recipes and competitive market structures. Firms within strategic groups generally adopt similar strategic recipes and compete more intensely than firms across strategic groups. Building on recent research, the authors develop the concept of hybrid strategic groups, which blend the strategic recipes of more than one group, in contrast to existing conceptualizations of strategic groups, where either firms tightly follow the recipes of a strategic group (i.e., core firms) or firms loosely follow the recipes of a strategic group (i.e., secondary firms). Thus, competition among firms depends not only on the strategic group but also on the overlap of that strategic group with other strategic groups. The authors devise a combinatorial optimization-based classification procedure utilizing a bilinear model that accommodates multiple variable batteries that can estimate hybrid strategic groups. The proposed methodology is illustrated by using archival data on public banks. For this illustration, the hybrid strategic group solution outperforms ordinary cluster analyses and offers critical insights into the nature of competition among firms. Copyright © 2007 John Wiley & Sons, Ltd.     

When will boards influence strategy? inclination × power = strategic change

While boards of directors are usually recognized as having the potential to affect strategic change in organizations, there is considerable debate as to whether such potential is typically realized. We seek to reconcile the debate on whether boards are typically passive vs. active players in the strategy realm by developing a model that specifies when boards are likely to influence organizational strategy and whether such an influence is likely to impel vs. impede change. Specifically, we develop arguments as to when certain demographic and processual features of boards imply a greater inclination for strategic change, when these features imply a greater preference for the status quo, and how differences in such inclinations will influence strategic change. We then also propose that a board's inclination for strategic change interacts with a board's power to affect change, generating a multiplicative effect on strategic change. These ideas are tested using survey and archival data from a national sample of over 3000 hospitals. The supportive findings suggest that strategic change is significantly affected by board demography and board processes, and that these governance effects manifest themselves most strongly in situations where boards are more powerful. We discuss these findings in terms of their relevance for theories of demography, agency, and power. Copyright © 2001 John Wiley & Sons, Ltd.     

Cointegration relationships of strategy variables among firms within strategic groups

This study examines the long-term, dynamic equilibrium relationship for strategy variables of firms in strategic groups by conducting a cointegration analysis. Replicating the Nair and Filer (Strateg. Manage. J., 24: 145–159, 2003) methodology and extending it to four industries listed on the Taiwan Stock Exchange, we find that not all of non-stationary strategy variables have the cointegration relationships, and that only the strategy variables of strategic groups in our traditional industries (as compared to our high-tech industries) should have a long-term competitive equilibrium (cointegration relationship). In other words, we can proceed with an error correction model in some traditional industries to map out the relative positions of rival firm strategies and subsequently implement appropriate reactions.

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.     

Nested identities as cognitive drivers of strategy

Research Summary: Organizations face tensions to conform to industry norms for legitimacy yet differentiate for competitive advantage when implementing strategies. We suggest this tension is due to and resolved through organizations’ cognitive negotiations of multiple levels of identity. Through an inductive study in the recreational vehicle industry, we find that organizations concurrently draw on identities at the organizational, industry, and strategic group levels to formulate and enact specific competitive actions. Specifically, we find that organizational identity relates to decisions on product offerings; industry identity relates to downstream strategy; and strategic group identity relates to upstream strategy, firm boundaries, and expansion mode. Our findings highlight the importance of strategic group identity and inform a grounded model describing how organizations draw upon different levels of identity to influence strategy. Managerial Summary: Many managers experience tensions of differentiating their firms’ competitive actions from rivals, while conforming with industry norms and practices. In this article, we argue that a manager can navigate these tensions by understanding their firm, strategic group, and industry identities and how these identities interrelate. Through a qualitative case study of the U.S. recreational vehicle industry, we show that each level of identity influences different competitive actions, with firm identity connected to product offerings, industry identity related to managing downstream distribution, and strategic group identity related to firm boundary and acquisition strategies. Overall, strategic group identity is the most critical for managers as this level filters how they view competitors and provides the rules of competition.     

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.     

Dynamic strategic groups: deriving spatial evolutionary paths

Recent theoretical developments in the domain of strategic groups, specifically those related to cognitive groups and strategic group identity, seem to suggest that strategic group membership is likely to be relatively stable over time and that firms in a strategic group co‐evolve. Yet appropriate data analytic approaches that use information about firms over time to identify stable strategic groups and their evolutionary paths have been lacking. To overcome such limitations, this research proposes a new clusterwise bilinear multidimensional scaling model that can simultaneously identify (1) the number of strategic groups, (2) the dimensions on which the strategic groups are based, and (3) the evolution of the strategy of these groups over time. Our discussion encompasses various alternative model specifications, together with model selection heuristics based on statistical information criteria. An illustration of the proposed methodology using data pertaining to strategic variables for a sample of public banks in the tristate area of New York, Ohio, and Pennsylvania across three time periods (1995, 1999, and 2003) identifies two underlying dimensions with five strategic groups that display very different evolutionary paths over time. Post hoc analysis shows pronounced differences in firm performance across the five derived strategic groups. This article concludes with a discussion of the implications of the findings, as well as potential future research directions. John Wiley & Sons, Ltd. Copyright © 2009 John Wiley & Sons, Ltd.     

Rivalry within strategic groups and consequences for performance: the firm‐size effects

Our study examines how, in a given industry, rivalry functions within strategic groups defined according to the size of their member firms and how this rivalry affects performance. We hypothesize that, owing to several forms of group‐level effects including market power, efficiency, differentiation, and multimarket contact, strategic groups that comprise smaller firms will exhibit both increased rivalry and decreased performance compared with strategic groups that comprise larger firms. We test our hypotheses by estimating the effect of group‐level strategic interactions (i.e., conjectural variations) on firm performance. Ultimately, our analysis of empirical data on loans in the Spanish banking industry demonstrates that increased rivalry and decreased performance indeed characterizes firms belonging to a strategic group that comprises smaller firms. Copyright © 2011 John Wiley & Sons, Ltd.     

Managing strategic change: The duality of CEO personality

Using the five factor model (FFM) of personality, we delineate two distinct roles of CEO personality in managing strategic change: initiating strategic change and determining the performance effects of strategic change implementation. Based on data from 120 small‐ and medium‐sized enterprises (SMEs) in Ecuador, we found that some FFM traits of CEOs influenced initiation only (extraversion and openness), others similarly influenced initiation and performance effects of implementation (emotional stability and agreeableness), and still others had opposing effects on initiation and effective implementation (conscientiousness). These results point to a dual role of CEO FFM of personality in managing strategic change, and they indicate the differences in CEO FFM traits needed to initiate strategic change and those needed to improve the performance effects of strategic change implementation. Copyright © 2013 John Wiley & Sons, Ltd.     

The moderating influence of strategic orientation on the strategy formation capability–performance relationship

An effective strategy formation capability is a complex organizational resource—a dynamic capability that should lead to superior performance. Strategy scholars have examined the strategy formation capability from many perspectives. However, no study has examined a comprehensive model of strategy formation in the context of the firm's strategic orientation. We develop and examine such a model. The results show that strategic orientation moderates the relationship between different elements of the strategy formation capability and performance. Copyright © 2006 John Wiley & Sons, Ltd.