Showing papers in "Strategic Management Journal in 1989"
TL;DR: Examines the strategic postures, competitive tactics, and organization structures of small manufacturing firms that are associated with high performance in both hostile and benign environments to suggest that entrepreneurial firms perform better in hostile environments, while small conservative firms perform best in more benign environments.
Abstract: This paper reports the results of a study designed to investigate the effective strategic responses to environmental hostility among small manufacturing firms. Data on environmental hostility, organization structure, strategic posture, competitive tactics, and financial performance were collected from 161 small manufacturers. Findings indicate that performance among small firms in hostile environments was positively related to an organic structure, an entrepreneurial strategic posture, and a competitive profile characterized by a long-term orientation, high product prices, and a concern for predicting industry trends. In benign environments, on the other hand, performance was positively related to a mechanistic structure, a conservative strategic posture, and a competitive profile characterized by conservative financial management and a short-term financial orientation, an emphasis on product refinement, and a willingness to rely heavily on single customers.
5,277 citations
TL;DR: Results indicate that more innovative banks are managed by more educated teams who are diverse with respect to their functional areas of expertise.
Abstract: The relationship between the social composition of top management teams and innovation adoptions was examined in a sample of 199 banks. The following characteristics of top management teams were examined: average age, average tenure in the firm, education level, and heterogeneity with respect to age, tenure, educational background, and functional background. In addition, the effects of bank size, location (state of operation), and team size were assessed. Results indicate that more innovative banks are managed by more educated teams who are diverse with respect to their functional areas of expertise. These relationships remain significant when organizational size, team size, and location are controlled for.
2,824 citations
TL;DR: Using a representative model from each paradigm, it is found that both sets of factors are significant determinants of firm performance and that organizational factors explain about twice as much variance in profit rates as economic factors.
Abstract: We decompose the inter-firm variance in profit rates into economic and organizational components. Using a representative model from each paradigm we find that both sets of factors are significant determinants of firm performance. Further findings are that the two effects are roughly independent and that organizational factors explain about twice as much variance in profit rates as economic factors.
1,382 citations
TL;DR: It is shown that the different contextual conditions faced by the different subsidiaries of the MNC can be meaningfully classified into four generic situations, which are described as hierarchical, federative, clan and integrative.
Abstract: This paper argues that the internal structure in complex, multi-unit organizations such as a multinational corporation (MNC) is not homogeneous throughout the organization, but is systematically differentiated so as to ‘fit’ the different environmental and resource contingencies faced by the different national subsidiaries. Based on a survey of 66 of the largest European and North American MNCs, yielding data on 618 cases of headquarters-subsidiary relations, it is shown that the different contextual conditions faced by the different subsidiaries of the MNC can be meaningfully classified into four generic situations. Furthermore, for each of these situations the exchange relation between the MNC headquarters and the subsidiary is characterized by a ‘fit’ governance structure consisting of a different combination of structural elements such as centralization of authority, formalization of rules and systems, and normative integration of members. Following the existing literature, these ‘fit’ structures are labeled in this paper as hierarchical, federative, clan and integrative. The multinational is then described as an internally differentiated organization in which each headquarters-subsidiary link corresponds to one or the other of these administrative forms.
888 citations
TL;DR: Diversification strategy was significantly related to MNE performance, extending Rumelt's seminal research to international business and degree of internationalization was also significantlyrelated to M NE performance.
Abstract: This study examines potential explanations for performance differenlces among mnultinational enterprises (MNEs). The research variables, diversification strategy and degree of internationalization, involve basic elements of firms' strategy: range and relatedness of products, and relative emphasis on foreign versus domestic operations. The samnple included the 100 largest MNEs from the U.S. and Europe. Diversification strategy was significantly related to MNE performance, extending Rumelt's seminal research to international business. Degree of internationalization was also significantly related to MNE performance. An important phenomenon within international business is the increased role of multinational enterprises (MNEs), particularly large multinationals. In 1981 the sales of the largest 500 MNEs were equal to over 20 per cent of the world's gross domestic product, over 50 per cent of the world's traded output, and over 80 per cent of the foreign direct investment (Rugman, 1987; Stopford and Dunning, 1983). Management of these enterprises and their immense resources is a more complex and challenging task than for firms whose activities are largely confined to a single nation. Because of their important role in the world economy, much attention has been lavished upon MNEs, including examination of the rationale for their existence; their influence upon politics, culture, and industries; and their structure, strategies and management. One observation reported by several researchers involves
853 citations
TL;DR: In this article, a synthesis of diverse streams of research on diversification is presented with a view to fostering further strategic management research in this area by taking a multi-disciplinary perspective.
Abstract: Diversification has emerged as a central topic of research in strategic management. Although this topic has been widely and intensively studied by scholars from other areas such as industrial organization economics, financial economics, organization theory, and marketing, a synthesis of these diverse streams of research is lacking. This paper attempts such a synthesis with a view to fostering further strategic management research in this area by taking a multi-disciplinary perspective on diversification. A wide-ranging search of the literature led to the development of an overarching research framework that facilitates the classification of a vast body of literature. Proceeding from the framework, a critique of the literature is performed with a particular emphasis on studies by strategic management researchers. Five key conceptual and methodological problems are identified and discussed. Suggestions are offered for future research on diversification.
806 citations
TL;DR: The study finds that CEO pay has complex links to several factors: firm size, complexity, performance, CEO power, board vigilance, and the CEO's human capital.
Abstract: A model of the determinants of chief executive (CEO) compensation is presented and tested. Based on a sample from the leisure industry, the study finds that CEO pay has complex links to several factors: firm size, complexity, performance, CEO power, board vigilance, and the CEO's human capital. The study includes a separate examination of CEO salary and bonus, as well as a test of pay determination across McEachern's (1975) ownership categories.
721 citations
TL;DR: This paper presents a model of visionary leadership as drama, an interaction of repetition, representation, and assistance, more suitable for strategic management.
Abstract: This paper describes the concept of visionary leadership in a new way, more suitable for strategic management. First, drawing on an account of theatre, it presents a model of visionary leadership as drama, an interaction of repetition, representation, and assistance. Second, considering the experiences of a number of visionary leaders, in terms of style, process, content, and context, the paper describes various types of visionary leadership—the creator, the proselytizer, the idealist, the bricoleur, and the diviner.
663 citations
TL;DR: Testing a number of hypotheses relating top management group composition to firm performance found partial support for these hypotheses was found; however, the pattern of results also highlights the numerous difficulties in untangling and identifying the determinants of firm performance.
Abstract: Using a sample of 84 Fortune 500 food and oil companies, observed over the period 1967 to 1981, this paper tests a number of hypotheses relating top management group composition to firm performance. Specifically, it was expected that homogeneous top management groups would interact more efficiently and therefore be preferable when competition is intense, but that heterogeneous groups would facilitate adaptation and therefore be preferable under conditions of environmental change. Partial support for these hypotheses was found; however, the pattern of results also highlights the numerous difficulties in untangling and identifying the determinants of firm performance.
652 citations
TL;DR: The study proposes two sources of theoretical tension relating to changing strategies: the notion of equally viable generic strategies versus particularly appropriate strategy/environment combinations, and the relative influence of process versus content issues.
Abstract: This study argues for greater research attention to the issue of changing generic strategies over time. The study proposes two sources of theoretical tension relating to changing strategies: (1) the notion of equally viable generic strategies versus particularly appropriate strategy/environment combinations, and (2) the relative influence of process (ability to change strategies) versus content (desire to change strategies) issues. Questions relating to these tensions are then examined empirically in an industry-specific analysis of the likelihood, direction, and performance implications of an organization'S changing its strategy in response to an environmental shift. The findings suggest that changes in generic strategy are not rare, and that organizations do not perceive generic strategies to be equally viable in different environments across time. Performance differences were also found across generic strategies, but not between firms that changed their strategy versus those that did not.
479 citations
TL;DR: The results for the 1986 survey are compared in this paper, showing that the Japanese are clearly ahead in the trade-off between flexibility and cost efficiency, while the European and North Americans are not yet seizing the opportunity to cut costs through rapid production and design changes, and are focusing more on traditional cost reduction programmes and the improvement of quality.
Abstract: Over the past 4 years research teams from INSEAD (Fontainebleau), Boston University and Waseda University (Tokyo) have administered a yearly survey on the manufacturing strategy of the large manufacturers of the three industrialized regions of the world In this paper the results for the 1986 survey are compared One of the most striking results of that year's survey is the emphasis some of the more advanced manufacturers put on their efforts to overcome the trade-off between flexibility and cost efficiency In particular for the Japanese respondents these attempts become clear Europeans and North Americans are not yet seizing the opportunity to cut costs through rapid production and design changes, and are focusing more on traditional cost reduction programmes and the improvement of quality This might mean that they are preparing the basis on which they can built to obtain added value from flexible automation If this is the case then the Japanese are clearly ahead
TL;DR: In this article, the authors examined the impact of global diversification strategy on corporate profit performance by integrating the product and the international market dimensions of diversification, and they found that the profit performance impact of related and unrelated diversification varies depending upon the extent of a firm's international market diversification.
Abstract: Based on a sample of 62 multinationals, this paper examines the impact of global diversification strategy on corporate profit performance by integrating the product and the international market dimensions of diversification. The results suggest that the corporate profit performance impact of related and unrelated diversification varies contingent upon the extent of a firm's international market diversification. One important lesson of this work is that both business strategy researchers and managers should review corporate diversification as having distinct yet interactive strategic dimensions—product and international market—and they would do well to recognize both the different and the joint effect of these dimensions on corporate profit performance.
TL;DR: In this article, the authors summarized the major changes over the period 1960-86 in the shares of world markets of the world's leading American, European and Asian corporations based in 15 major industries.
Abstract: This study summarizes the major changes over the period 1960–86 in the shares of world markets of the world'S leading American, European and Asian corporations based in 15 major industries. It relates the differential sales growth rates of the gaining and losing firms to national trends in industrial competitiveness, to employment change and to long-term returns to shareholders. One principal determinant of firms' global growth rates, and thence gains and losses in ‘world market share’, corporate research and development (R&D) intensity, is examined and tested on an 83-firm, six-industry subset of the overall data base. The proportion of corporate sales revenues allocated to commercially oriented R&D emerges as a, perhaps the, principal indicator of subsequent sales growth performance relative to competition over 5–10-year periods. Insofar as many U.S. and U.K. firms have lost global market share relative to Asian and European competitors over the past two decades, a significant contributory factor would appear to have been negligence on the part of many U.S. and U.K. firms of investment in technology as a factor determining strategic, competitive advantage.
TL;DR: A conceptual framework that links manufacturing to business unit strategy and focuses on developing the notion of ‘generic manufacturing strategies’ at the strategic business unit (SBU) level is provided.
Abstract: This paper provides a conceptual framework that links manufacturing to business unit strategy and focuses on developing the notion of 'generic manufacturing strategies' at the strategic business unit (SBU) level Specifically, an explicit conceptual link is drawn between 'generic' business unit strategies and 'generic' functional structures in manufacturing It is proposed that the alternate manufacturing structures implicitly represent 'generic manufacturing strategies' Drawing on ideas and concepts from the business strategy literature and manufacturing literature the paper links Porter's generic strategy framework to a complementary manufacturing structure framework that uses three dimensions: process structure complexity, product line complexity, and organizational scope Viewed from different perspectives, the 'manufacturing contingency theory' concepts presented implicitly in the paper can be viewed as an extension of classic research on the interdependence between strategy and structure The frameworks developed here provide a partial synthesis of knowledge in the broader disciplines of engineering and management without sacrificing academic rigor and practitioner relevance
TL;DR: Data from 121 SBUs indicate that SBU competitive strategy interacts with several managerial orientations (functional background, locus of control, and problem-solving style) to influence SBU effectiveness.
Abstract: This paper argues that, for superior performance, it is necessary to attune the choice of the general manager to the strategy of the business unit (SBU). Data from 121 SBUs indicate that SBU competitive strategy interacts with several managerial orientations (functional background, locus of control, and problem-solving style) to influence SBU effectiveness. The theoretical and practical relevance of these findings are discussed, as are directions for future research.
TL;DR: Two important business-level strategic typologies were systematically evaluated, analyzed and compared in this study: Porter'S Overall Cost Leadership, Differentiation, Focus, and ‘Stuck in the Middle’ generic competitive strategies, and Miles and Snow'S Defender, Prospector, Analyzer, and Reactor types of organizational adaptation.
Abstract: Two important business-level strategic typologies were systematically evaluated, analyzed and compared in this study: Porter'S Overall Cost Leadership, Differentiation, Focus, and ‘Stuck in the Middle’ generic competitive strategies, and Miles and Snow'S Defender, Prospector, Analyzer, and Reactor types of organizational adaptation. On the basis of strategic theory, and following a pilot study, 31 strategic variables were evaluated by judges on a seven-point maximum-minimum scale, for each strategy, within its typology. Analysis of variances and concordance among judges regarding the ranking of the strategies on each variable were examined, and a strategic profile was built for each strategy. Proximities between strategies of the two typologies were analyzed using monotonic multidimensional scaling. The analysis indicated similarities and differences between the two typologies. A synthesis of the two typologies is suggested along two dimensions: internal consistency of the strategy, and level of proactiveness.
TL;DR: In this paper, the authors examined the relationship between commonly discussed strategic acquisition factors and long-term financial performance measures of acquiring firms, including relative size, previous acquisition experience, organizational age, industry commoniality, contested versus uncontested acquisitions, and percenltage of stock acquired.
Abstract: The present study extends previous research efforts and examines relationships between commonly discussed strategic acquisition factors and long-term financial performance measures of acquiring firnms. The factors of interest include relative size, previous acquisition experience, organizational age, industry commoniality, contested versus uncontested acquisitions, and percenltage of stock acquired. The financial performance measures include both accouniting and capital market data for the 4-year period precedinig acquisition activity and the 4-year period following such activity. The study presents bivariate and multivariate analyses for 42 industrial manufacturing firms that engaged in the tender offer form of acquisition. The fin(dings indicate that, on the average, post-acquisition financial performance improved significantly for organizations that had previous acquisition experience, acquired a higher percentage of a target, or were older. Post-acquiisition performance decreased significantly for acquiring firms when target firtns contested an acquisition.
TL;DR: Top managers were front and center in the frameworks of the strategy field as mentioned in this paper, and the Harvard model, which served as principal guide for policy thinkers in the sixties and early seventies, emphasized the personal role of senior executives in shaping their firms.
Abstract: At one time, top managers were front and center in the frameworks of the strategy field. The Harvard model (Learned et al., 1961; Andrews, 1971), which served as principal guide for policy thinkers in the sixties and early seventies, emphasized the personal role of senior executives in shaping their firms. This view was not new. Earlier theoretical work by Barnard (1938) and Selznick (1957), for example, had established a rationale for including top managers in analytic investigations of contemporary organizations. However, as of the early seventies, this theme was essentially lost. Top managers became noticeably absent from writings on strategy, somehow passed over in favor of more technoeconomic factors such as product life cycles, market share, experience curves, portfolio matrices, and industry analysis. Consulting firms all sought their own concise, analytic, quantifiable schemes. Strategy researchers struggled to demonstrate that their domain was as 'hard' as any other. Corporations came to think of strategic management as the annual production of glossy three-ring binders and slide shows, rather than the development and cultivation of strategic thinkers. Now, after almost two decades of relative neglect, the people at the helms of organizations are once again becoming part of the theoretical formulations of strategy and organization researchers (e.g., Kotter, 1982; Hambrick and Mason, 1984; Gupta and Govindarajan, 1984; Miller and Droge, 1986; Gabarro, 1987). The press and politicians have put forth a cry
TL;DR: The results indicate that the primary impact of negotiations is evident in the fourth year after a settlement date, which is likely to cause the target'S management team to experience abnormally high turnover 4 years later.
Abstract: This research investigates the effects of merger and acquisition negotiations on subsequent target company top management turnover. Three attributes of the companies and seven attributes of the merger and acquisition transactions are examined. The results indicate that the primary impact of negotiations is evident in the fourth year after a settlement date. When a buyer approaches an unrelated company that has been subject to previous takeover interest with a merger proposal, and an agreement is reached, the target's management team is likely to experience abnormally high turnover 4 years later. Additional research ideas are suggested to help explain the sizeable turnover rates in the 3 years immediately following a merger or acquisition.
TL;DR: A model of the psychological context of strategic decisions is developed and two experiments are reported on how reinvestment decisions faced with success or failure feedback on a past decision, high or low perceived organizational slack, and decisions framed to depict a positive or negative future outlook are affected.
Abstract: Strategic decision-makers typically are involved in a series of incremental decisions, each affected by a variety of contextual factors. This papers develops a model of the psychological context of strategic decisions and reports two experiments. First, students made reinvestment decisions faced with success or failure feedback on a past decision, high or low perceived organizational slack, and decisions framed to depict a positive or negative future outlook. All three variables had main and interactive effects. Second, managers made similar decisions in a related experimental design. Results confirmed and extended the initial findings. Implications and directions for future research are discussed.
TL;DR: AUTOMOBILE STOCK PERFORMANCE RELATED to RECALLS CONSIDERing the PRODUCTION of DEFECTIVE cars is studied for clues about the design and quality of these vehicles.
Abstract: AUTOMOBILE STOCK PERFORMANCE RELATED TO RECALLS CONSIDERING THE PRODUCTION OF DEFECTIVE CARS
TL;DR: In this article, it is shown that there exists a neglected line of relevant research by two schools of thought: the Cambridge (Massachusetts) axis and internalization theory, and that the recent focus of research is described as understanding the multinational corporation as a network competing on its flexibility and the transfer of acquired capabilities across borders.
Abstract: This article augments, as well as takes issue with, the recent review by Ghoshal on international competition. The central question is what changes strategically when a firm moves from domestic to overseas competition. In analyzing this question, it is shown that there exists a neglected line of relevant research by two schools of thought: the Cambridge (Massachusetts) axis and internalization theory. The recent focus of research is described as understanding the multinational corporation as a network competing on its flexibility and the transfer of acquired capabilities across borders.
TL;DR: A creative management model is explained, which goes beyond conventional strategic management, and the behaviors of top managers needed for the ongoing renewal of their business are identified.
Abstract: Increasingly the makeup of the top management group is believed to affect the development, identification and exploitation of strategic opportunities. This paper explains a creative management model, which goes beyond conventional strategic management, and identifies the behaviors of top managers needed for the ongoing renewal of their business. It is proposed these behaviors cluster and can be aligned with different and distinct cognitive styles or types. The implication is that top management groups should be composed of a mix of types. This paper posits a mix of Jungian types, Intuitives, Feelers, Thinkers and Sensors. This diversity can yield great strength if the differences can be focused and unified. Propositions and suggestions for further empirical research are developed.
TL;DR: In this article, a structural model is proposed which integrates and extends previous findings on the interrelations between risk-return outcomes, market share, firm conduct attributes, and inter-firm rivalry.
Abstract: A structural model is proposed which integrates and extends previous findings on the interrelations between risk—return outcomes, market share, firm conduct attributes, and inter-firm rivalry. It is argued that the relative impact of market share and firm conduct attributes on risk—return outcomes depends on the intensity of rivalry. The empirical setting is commerical banking in Indiana (1975–79). Latent variable path analysis (partial least-squares) is used to estimate the model. The effect of market share is found to be quite important, even when possible ‘spurious’ effects due to differences in individual firm attributes are controlled for. Given consistent indications of oligopolistic coordination found in various parts of the model, it is inferred that the measured effect of market share reflects the exercise of market power.
TL;DR: Regression analysis shows that differences in risk-return performance among diversified firms are more closely associated with structural factors associated with markets and businesses than with the particular diversification strategy chosen.
Abstract: This study examines the impact of diversification strategy on risk and return in diversified firms. Following an assessment of previous research on strategic risk, relationships between risk, return, and diversification strategy are hypothesized. Regression analysis shows that differences in risk-return performance among diversified firms are more closely associated with structural factors associated with markets and businesses than with the particular diversification strategy chosen. Returns also influence the choice of diversification strategles which, in turn, do not get rewarded with higher profits. A curvilinear risk-return relationship is also observed which is consistent with previous theoretical suggestions. Implications for the strategic management of risk are then drawn.
TL;DR: A procedure for identifying strategic groups based on mobility barriers is recommended and illustrated and the strategic groups identified were observed to exhibit group membership stability and differences in profitability.
Abstract: A procedure for identifying strategic groups based on mobility barriers is recommended and illustrated. The strategic groups identified were observed to exhibit group membership stability and differences in profitability.
TL;DR: In this article, the authors address some of the difficulties in using accounting data for value chain analysis and divide these difficulties into those that are inherent, because of differences in methods of data accumulation, and those that were avoidable.
Abstract: Strategic planning frameworks provide a means of combining internal data about the firm's capabilities with external information about the competitive environment in a manner designed to guide resource allocation. The value chain approach to strategic planning, as described by Michael Porter in his book Competitive Advantage (1985), is a recent addition to this family of planning frameworks. In this article, we address some of the difficulties in using accounting data for value chain analysis. These difficulties are divided into those that are inherent, because of differences in methods of data accumulation, and those that are avoidable.
TL;DR: An empirical analysis of the sequence relating the performance of the firm to its behavior, which in turn depends upon the origin and personal characteristics of the entrepreneurs, shows that significant differences exist among the entrepreneurs and firms.
Abstract: The main purpose of this paper is to present an empirical analysis of the sequence relating the performance of the firm to its behavior, which in turn depends upon the origin and personal characteristics of the entrepreneurs. The data are drawn from new Spanish firms. A typology of new entrepreneurs is constructed, based on their basic work aspirations. Each type of entrepreneur is then examined, in terms of the origin and personal characteristics of the members of the class. The results of the study show that significant differences exist among the entrepreneurs and firms of each type, especially in terms of the size of the firm (number of employees) and its evolution over time. The implications of these results, for the theory of entrepreneurship and for the design of policies towards the creation of new firms, are then derived.
TL;DR: The first empirical test of Hrebiniak and Joyce'S innovative model of business-environment relations is described, and results suggest that strategy-environment fit may not be as critical as market-selection in the competitive success of firms.
Abstract: This paper describes the first empirical test of Hrebiniak and Joyce'S innovative model of business-environment relations. Virtually all the literature prior to their Administrative Science Quarterly article (1985) assumes a zero-sum relationship between managerial choice and environmental determinism. In the Hrebiniak and Joyce framework the two are orthogonal, and environments where management and environment are both weak or both powerful are possible. We first look for evidence of Hrebiniak and Joyce'S environment typology in 52 manufacturing industries previously specified by Dess and Beard (1984). Next, we test their propositions of strategy-environment fit by classifying 146 firms into strategic groups, then evaluating each group in each environment. Our tests provide partial support for Hrebiniak and Joyce'S environment typology and for their contingent strategies. However, frequencies of firm location among the environments were highly skewed. These results suggest that strategy-environment fit may not be as critical as market-selection in the competitive success of firms.
TL;DR: In this paper, the authors evaluate entry and survival rates in a sample of 39 chemical product industries and find that entry was facilitated by the fact that for most products, technology was available from a range of sources.
Abstract: This paper evaluates entry and survival rates in a sample of 39 chemical product industries. The analysis focuses on learning-based cost advantages potentially held by incumbent firms. A logit model of entry gives no evidence that entry decisions were sensitive to the cumulative production lead held by incumbents. Entry was facilitated by the fact that for most products, technology was available from a range of sources. A hazard function model reveals that entrant survival rates were unrelated to order of entry or source of process technology. However, survival was adversely affected when the leading incumbent held a large cumulative output advantage or when entrants built plants of sub-optimal scale. Thus, a large incumbent lead in production experience did not deter new entry but did reduce the entrant'S probability of survival.