Resource Allocation as an Outcropping of Strategic Consistency: Performance Implications
TL;DR: Similarities in financial resource allocations across the lines of business of diversified firms may indicate corporate strategic consistency, which may lead to superior corporate performance as discussed by the authors. But, as discussed in Section 2.
Abstract: Similarities in financial resource allocations across the lines of business of diversified firms may indicate corporate strategic consistency, which may lead to superior corporate performance. In s...
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TL;DR: The authors examined relationships among the stakeholder attributes of power, legitimacy, urgency, and salience; CEO values; and corpo...Using unique data provided by the CEOs of 80 large U.S. firms,
Abstract: Using unique data provided by the CEOs of 80 large U.S. firms, the authors examined relationships among the stakeholder attributes of power, legitimacy, urgency, and salience; CEO values; and corpo...
1,754 citations
TL;DR: In this article, the authors examine the effect that shifts in strategic emphasis have on stock return and find that the stock market reacts favorably when a firm increases its emphasis on value appropriation relative to value creation, but this effect is moderated by firm and industry characteristics, in particular, financial performance, the past level of strategic emphasis of the firm, and the technological envi...
Abstract: Firms allocate their limited resources between two fundamental processes of creating value (i.e., innovating, producing, and delivering products to the market) and appropriating value (i.e., extracting profits in the marketplace). Although both value creation and value appropriation are required for achieving sustained competitive advantage, a firm has significant latitude in deciding the extent to which it emphasizes one over the other. What effect does strategic emphasis (i.e., emphasis on value creation versus value appropriation) have on firm’s financial performance? The authors address this issue by examining the effect that shifts in strategic emphasis have on stock return. They find that the stock market reacts favorably when a firm increases its emphasis on value appropriation relative to value creation. This effect, however, is moderated by firm and industry characteristics, in particular, financial performance, the past level of strategic emphasis of the firm, and the technological envi...
794 citations
TL;DR: In this article, the authors suggest that the existence of complementary resources is a necessary but insufficient condition to achieve synergy, and that the resources must be effectively integrated and managed to realize the synergy.
719 citations
Cites background or result from "Resource Allocation as an Outcroppi..."
...Harrison et al. / Journal of Management 27 (2001) 679–690...
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...The Harrison et al. (2000) model, combined with findings on resource complementarity, offer an explanation for the near-zero returns acquiring firms receive as well as the contradictory findings on relatedness (e....
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...We conclude from this analysis that Harrison et al.’s (1991) original findings have not only gained support over time, but that they suggest an important and valuable conclusion regarding access to and use of complementary resources....
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TL;DR: This article employed a meta-analysis based on 80 samples from 66 studies (n=54,249) and found evidence of a positive relationship among all three slack types (i.e., available, recoverable, and potential) and financial performance.
427 citations
TL;DR: In this paper, the authors examined the relationship among four types of employment (knowledge-based, job-based and contract-based) and firm performance and found that a greater use of knowledge-based employment and contract work is positively associated with firm performance.
298 citations
References
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TL;DR: It is found that diversified firms outperformed specialized firms and there was no evidence that related diversification was more successful than unrelated and the findings conflict with those of earlier U.S. studies.
Abstract: This study examines differences in profit and sales performance between the different Wrigley/Rumelt categories of diversification strategy. Our sample comprised 305 large U. K. manufacturing companies over the period 1972–84. Although diversification strategy explained only a small proportion of inter-firm performance differences, once the influence of other firm and industry variables were taken into account, significant differences did emerge. Our findings conflict with those of earlier U.S. studies. In particular, we find that diversified firms outperformed specialized firms and there was no evidence that related diversification was more successful than unrelated.
164 citations
TL;DR: In this paper, a study which explored diversification, financial performance and other issues involved in corporate strategy is presented, and a discussion is presented about corporate management and proceses.
Abstract: The article focuses on a study which explored diversification, financial performance and other issues involved in corporate strategy. A discussion is presented about corporate management and proces...
159 citations
TL;DR: The unrelated‐external category appears to be the worst performer, which presents a dilema since this strategy has dominated the conglomerate movement.
Abstract: This paper examines the impact of the symbiotic relationship between diversification breadth and mode on firm performance. Seventy-three Fortune 500 firms were classified by diversification breadth (related/unrelated) and mode (internal/external) and their performance during the period 1975–84 analyzed on four financial performance measures. The two related categories (related-internal/related-external) were generally higher performers than the two unrelated categories (unrelated-internal/unrelated-external) as hypothesized, but the differences were not significant on most performance measures. The unrelated-external category appears to be the worst performer, which presents a dilema since this strategy has dominated the conglomerate movement.
155 citations
Additional excerpts
...Most empirical studies of the relatedness construct have made use of output-based measures that rely on product, market, or technological similarities within a diversified firm's business portfolio (e.g., Capon et al., 1988; Montgomery & Wernerfelt, 1988; Nathanson & Cassano, 1982; Palepu, 1985; Rumelt, 1974, 1982; Shelton, 1988; Simmonds, 1990; Varadarajan & Ramanujam, 1987)....
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131 citations
TL;DR: In this paper, the authors suggest that the same factors which lead to high profitability in an industry may cause its inefficient participants to earn lower profits, while higher growth, on the other hand, may benefit inefficient firms while reducing the gains of efficient competitors.
Abstract: Business Portfolio Planning techniques often suggest that firms should invest in industries with high profitability, high growth, or other attractive characteristics. Critiquing this view, we suggest that the same factors which lead to high profitability in an industry may cause its inefficient participants to earn lower profits. Higher growth, on the other hand, may benefit inefficient firms while reducing the gains of efficient competitors. The paper offers theory and evidence to support this view of performance dependencies for the special case of diversified firms.
128 citations