Intraindustry Differential Firm Performance– Insights of a Simulation Study about Strategy Formation

Organizational security is a multi-faceted concept. It appears that, in the context of organizational studies, it is synonymous to certainty. In strategy process research, much research has been conducted about the lack of long-term certainty - also termed strategic uncertainty. Factors and processes become important that influence or allow for a sustainable intraindustry differential firm performance. In this paper, I argue that the integration of atomic insights, which are taken from different threads of strategy process research, can create new findings which comprise of a higher level of complexity. In an explorative simulation study, I use research about firm's scanning behavior, influences of both environmental and organizational change on strategic for-mation to derive, test and reformulate three propositions about intraindustry differential firm performance. The first proposition indicates that an initial performance advantage cannot be sustained in the long-term, even when knowledge spill-over can be avoided, and implicates further improvements even when they are not considered necessary. The second proposition suggests that a sustained performance advantage emerges when innovations are initiated at higher relative levels of firm inertia. The third proposition shows that establishing a firm's optimal fitness configuration that balances internal and external requirements in order to obtain a performance advantage is a labor-intensive undertaking. It demands mangers to have detailed knowledge about firm's perception mechanisms as well as to be aware about possible approaches to scan the relevant environment.