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.

[1]  Xianggui Qu,et al.  Multivariate Data Analysis , 2007, Technometrics.

[2]  Paul M. Vaaler,et al.  Is performance driven by industry‐ or firm‐specific factors? A response to Hawawini, Subramanian, and Verdin , 2005 .

[3]  F. Mas-Ruiz,et al.  Asymmetric rivalry between strategic groups: response, speed of response and ex ante vs. ex post competitive interaction in the spanish bank deposit market , 2005 .

[4]  Jay B. Barney,et al.  Testing Resource-Based Theory , 2005 .

[5]  Erik R. Larsen,et al.  Things Change: Dynamic Resource Constraints and System-Dependent Selection in the Evolution of Organizational Populations , 2001, Manag. Sci..

[6]  James Guthrie,et al.  HUMAN RESOURCE MANAGEMENT AND LABOR PRODUCTIVITY: DOES INDUSTRY MATTER? , 2005 .

[7]  B. Wernerfelt,et al.  Product Development Resources and the Scope of the Firm , 2005 .

[8]  C. C. Snow,et al.  Research on Competitive Dynamics: Recent Accomplishments and Future Challenges , 2004 .

[9]  B. Burnes.  Kurt Lewin and complexity theories: back to the future? , 2004 .

[10]  Shige Makino,et al.  Does country matter , 2004 .

[11]  Rita Gunther McGrath,et al.  Real options reasoning and a new look at the R&D investment strategies of pharmaceutical firms , 2004 .

[12]  David J. Ketchen,et al.  MULTI-LEVEL INFLUENCES ON FIRM PERFORMANCE: INSIGHTS FROM THE RESOURCE-BASED VIEW AND STRATEGIC GROUPS RESEARCH , 2003 .

[13]  Timothy B. Palmer,et al.  FACING UP TO A MESO PERSPECTIVE: RESEARCH ISSUES FOR TESTING FIRM AND STRATEGIC GROUP INFLUENCES ON PERFORMANCE , 2003 .

[14]  Steven C. Michael.  TWO FACES OF STRATEGIC GROUP THEORY , 2003 .

[15]  W. Joyce.  INTEGRATING THE RESOURCE-BASED AND STRATEGIC GROUPS’ INFLUENCES ON FIRM PERFORMANCE: EXTENDING A MESO PERSPECTIVE , 2003 .

[16]  E. Altman,et al.  Default Recovery Rates in Credit Risk Modelling: A Review of the Literature and Empirical Evidence , 2003 .

[17]  J. Hendry,et al.  The Structure and Significance of Strategic Episodes: Social Systems Theory and the Routine Practices of Strategic Change , 2003 .

[18]  A. Nair,et al.  Cointegration of firm strategies within groups: a long-run analysis of firm behavior in the Japanese steel industry , 2003 .

[19]  James G. Combs,et al.  Managerialist and Human Capital Explanations for Key Executive Pay Premiums: A Contingency Perspective , 2003 .

[20]  P. Regnér.  Strategy Creation in the Periphery: Inductive Versus Deductive Strategy Making , 2003 .

[21]  Paul J. Verdin,et al.  IS PERFORMANCE DRIVEN BY INDUSTRY- OR FIRM-SPECIFIC FACTORS? A NEW LOOK AT THE EVIDENCE , 2009 .

[22]  E. Levitas,et al.  RETHINKING ROUSE AND DAELLENBACH'S RETHINKING: ISOLATING VS. TESTING FOR SOURCES OF SUSTAINABLE COMPETITIVE ADVANTAGE , 2002 .

[23]  David L. Deephouse,et al.  Competitive Positioning Withing and Across a Strategic Group Structure: The Performance of Core, Secondary, and Solitary Firms , 2002 .

[24]  Timothy B. Palmer,et al.  The Role of Sampling in Strategic Management Research on Performance: A Two-Study Analysis , 2002 .

[25]  P. Wright,et al.  Desegregating HRM: A Review and Synthesis of Micro and Macro Human Resource Management Research , 2002 .

[26]  J. D. Osborne,et al.  Strategic groups and competitive enactment: a study of dynamic relationships between mental models and performance , 2001 .

[27]  S. Kotha,et al.  Does group membership matter? Evidence from the Japanese steel industry , 2001 .

[28]  Y. Fried,et al.  Location, location, location: contextualizing organizational research* , 2001 .

[29]  Todd H. Chiles.  Complexity Theory and Organization Science , 2001 .

[30]  Harbir Singh,et al.  Corporate and industry effects on business unit competitive position , 2000 .

[31]  Melissa A. Schilling.  Toward a General Modular Systems Theory and Its Application to Interfirm Product Modularity , 2000 .

[32]  Yuk Fai Cheong,et al.  HLM 6: Hierarchical Linear and Nonlinear Modeling , 2000 .

[33]  David L. Deephouse,et al.  Do Strategic Groups Differ in Reputation? , 1999 .

[34]  Timothy B. Palmer,et al.  Decoupling risk taking from income stream uncertainty: a holistic model of risk , 1999 .

[35]  Edward I. Altman,et al.  The Equity Performance of Firms Emerging from Bankruptcy , 1999 .

[36]  James G. Combs,et al.  Explaining interfirm cooperation and performance: toward a reconciliation of predictions from the resource-based view and organizational economics , 1999 .

[37]  L. G. Thomas,et al.  Competing capitalisms : Capital investment in American, German, and Japanese firms , 1999 .

[38]  Robert E. Hoskisson,et al.  Theory and research in strategic management: Swings of a pendulum , 1999 .

[39]  M. Rouse,et al.  Rethinking research methods for the resource‐based perspective: isolating sources of sustainable competitive advantage , 1999 .

[40]  David J. Ketchen,et al.  Organizational configurations and performance: the role of statistical power in extant research , 1999 .

[41]  Benoit Morel,et al.  Through the Looking Glass of Complexity: the Dynamics of Organizations As Adaptive and Evolving Systems , 1999 .

[42]  Gérard P. Cachon,et al.  Perspective: Complexity Theory and Organization Science , 1999, Organization Science.

[43]  Margaret A. Peteraf,et al.  Do strategic groups exist? an economic framework for analysis , 1998 .

[44]  G. Huber,et al.  Firm and industry as determinants of executive perceptions of the environment , 1998 .

[45]  Karen A. Bantel.  Technology-based, “adolescent” firm configurations: strategy identification, context, and performance , 1998 .

[46]  Gordon E. Greenley,et al.  A Comparison of Slack Resources in High and Low Performing British Companies , 1998 .

[47]  Alfredo J. Mauri,et al.  Firm and industry effects within strategic management: an empirical examination , 1998 .

[48]  Jonathan L. Johnson,et al.  META-ANALYTIC REVIEWS OF BOARD COMPOSITION, LEADERSHIP STRUCTURE, AND FINANCIAL PERFORMANCE , 1998 .

[49]  Joan D. Penner-Hahn,et al.  Firm and environmental influences on the mode and sequence of foreign research and development activities , 1998 .

[50]  D. Hofmann.  An Overview of the Logic and Rationale of Hierarchical Linear Models , 1997 .

[51]  Thomas H. Brush,et al.  What does a small corporate effect mean? A variance components simulation of corporate and business effects , 1997 .

[52]  Thomas S. Gruca,et al.  Convergence across alternative methods for forming strategic groups , 1997 .

[53]  Aimé Heene,et al.  Strategic groups as subsets of strategic scope groups in the Belgian brewing industry , 1997 .

[54]  M. Porter,et al.  HOW MUCH DOES INDUSTRY MATTER, REALLY? , 1997 .

[55]  Rajaram Veliyath,et al.  Agency Influences on Risk Reduction and Operating Performance: An Empirical Investigation Among Strategic Groups , 1997 .

[56]  Margaret A. Peteraf,et al.  GETTING TO KNOW YOU: A THEORY OF STRATEGIC GROUP IDENTITY , 1997, Strategic Management Journal.

[57]  D. Slevin,et al.  Strategy Formation Patterns, Performance, and the Significance of Context , 1997 .

[58]  Christopher L. Shook,et al.  Organizational Configurations And Performance: A Meta-Analysis , 1997 .

[59]  Greg L. Stewart,et al.  Attaining Flexible Stability by Integrating Total Quality Management and Socio-Technical Systems Theory , 1997 .

[60]  Paul M. Vaaler,et al.  A Descriptive Alternative to Cluster Analysis: Understanding Strategic Group Performance with Simulated Annealing , 1997 .

[61]  L. Gómez-Mejia,et al.  Reframing executive compensation: An assessment and outlook , 1997 .

[62]  P. Bierly,et al.  Generic knowledge strategies in the U.S. pharmaceutical industry , 1996 .

[63]  Jeffrey J. Reuer,et al.  MEASURING ORGANIZATIONAL DOWNSIDE RISK , 1996 .

[64]  P. Bromiley,et al.  Toward a Model of Risk in Declining Organizations: An Empirical Examination of Risk, Performance and Decline , 1996 .

[65]  David J. Ketchen,et al.  THE APPLICATION OF CLUSTER ANALYSIS IN STRATEGIC MANAGEMENT RESEARCH: AN ANALYSIS AND CRITIQUE , 1996 .

[66]  David J. Miller,et al.  The Resource-Based View of the Firm in Two Environments: The Hollywood Film Studios From 1936 to 1965 , 1996 .

[67]  Ajay Mehra.  RESOURCE AND MARKET BASED DETERMINANTS OF PERFORMANCE IN THE U.S. BANKING INDUSTRY , 1996 .

[68]  D. Schendel,et al.  STRATEGIC REFERENCE POINT THEORY , 1996 .

[69]  Timothy B. Palmer,et al.  Managerial Categorization of Competitors: Using Old Maps to Navigate New Environments , 1996 .

[70]  T. Kuhn.  The structure of scientific revolutions, 3rd ed. , 1996 .

[71]  R. Kaplan,et al.  Using the balanced scorecard as a strategic management system , 1996 .

[72]  Timothy W. Ruefli,et al.  Necessary Conditions for the Predictive Validity of Strategic Groups: Analysis Without Reliance on Clustering Techniques , 1995 .

[73]  H. Thomas,et al.  Strategic Groups as Reference Groups: Theory, Modeling and Empirical Examination of Industry and Competitive Strategy , 1995 .

[74]  G. Hendrikse.  Fundamental Issues in Strategy , 1995 .

[75]  Paul C. Godfrey,et al.  THE PROBLEM OF UNOBSERVABLES IN STRATEGIC MANAGEMENT RESEARCH , 1995 .

[76]  H. P. Sims,et al.  Top Management Team Demography and Process: The Role of Social Integration and Communication , 1994 .

[77]  K. Klein,et al.  Levels Issues in Theory Development, Data Collection, and Analysis , 1994 .

[78]  C. C. Snow,et al.  Organizational Configurations and Performance: A Comparison of Theoretical Approaches , 1993 .

[79]  A. Huff,et al.  STRATEGIC GROUPS: A COGNITIVE PERSPECTIVE , 1993 .

[80]  H. Thomas,et al.  INDUSTRY AND STRATEGIC GROUP DYNAMICS: COMPETITIVE STRATEGY IN THE INSURANCE INDUSTRY, 1970–84 , 1993 .

[81]  Anthony S. Bryk,et al.  Hierarchical Linear Models: Applications and Data Analysis Methods , 1992 .

[82]  Rhonda K. Reger,et al.  Deregulation, strategic choice, risk and financial performance , 1992 .

[83]  R. Hall.  The strategic analysis of intangible resources , 1992 .

[84]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[85]  R. Rumelt.  How much does industry matter , 1991 .

[86]  M. Bazerman,et al.  BLIND SPOTS IN INDUSTRY AND COMPETITOR ANALYSIS: IMPLICATIONS OF INTERFIRM (MIS)PERCEPTIONS FOR STRATEGIC DECISIONS , 1991 .

[87]  George M. Zinkhan,et al.  Strategy and the research process: A comment , 1991 .

[88]  Birger Wernerfelt,et al.  The link between resources and type of diversification: Theory and evidence , 1991 .

[89]  Richard A. D'Aveni,et al.  Crisis and the Content of Managerial Communications: A Study of the Focus of Attention of Top Managers in Surviving and Failing Firms. , 1990 .

[90]  J. Farley,et al.  Determinants of Financial Performance: A Meta-Analysis , 1990 .

[91]  Richard A. D'Aveni.  Top Managerial Prestige and Organizational Bankruptcy , 1990 .

[92]  H. Thomas,et al.  STRATEGIC GROUPS AND PERFORMANCE: THE U.S. INSURANCE INDUSTRY, 1970-84 , 1990 .

[93]  Robert E. Hoskisson,et al.  Strategic groups: Untested assertions and research proposals , 1990 .

[94]  D. Aaker,et al.  Mobility barriers and strategic groups , 1989 .

[95]  Barbara W. Keats,et al.  A Causal Model of Linkages Among Environmental Dimensions, Macro Organizational Characteristics, and Performance , 1988 .

[96]  Karel Cool,et al.  Performance differences among strategic group members , 1988 .

[97]  R. Zammuto.  ORGANIZATIONAL ADAPTATION: SOME IMPLICATIONS OF ORGANIZATIONAL ECOLOGY FOR STRATEGIC CHOICE[1] , 1988 .

[98]  John McGee,et al.  Exploring the Linkage Between Strategic Groups and Competitive Strategy , 1988 .

[99]  Donald C. Hambrick,et al.  Large Corporate Failures as Downward Spirals , 1988 .

[100]  George P. Huber,et al.  The Systems Paradigm in Organization Theory: Correcting the Record and Suggesting the Future , 1987 .

[101]  Karel Cool,et al.  Strategic Group Formation and Performance: The Case of the U.S. Pharmaceutical Industry, 1963-1982 , 1987 .

[102]  H. Thomas,et al.  The concept of stable strategic time periods in strategic group research , 1987 .

[103]  Cynthia A. Montgomery,et al.  What is an Attractive Industry , 1986 .

[104]  R. E. Shrieves,et al.  Towards Reconciliation of Market Performance Measures to Strategic Management Research , 1986 .

[105]  H. Thomas,et al.  Strategic Groups: Theory, Research and Taxonomy , 1986 .

[106]  L. G. Hrebiniak,et al.  Organizational Adaptation: Strategic Choice and Environmental Determinism. , 1985 .

[107]  D. Rousseau.  Issues of level in organizational research: Multi-level and cross-level perspectives. , 1985 .

[108]  R. A. Cooke,et al.  Technology and Structure: The Concrete, Abstract, and Activity Systems of Organizations , 1984 .

[109]  E. Altman.  The success of business failure prediction models: An international survey , 1984 .

[110]  M. Hannan,et al.  Structural Inertia and Organizational Change , 1984 .

[111]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[112]  R. Schmalensee.  Do Markets Differ Much , 1984 .

[113]  Katherine Schipper,et al.  Application of Classification Techniques in Business, Banking and Finance. , 1983 .

[114]  Donald L. Mills,et al.  Organizations: Rational, Natural and Open Systems , 1983 .

[115]  Edward I. Altman,et al.  Application of Classification Techniques in Business, Banking and Finance. , 1983 .

[116]  Denise M. Rousseau,et al.  Assessment of Technology In Organizations: Closed versus Open Systems Approach , 1979 .

[117]  M. Porter.  The Structure Within Industries and Companies' Performance , 1979 .

[118]  R E Miles,et al.  Organizational strategy, structure, and process. , 1978, Academy of management review. Academy of Management.

[119]  Michael Hunt.  Competition in the major home appliance industry, 1960-1970 , 1972 .

[120]  T. Kuhn,et al.  The Structure of Scientific Revolutions. , 1964 .

[121]  J. Bain.  Barriers to new competition , 1957 .

[122]  K. Boulding.  General Systems Theory---The Skeleton of Science , 1956 .