Strategy-Performance Relationships in Service Firms: A Test for Equifinality

In the process of using the open systems model to legitimize organizational studies, Katz and Kahn (1966) discussed the properties of open systems and included the notion of equifinality. The systems paradigm peaked in 1972 and eventually went out of fashion by 1976 (Ashmos and Huber, 1987). However, in the strategic management and strategic marketing literature, many statements have been made that within a certain strategic typology, no one strategy is neither inferior nor superior to that of another strategy (Kald et al., 2000; Deshpande and Farley, 1998). In fact, Miles and Snow (1978) and Porter (1980) argue that the strategies described in their respective typologies are neither inferior nor superior. Certain researchers have posited that the notion of equifinality may offer insights into this superiority-inferiority argument (Gresov and Drazin, 1997; Jennings and Seaman, 1994; Matsuno and Mentzer, 2000). Interestingly, within the strategic management and marketing literature, the notion of equifinality has been studied and has taken on two theoretical perspectives. One such perspective (the strategy approach) is that an organization can achieve an outcome by a variety of strategic actions or strategies (Miles et al., 1978). The other perspective (the strategy-structure fit perspective) is that a feasible set of equally effective, internally consistent patterns of strategy and structure exist (Van de Ven and Drazin, 1985). In essence, proponents from both schools make the same argument--a desired outcome can be reached by the use of different approaches. The "strategy approach" school argues that different strategies can yield the same outcome. This is the rationale used by Miles and Snow (1978) and by Porter (1980) in stating that the strategies described in their respective typologies are neither inferior nor superior. However, advocates of the "strategy-structure fit" school add an extra dimension to their argument in that the firm's strategy must be aligned with its structure and that a variety of strategy-structure matches can be used to acquire the same outcome. While most of the research on equifinality within strategic management and marketing has been theoretical in nature, two empirical studies of equifinality have been conducted (Doty et al., 1993; Jennings and Seaman, 1994). Both of these studies have supported the notion of equifinality in that a variety of strategic approaches can achieve the same outcome. The purpose of this study is to extend research on equifinality by examining the strategy-performance relationship across a variety of service firms. First, the literature on contingency theory and business strategy is reviewed to present a theoretical framework and to develop hypotheses. Next, the methodology used in the study is presented, and then the findings are reported and discussed. THEORETICAL FRAMEWORK AND HYPOTHESES Contingency Theory Two sets of pervasive arguments exist among contingency theorists with respect to how fit affects performance. One such argument suggests that a one-best strategy-structure arrangement exists to fit a given industry environment (Dill, 1958; Hage and Aiken, 1970; Lawrence and Lorsch, 1969; Lorsch and Morse, 1974). The other argument is that organizational effectiveness results from fitting certain organizational characteristics to contingencies that reflect the situation of the organization (Burns and Stalker, 1961; Galbraith, 1973; Hage and Aiken, 1969; Pugh et al., 1969). These contingencies include the environment (Burns and Stalker, 1961), organizational size (Child, 1975), and strategy (Chandler, 1962). Proponents of the contingency school of organizational behavior (Donaldson, 2001; Pennings, 1975; Pfeffer, 1997; Schoonhoven, 1981; Scott, 1992) argue that a variety of strategic approaches can be equally effective. Donaldson (2001) argues that those scholars who assert there is one best way to organize belong in the universalistic theory of organization thought rather than to the contingency theory school. …