Strategic Group Formation and Performance: The Case of the U.S. Pharmaceutical Industry, 1963-1982

The focus of this paper is on three major questions: 1 what is the theoretical rationale for the strategic group concept?; 2 does strategic group membership have performance implications?; and 3 are strategic groups and membership in strategic groups stable characteristics of industries? A statistical procedure is proposed to longitudinally identify strategic groups. The empirical setting is the U.S. pharmaceutical industry over the period 1963-82. While performance differences are found in terms of market share, profitability differences between groups are not observed. Neither are differences found in terms of risk and risk-adjusted performance. These results are attributed to the existence of performance variation within each strategic group. A dynamic model of competitive repositioning is proposed which helps integrate the findings from the study.

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