Authenticity matters: a nonmarket perspective on the competitive strategy-firm performance nexus

Abstract

PurposeScholars have underscored the importance of organizational authenticity, but it is unclear how it influences the links among market strategy, and nonmarket strategy (NMS) and firm performance. This study addresses this gap in the literature.Design/methodology/approachA survey of 294 managers in firms based in the United States investigates configurations among competitive strategy (e.g. cost leadership or differentiation), political and social nonmarket strategy (NMS), authenticity, and firm performance.FindingsCost leaders tend to engage in political nonmarket strategy (PNMS), but the interaction does not necessarily improve firm performance. Differentiators are more likely to pursue social nonmarket strategy (SNMS) and perform better, but neither market-nonmarket strategy configuration is inherently optimal.Research limitations/implicationsThe results support market-nonmarket strategy configurations but do not prescribe optimal combinations. However, the sample is cross-sector and employs self-reports for firm performance.Practical implicationsPolitical and social authenticity can enhance firm performance, but nonmarket activity can compromise a firm’s ability to be politically and socially authentic. Authenticity can drive performance, but a firm’s nonmarket activity can compromise its ability to be politically and socially authentic. Firms should view a prospective loss in authenticity as a potential cost of nonmarket activity.Originality/valueThis paper investigates how a firm’s emphasis on market (competitive) strategies, political and social nonmarket strategies, and political and social authenticity impact financial and non-financial performance. It also tests the veracity of two market-nonmarket configurations, cost leadership with political NMS and differentiation with social NMS.