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

Abstract

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.

A set-theoretic approach to organizational configurations

“…To avoid the limitations of regression analysis for studying configurations, in a considerable number of studies, researchers have instead employed cluster analysis (e.g., Bensaou & Venkatraman, 1995;Cool & Schendel, 1987;Desarbo, Di Benedetto, Song, & Sinha, 2005;Dess & Davis, 1984;Ferguson, Deephouse, & Ferguson, 2000;Fiegenbaum & Thomas, 1990;Hambrick, 1983;Ketchen et al, 1993;Lim, Acito, & Rusetski, 2006;Moores & Yuen, 2001). Typically, these studies use clustering algorithms to identify distinct groups of firms and then employ ANOVA or MANOVA to examine whether the distinct groups show differences in their performance.…”

“…To establish and measure configuration membership, authors have used a variety of clustering algorithms (e.g., Bensaou & Venkatraman, 1995;Cool & Schendel, 1987;Fiegenbaum & Thomas, 1990;Hambrick, 1983;Ketchen et al, 1993), interaction effects (e.g., Baker & Cullen, 1993;Dess, Lumpkin, & Covin, 1997), and deviation score approaches (e.g., Delery & Doty, 1996; to identify configurations and their effects, typically on performance as the key outcome variable. However, evidence on the relationship between configurations and performance has been equivocal.…”

How do Firms Adapt? A Fuzzy-Set Analysis of the Role of Cognition and Capabilities in U.S. Defense Firms’ Responses to 9/11

“…Eggers and Kaplan (2009) complemented this finding by establishing that managerial attention timing is important for explaining the speed of asset reconfiguration. Several scholars further demonstrated that cognition precedes asset reconfiguration-that is, managerial attention leads to strategic change, as shown in studies that seek to mitigate simultaneous and reverse causality, and rule out alternative explanations (Cho & Hambrick, 2006;Cool & Schendel, 1987;Kaplan, Murray, & Henderson, 2003). At the industry level, cognition scholars found that competitors endowed with similar assets can respond very differently to the same environmental shift when their top managers' attentional patterns differ (Fiol, 1990;Osborne, Stubbart, & Ramaprasad, 2001;Porac & Thomas, 1994).…”

Strategic Groups and Banks' Performance

“…To that end, most researchers found significant differences in financial results between groups identified, us ing cluster analysis (Dess andDavid, 1984: Reger andHuff, 1993;Heene and Houthoofd, 2002). Some of the authors, however, did not detect significant differences in profitabilities that could be explained by allocation to par ticular groups (Frazier and Howell, 1983;Cool and Schendel, 1987;Martens, 1988). Nevertheless, papers that analysed the banking sectors generally identified significant differences between groups in terms of prof itability (Mehra, 1996;Koller, 2001).…”