Strategic groups: Theory, research and taxonomy

Abstract

This paper discusses the concept of strategic groups, focusing upon the importance of intra‐industry strategic groupings in understanding differences across firms within an industry. The problems involved in identifying strategic groups within industries are examined through a comprehensive review of recent studies. It is demonstrated that much of the research has used surrogates for elements of a firm's strategic direction, e.g. vertical integration, product range, R & D expenditure, to suggest bases by which creative and sustainable groups are formed. The authors argue that certain theoretical concepts such as mobility barriers, isolating mechanisms and controllable variablesprovide much firmer bases for identifying strategic groups within industries. Thus, taxonomies for understanding the nature of strategic group formulation can be developed. Implications of the strategic group concept for such strategic issues as the structure‐performance linkage, firm mobility, patterns of rivalry, industry evolutionand firm growthare then examined. The paper concludes by indicating fruitful directions for strategic group research in the context of the strategic management field.

Edith Penrose's contribution to the resource‐based view of strategic management

“…Her insights on the growth process, especially the enactment of the environment and the discovery of productive opportunities through a dynamic learning process but guided by path dependencies, remain as relevant today as 40 years ago. Key references in this context include the path-breaking work on internal corporate venturing and the process of strategy formation by Burgelman (1983) and McGee and Thomas's (1986) creative perspective on strategic groups.…”

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

“…Vertical financial ownership thus may evolve as a means of maintaining oligopolistic discipline and may provide mobility barriers (Caves & Porter, 1977) which sustain the stability of strategic groups (McGee & Thomas, 1986;Newman, 1978). Differences between existing firms in their degree of vertical financial ownership appear to have led to difficulties in agreement on the desirable vertical price structure.…”

International Trade, Entrepreneurship, and Monopolistic Competition: German Hidden Champions and Global Markets

“…The strategic choice approach by Purdue-studies assumes that systematic similarities and differences exist among firms as a result of strategic resource choices, i.e. decisions to invest in assets which are often difficult and costly to imitate (McGee & Thomas, 1986. While the Harvard studies relied on the cross-sectional data in econometric analyses, Purdue-studies used time-series data to draw valid inferences about the performance differences and patterns of competition of a single industry.…”