Strategic Reference Point Theory

Abstract

How can executives achieve a match between expected external environmental conditions and internal organizational capabilities that facilitates improved performance? This paper argues that a firm's choice of ‘reference points’ can help achieve strategic alignment capable of yielding improved performance and potentially even a sustainable competitive advantage. Building upon prospect theory and other relevant theoretical perspectives, the strategic reference point (SRP) matrix is developed. A firm's SRP consists of three dimensions: internal capability, external conditions, and time. A theory is developed which posits an optimal SRP structure, and propositions are offered which articulate the expected relationships between the SRP, strategic choice behavior, and firm performance. The paper closes with some suggestions for using strategic reference points in both research and practice.

Assessing Espoused Goals in Private Family Firms Using Content Analysis

“…Similar to others advocating a balanced scorecard approach that examines financial, customer, internal business, and innovation/learning-based goals in family businesses (Craig & Moores, 2005), we argue for the importance of incorporating diverse goals into understanding the overall performance of family businesses. Following strategic reference point theory, which states that businesses use internal, external, and/or time-related referents to gauge performance (Fiegenbaum, Hart, & Schendel, 1996), we argue that such referents can be identified using content analysis of narratives and that these may be reasonable indicators of objective performance (Short & Palmer, 2003). Below we more extensively discuss the method demonstrated in this article and identify several areas where future research can use this method to further our understanding of privately held family businesses.…”

A Natural-Resource-Based View of the Firm

“…To be effective, a vision must be unambiguous, public, and widely understood, making it highly codified in nature (Hamel and Prahalad, 1989;Fiegenbaum, Hart, and Schendel, 1994). However, "saying it" and "doing it" are two different things: Developing a shared vision of sustainable development would seem to require skilful leadership and an empowering social process, reaching deep into the management ranks (Senge, 1990).…”

“…Furthermore, shared vision might provide the essential context within which process-based initiatives can be embedded (Hamel and Prahalad, 1989). Efforts to develop new process skills without a sense of purpose or direction would thus seem to be less effective than process development driven by a shared vision (Senge, 1990;Fiegenbaum, Hart, and Schendel, 1994).…”

Exploration and exploitation within and across intra-organisational domains and their reactions to firm-level failure

“…Performance has triggered organisational search because performance above or below aspirations has determined the boundary between success and failure (Fiegenbaum, Hart, and Schendel 1996;Greve 2003;Lant and Mezias 1990;Lant, Milliken, and Batra 1992). Case study research has demonstrated that performance shocks can have the effect of overcoming inertial forces resistant to exploration activities and can stimulate organisational renewal.…”