Strategy-performance linkage: methodological refinements and empirical analysis

Abstract

Purpose Strategic typologies are applied to investigate strategy–performance relationship. The typology of Miles and Snow (1978) is one of them, but the methodology applied for identification of strategic types for archival financial data is questionable on three grounds: no standard procedure for categorization of strategic types; identification of reactor strategy is always ignored; and the behavior of firms’ strategic orientation over time is under-researched. Besides, the assumptions that viable strategies are expected to perform equally well, outperform reactors and distributed evenly are not overwhelmingly supported. The purpose of this paper is to address these issues. Design/methodology/approach A refined scoring methodology is developed and used for identification of all strategic types, including reactors, by investigating the consistency of the firms over time. Empirical analysis using seven years of data of 121 joint stock firms of the textile sector in Pakistan is performed to test the assumptions regarding presence, distribution and performance of strategic types. Findings There is significant difference in the distribution of the strategic types. Pure defenders and pure prospectors are non-existing, whereas a reasonable number of reactors are present. Overall difference in performance among strategies is generally insignificant and viable strategies outperformed reactors. The effect of size on performance is also insignificant. However, there is variation in performance of strategies with variation in size. Strategy is the better predictor of performance than size. Originality/value The transition of strategic stance of the firms over time and the identification of reactor strategy from archived financial data are the important outcomes of the proposed methodology. The proposed methodology can be used for any longitudinal study for identification of all possible strategic types and can also be used for any other typological research.

Miles and Snow Typology: most influential journals, articles, authors and subject areas

“…However, there is a clear dearth of its applicability in accounting and finance subject area. The reason for this might be the fact that the classification of strategic types is generally based on the perceived measures such as paragraph approach or self-typing measures as investigated by Anwar and Hasnu (2016a, b). The use of financial data for measuring strategy is needed to integrate the discipline of finance with strategic management.…”

“…In practice, firms adopt a greater variety of competitive strategies that go far beyond the pure strategies created by theory and that result in adoption of hybrid strategies. This concept of strategic hybridization is getting space in the literature with accelerating pace (Bentley et al , 2013; Thomas and Ramaswamy, 1996; Anwar and Hasnu, 2016b). The methodological developments are needed for classification of hybrid strategic types based on the theoretical foundations of this typology.…”

“…), type of analysis (parametric and non-parametric), etc. Anwar and Hasnu (2016a, b) summarized the research evidences for country of study, sample size, research settings (single industry or multiple industries), data collection methods specifically for identification of strategic types (self-typing, paragraph approach, questionnaire or interview and archival data), strategy and performance measures, selection of strategic types, data sets and tools and techniques along with key findings. Ingram et al (2016) did a 40 years review of the Miles and Snow typology literature to provide the summary of authors, sample size, country, variables (dependent, independent and moderating), etc.…”

Strategic patterns and firm performance: comparing consistent, flexible and reactor strategies

“…Archived financial data are used for measuring strategy. Following Anwar and Hasnu (2016), four measures are used to capture the long-term strategic orientation of the firms. Marketing expenses (selling, administration, and general expenses) to sales ratio.…”

Relationship between manufacturing strategy and firm performance: the empirical study of Vietnamese manufacturing plants

“…According to B. Flyn et al (1997), factors impacting firm performance can be diverse, covering supply chain management, quality management, lean manufacturing, human resource management, manufacturing strategy and so on [6]. Strategy is generally considered a strong predictor of performance (Anwar et al, 2016) [9]; and in particular, manufacturing strategy -coined by W. Skinner (1969) [18] -is said to be an important intrinsic factor impacting the firm's competitiveness. In a similar statement, P. Swamidass and W. Newell (1987) indicate that manufacturing strategy is a critical part of a firm's comprehensive strategy, aimed at improving competitive performance by leveraging manufacturing strengths [19].…”