Strategic models at the business level: Toward an integrative contingency approach

Since Ackoff (1970) suggested that a business strategy can be formulated on the basis of the key relationship between managerially controllable (strategic) and uncontrollable (environmental) variables, many research studies have explored strategic models that explain performance in terms of strategy and environment. However, relatively little progress has been made towards developing integrative contingency models of strategy, despite increasing interest in contingency models of strategy research. Also, very little research has been conducted to explore the strategic model on multiple performance objectives such as profit, market share, and risk.Using a sample size of 1778 businesses, this research explores strategic models that are based on the key relationships between a firm's multiple objectives, its strategy, and the market structure in which it operates. The research will concentrate on this relationship in order to explore the integrative contingency perspective of strategy by using systematically the following contingency factors: low performance, market share/growth, and industry type. This research considers various statistical issues and methods such as multicollinearity, influential observations, heteroskedasticity, and Chow's test.The results indicate that the impact of strategic and market structure variables on performance varies for the following groups: (1) high-performance and low-performance businesses, (2) the food processing, chemical processing, machinery, and electric and electronic equipment industries, and (3) the four cells of the Boston Consulting Group matrix. That is, the impact of strategic and market structure variables on performance is context-specific. For example, marketing expenditure and R&D in the total sample are significantly and positively related to profit. These results are consistent with the findings of most previous research that have shown similar relationships because of product differentiation. However, those relationships in other business groups are context-specific. Similarly, concentration, capital requirement, and Minimum Efficient Scale in the total sample are also significantly and positively related to profit. These results are also consistent with the findings of previous research. However, contingent relationships were observed for some business groups. In addition, the research found that strategic and market structure variables affect performance objectives differently.By systematically comparing the strategic and market structure profiles pursued by businesses under different sets of situations, this research provides valuable insights for managers and researchers. A more comprehensive model of strategy in a wide range of situations can be developed in the following dimensions: (1) when several contingency factors, such as product life cycle, market share/growth, industry type, and low performance are systematically combined, and (2) when the impact of strategy and market structure variables on multiple performance objectives such as market share, profit, and risk is considered. This can provide an answer, in part, to the following research question: "Which strategies are preferred in which environment conditions?"U of I OnlyETDs are only available to UIUC Users without author permissio