Strategic Reorientation in the Computer Software and Furniture Industries: a Hierarchical Regression Analysis

Insufficient literature exists in the area of incremental and revolutionary change to explain and predict the convergence and reorientation phenomena happening in organizations. The process of strategic reorientation involves the internal organizational complexities of fast-paced (within two years) changes in competitive strategy as a necessary condition coupled with changes in at least two of organization structure, power distribution, and control systems. Antecedent forces believed to influence the discontinuous change process include industry sales turbulence, structural inertia/firm size, firm past financial performance, CEO turnover, top management team turnover, management team heterogeneity, management environmental awareness, and external attributions for negative financial performance. Punctuated equilibrium was the foundational theory for this study in which a strategic reorientation model published in Strategic Management Journal was reconstructed. The research question was: What seem to be the significant time-based antecedent forces or conditions that lead to strategic reorientation? The study used two hierarchical logit regression models to analyze data gathered from COMPUSTAT PC Industrial Data Base and Compact Disclosure (CD-ROM) over the years 1987-1993 from the turbulent computer software and stable furniture industries. Qualitative data were found in 10-K reports and President's Letters in Annual Reports filed with the SEC and available on Laserdisclosure. The sample, exclusive of 3 multivariate outliers, included 74 software firms and 43 furniture firms for a pooled total of 117 firms. When separate industries were analyzed using the first of the Systat logit hierarchical regressions, results showed no statistically significant effects. By contrast, when data were pooled, the second hierarchical logit regression model, which included industry turbulence and firm size, showed these one-tailed statistically significant results: strategic reorientation is positively affected by prior industry turbulence and CEO turnover, but is negatively affected by prior top management team turnover and the interaction between industry turbulence and external attributions for negative financial performance