Culture, strategy formulation, and firm performance: a meta-analysis

Abstract

PurposeThis article explores how strategy formulation affects firm performance to determine whether rational/analytical strategy formulation is more effective than emergent/reflexive strategy formulation. Additionally, the article assesses if such superiority holds for different cultural contexts.Design/methodology/approachMeta-analysis was performed using the Raju, Burke, Norman, and Landis (RBNL) procedure applied to a dataset of 43 empirical studies reporting 54 effect sizes on strategy–performance relationships.FindingsImplementing a formal strategy formulation process positively relates to firm performance. Rational/analytical formulation approaches are more effective than emergent/reflexive approaches in enhancing firm performance, especially for cultures with low future orientation, high uncertainty avoidance, and high power distance.Research limitations/implicationsThe reduced number of published empirical studies limited the scope and generalizability of the results across countries, industries, or firms. This limitation might be especially true for Latin American firms given the absence of relevant studies in this region. Another potential limitation is related to the distinction between strategy formulation and strategy implementation. Given the empirical nature of the studies meta-analyzed, strategic tools are used as a proxy to determine the formulation approach.Practical implicationsFirms that operate in short-term oriented, uncertainty-avoiding, and elitist cultures should favor implementing rational/analytical strategy formulation techniques rather than emergent/reflexive approaches. Although prescriptive recommendations are limited by the lack of studies in Latin America, firms in this region would seem to be better off using rational/analytical strategy formulation approaches.Originality/valueThese findings provide a partial explanation for the varying results yielded by strategy formulation and suggest cultural contexts in which rational/analytical strategy formulation should be more effective than emergent/reflexive approaches.