A causal analysis of formal strategic planning and firm performance

Abstract

PurposeThe purpose of this paper is to examine the nature of the strategic planning‐performance relationship by drawing on data from a sample of Turkish firms.Design/methodology/approachThe sample frame for the study was derived from the database of the Istanbul Chamber of Industry's 500 largest Turkish manufacturing companies and the database of companies quoted on the Istanbul Stock Exchange. Based on a postal survey, 135 usable questionnaires were returned. Using LISREL causal modeling the moderating effects of a set of contingency factors on the relationship between formal strategic planning and firm performance were investigated.FindingsThe findings show that there is a good deal of support for the study's hypotheses. A strong and positive relationship was formed between formal strategic planning and firm performance, which tends to confirm the arguments of the prescriptive strategic management literature. The test results also verify the moderating roles of environmental turbulence, organization structure and firm size on the strategic planning‐performance link.Research limitations/implicationsStrategic planning and its key dimensions represent a subtle and complex activity, and that to obtain rich data on such phenomena may be best accomplished through research methods that employ qualitative data gathering techniques. Incorporation of qualitative performance measures, in addition to financial measures would enrich our understanding of the planning‐performance relationship.Practical implicationsAfter almost a decade of relative neglect perhaps this research issue will again begin to attract the kind of attention that it deserves. Although strategy is often considered to be a universal practice, it is better thought of as many different crafts, varying according to its different contexts. So, the impact of various contexts on the planning‐performance relationship should be taken into account.Originality/valuePrior studies that have examined strategic planning‐performance relationship have tended to focus on firms from industrialized countries. This is one of the first studies that has explicitly modeled and empirically tested the relationship in an emerging country context.