The role of firm-specific factors in the strategy-performance relationship

Abstract

Purpose This paper aims to attempt to bring together various organisational aspects that have never been collectively investigated before in the strategic management literature. Its main objective is to examine the relationship between “strategic orientation” and “firm performance”, in the light of two firm-specific factors (“distinct manufacturing capabilities” and “organisational structure”). The proposed research model of the present study is built upon the resource-based view (RBV) of the firm and the organisational aspect of the VRIO framework (the “O” from the VRIO model). Design/methodology/approach The study proposes a newly developed research model that adopts a four-factor approach, while examining a number of direct and indirect effects. The examination of the proposed research model was made with the use of a newly developed structured questionnaire that was distributed on a sample of Greek manufacturing companies. Research hypotheses were tested using the structural equation modelling technique. The present study is explanatory (examines cause and effect relationships), deductive (tests research hypotheses), empirical (collects primary data) and quantitative (analyses quantitative data that were collected using a structured questionnaire). Findings The empirical results suggest the coexistence of three distinct categories of effects on “firm performance”: strategy or “utility” effects, depending on the content of the implemented strategy; firm-specific effects, depending on the content of the organisational resources and capabilities; and organisational effects, depending on the implemented organisational structure. More specifically, the statistical analysis underlines the significant mediating role of “strategic orientation” and the complementary role of “organisational structure”. Finally, empirical results support the argument that “strategy follows structure”. Research limitations/implications The use of self-reported scales constitutes an inherent methodological limitation. Moreover, the present study lacks a longitudinal approach because it provides a static picture of the subject under consideration. Finally, the sample size of 130 manufacturing companies could raise some concerns. Despite that, previous empirical studies of the same field, published in respectable journals, were also based on similar samples. Practical implications When examining the total (direct and indirect) effects on “firm performance”, it seems that the effect of “organisational structure” is, almost, identical to the effect of “distinct manufacturing capabilities”. This implies that “organisational structure” (an imitable capability) has, almost, the same contribution on “firm performance” as the manufacturing capabilities of the organisation (an inimitable capability). Thus, the practical significance of “organisational structure” is being highlighted. Originality/value There has been little empirical research concerning the bundle of firm-specific factors that enhance the impact of strategy on business performance. Under the context of the resource-based view (RBV) of the firm, the present study examines the impact of “organisational structure” on the “strategy-capabilities-performance” relationship, something that has not been thoroughly investigated in the strategic management literature. Also, the present study proposes an alternate measure for capturing the concept of business strategy, the so-called factor of “strategic orientation”. Finally, the study adopts a “reversed view” in the relationship between structure and strategy. More specifically, it postulates that “strategy follows structure” and not the opposite (“structure follows strategy”). Actually, the empirical data supported that (reversed) view, challenging the traditional approach of Chandler (1962) and calling for additional research on that ongoing dispute.