Determinants and consequences of corporate development and strategy function size

Abstract

The corporate development and strategy function at headquarters is critical for contemporary firms’ strategy activities, yet we know little about its design and structure. We explore how firms determine the need for strategy resources at the corporate level and, thus, the corporate development and strategy function size, as well as the extent to which they benefit from this structural choice. Drawing on a survey of chief strategy officers from 105 large listed European firms, as well as archival data, our analysis indicates that (a) the number of corporate development and strategy function employees differs substantially across firms, suggesting distinct corporate development and strategy function types and economies of scale in the corporate development and strategy function; (b) environmental, strategic, and structural factors explain this variance; and (c) the corporate development and strategy function size is consequential for a firm’s performance, although one size does not fit all firms. Overall, the study highlights the importance of strategy professionals and functions for a firm’s strategy processes.