Strategy and structure configurations: an examination of fit and performance

Date

2001-08

Journal Title

Journal ISSN

Volume Title

Publisher

Texas Tech University

Abstract

Organizational configurations are groupings of firms that are connected by a common theme or profile (Miller & Mintzberg, 1984; Miller, 1996a). These themes are found within or across different categories of organizations and have led to debates as to their specific relationship to organizational performance. While Ketchen, Combs, Russell, Shook, Dean, Runge, Lohrke, Naumann, Haptonstahl, Baker, Beckstein, Handler, Honig and Lamoureux (1997) demonstrate that the configuration-performance relationship does exist, previous studies on configurations have been criticized (Barney & Hoskisson, 1990). In addition to other criticisms, configuration research typically fails to account for both strategic and structural elements of organizations (Miller, 1996a) and often lacks acceptable statistical power (Ferguson & Ketchen, 1999). Therefore, the actual relationship between organizational configurations and performance may still not be adequately shown. This study tests this relationship by following Miller's (1996a) and Miller and Chen's (1996) argument for researching configuration properties by placing specific focus on competitive activities and the complementary structural elements involved. In addition, equifinality and strategy-structure fit arguments are theoretically expanded upon and empirically tested as components of organizational configurations.

Specifically, this study examines explicit configurations that place emphasis on two types of strategy dimensions—differentiation-cost and broad-narrow scope—based on Porter's (1985) generic strategies and on two structure dimensions covering expansiveness and interorganizational relationships (lORs). Specific hypotheses are developed and multiple empirical tests follow the conceptual arguments made for the existence of configurations that reside in the orchestrating themes and interactive mechanisms surrounding both strategy and structure.

Results support the existence and importance of strategy and structure configurations in relation to financial performance. Additionally, all of the independent dimensions of strategy and structure demonstrate statistical significance in relation to financial performance. As anticipated, the strategy dimension of differentiation was positively related to financial performance, the strategy dimension of scope was inversely related. The structural dimensions of expansiveness and level of interorganizational relationships also showed a significant inverse relationship.

Hypotheses regarding the fit between each of these dimensions are not entirely supported however. Only the fit between target scope and expansiveness demonstrated statistical significance.

Conclusions drawn from these results suggest that within a specified segment of a dynamic and uncertain industry, fit between strategy and structure is not important to overall financial performance. Implications are that true equifinality is non-existent in such controlled industry contexts. In other words, perhaps only one or a very few organizational configurations are successful in any given environment—failure to take that configurational form will result in diminished financial returns. This "successful" form is characterized by highly differentiated services, narrow target scope, and small physical and organization size with little geographical dispersion.

Description

Keywords

Success in business, Organizational behavior, Business planning, Industrial management, Strategic planning

Citation