A Resource-Based Perspective on the Dynamic Strategy-Performance Relationship: An Empirical Examination of the Focus and Differentiation Strategies in Entrepreneurial Firms
Restricted accessResearch articleFirst published online August, 1993
A Resource-Based Perspective on the Dynamic Strategy-Performance Relationship: An Empirical Examination of the Focus and Differentiation Strategies in Entrepreneurial Firms
This research applies a resource-based perspective, which emphusizes a firm’s specialized or unique resources, to the question of how the focus and differentiation strategies affect the economic performance of entrepreneurial firms. We develop dynamic models that separate the period of creating or acquiring these resources from subsequent periods. With longitudinal data on entrepreneurial software firms, we examine the dynamic effects of multiple forms of these strategies on a firm’s performance. The results generally support the hypotheses that, when the focus and differentiation strategies are established, performance is higher than for other firms. The results fail to support the hypothesis that firm performance will decrease when these strategies are adopted.
Get full access to this article
View all access options for this article.
References
1.
Abell, D. F. (1980). Defining the business; The starting point of strategic planning. Englewood Cliffs, NJ: Prentice-Hall.
2.
Arthur, W. B. (1988). Self-reinforcing mechanisms in economics. Pp. 9-31 in P. W. Anderson, K. J. Arrow, & D. Pines (Eds.), The economy as an evolving complex system. Redwood City, CA: Addison-Wesley.
3.
Barney, J. (1986a). Strategic factor markets: Expectations, luck, and business strategy. Management Science, 32: 1231-1241.
4.
Barney, J. (1986b). Organizational culture: Can it be a source of sustained competitive advantage?Academy of Management Review, 11: 656-665.
5.
Barney, J. (1989). Asset stock accumulation and sustained competitive advantage: A comment. Management Science, 35: 1511-1513.
6.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17: 99-120.
7.
Biggadike, R. (1979). The risky business of diversification. Harvard Business Review, (May-June): 103-111.
8.
Boeker, W. (1989). Strategic change: The effects of founding and history. Academy of Management Journal. 32.
9.
Bower, I. L. (1989). Managing resource allocation or strategy as an outcome. Harvard Business School note, HBS 9-389-040.
10.
Bracker, J. S., Keats, B. W., & Pearson, J. N. (1988). Planning and financial performance among small firms in a growth industry. Strategic Management Journal, 9: 591-603.
11.
Bracker, J. S. & Pearson, I. N. (1986). Planning and financial performance of small, mature firms. Strategic Management Journal, 7: 503-522.
12.
Brockner, J. (1992). The escalation of commitment to a failing course of action: Toward theoretical progress. Academy of Management Review, 17: 39-61.
13.
Carroll, Glenn R. (1985). Concentration and specialization: Dynamics of niche width in populations of organizations. American Journal of Sociology, 90: 1262-1283.
14.
Caves, R. E. (1980). Industrial organization, corporate strategy and structure. Journal of Economic Literature, 58: 64-92.
15.
Chamberlin. E. H. (1933). The theory of monopolistic competition: A re-orientation of the theory of value. Cambridge, MA: Harvard.
16.
Conner, K. R. (1991). A historical comparison of resource-based theory and five schools of thought within industrial organization economics: Do we have a new theory of the firm?Journal of Management, 17: 121-154.
17.
Cooper, A. C. (1979). Strategic management: New ventures and small business. Pp. 316-327 in D. E. Schendel & C. W. Hofer (Eds.), Strategic management. Boston, MA: Little, Brown.
18.
Covin. J. G. & Slevin, D. I? (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10: 75-87.
19.
David, Paul A. (1985). Clio and the economics of QWERTY. American Economic Review Proceedings, 75: 332-337.
20.
Dierickx, I. & Cool, K. (1989). Asset stock accumulation and sustainability of competitive advantage. Management Science, 35: 1504-1511.
21.
Drazin. R. & Kazanjian. R. K. (1990). A reanalysis of Miller and Friesen’s life cycle data. Strategic Management Journal, 11: 319-325.
22.
Feeser, H. R. & Willard, G. E. (1990). Founding strategy and performance: A comparison of high and low growth firms. Strategic Management Journal, 11: 87-98.
23.
Geroski, Paul A. (1990). Modeling persistent profitability. Pp. 15-34 in Dennis C. Mueller (Ed.), Thedynamics of company profits. Cambridge, England: Cambridge University Press.
24.
Ginsberg, A. (1988). Measuring and modelling changes in strategy: Theoretical foundations and empirical directions. Strategic Management Journal, 9: 559-575.
25.
Greiner, L. E. (1972). Evolution and revolution as organizations grow. Harvard Business Review, 50(4), 37-46.
26.
Henderson, B. (1983). The concept of strategy, Pp. 3-26 in Kenneth J. Albert (Ed.), The strategic management handbook. New York, NY: McGraw-Hill..
27.
Hambrick, D. (1987). Top management teams: Key to strategic success. California Management Review, 30: 88-108.
28.
Hannan, M. T. & Freeman, J. H. (1977). The population ecology of organization. American Journal of Sociology, 82: 929-964.
29.
Hannan, M. T. & Freeman, J. H. (1989). Organizational ecology. Cambridge, MA: Harvard University Press.
30.
Hatten, K. J. & Hatten, M. L. (1987). Strategic groups, asymmetrical mobility barriers and contestability. Strategic Management Journal, 8: 329-342.
31.
Hill, C. W. L. (1988). Differentiation versus low cost or differentiation and low cost: A contingency framework. Academy of Management Journal, 13: 401-412.
32.
Hirshliefer, J. (1980). Price theory and applications, 2nd ed.Englewood Cliffs, NJ: Prentice-Hall.
33.
Inmon, W. H. (1985). Technomics: The economics of technology and the computer industry. New York: Dow-Jones/Irwin.
34.
Institutional investor. New York, NY, 1983-1984.
35.
Kazanjian, R. K. (1988). Relation of dominant problems to stages of growth in technology-based new ventures. Academy of Management Journal, 31: 257-279.
36.
Kirzner, Israel M. (1973). Competition and entrepreneurship. Chicago, IL: University of Chicago Press.
37.
Koopmans, Tjalling C. (1957). Three essays on the state of economic science. New York, NY: McGraw-Hill.
38.
Lieberstein, S. H. (1979) Who owns what is in your head: Trade secrets and the mobile employee. New York: Hawthorne Books.
39.
Lippman. Steven A. & McCardle, Keven F. (1987). Dropout behavior in R&D races with learning. Rand Journal of Economics, 18: 287-295.
40.
Lippman, Steven A. & Rumelt, Richard P. (1982). Uncertain imitability: An analysis of interfirm differences in efficiency under competition. Bell Journal of Economics, 13: 418-438.
41.
Mahoney, Joseph T. & Pandian, J. Rajendran. (1992). The resource-based view within the conversation of strategic management. Strategic Management Journal, 13: 363-380.
42.
Markus. G. B. (1979). Analyzing panel data. Berkeley Hill, CA: Sage.
43.
Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29: 770-791.
44.
Miller, D. & Friesen, P. A. (1984). A longitudinal study of the corporate life cycle. Management Science, 30: 1161-1183.
45.
Mintzberg, H. & Waters, J. A. (1982). Tracking strategy in an entrepreneurial firm. Academy of Management Journal, 25: 465-499.
46.
Mosakowski. E. (1991). Organizational boundaries and economic performance: An empirical study of entrepreneurial computer firms. Strategic Management Journal, 12: 115-133.
47.
Mueller, Dennis C. (1990). Profits and the process of competition. Pp. 1-14 in Dennis C. Mueller (Ed.), The dynamics of company profits. Cambridge, England: Cambridge University Press.
48.
Murray, A. I. (1988). A contingency view of Porter’s generic strategies. Academy of Management Journal, 15: 390-400.
49.
Penrose, E. G. (1959). The theory of the growth of the firm. New York: Wiley.
50.
Porter, M. (1980). Competitive strategy: Techniques for analyzing industries and companies. New York, NY: Free Press.
51.
Porter, M. (1985). Competitive advantage: Creating and sustaining superior performance. New York, NY: Free Press.
52.
Ravenscraft, D. & Scherer, E M. (1982). The lag structure of returns to research and development. Applied Economics, 14: 603-620.
53.
Robinson, R. B. & Pearce, J. A. (1983). The impact of formalized strategic planning on financial performance in small organizations. Strategic Management Journal, 4: 197-207.
54.
Robinson, R. B. & Pearce, J. A. (1984). Research thrusts in small firm strategic planning. Academy of Management Review, 9: 128-137.
55.
Rubin, P H. (1973). The expansion of firms. Journal of Political Economy, 81: 936-949.
56.
Rumelt, Richard P, (1982). Towards a strategic theory of the firm. Pp. 566-570 in R. B. Lamb (Ed.), Competitive strategic management. Englewood Cliffs, NJ: Prentice-Hall.
57.
Schulze. William S. (1992). The two resource-based models of the firm: Definitions and implications for research. Academy of Management Proceedings: 37-41.
58.
Shan, W. (1990). An empirical analysis of organizational strategies by entrepreneurial high-technology firms. Strategic Management Journal, 11: 129-139.
59.
Simon, H. A. (1957). Models of man. New York: Wiley.
60.
Staw, B. M. (1981). The escalation of commitment to a course of action. Academy of Management Review, 6: 577-587.
61.
Stinchcombe, A. L. (1965). Social structure and organizations. Pp. 142-193 in J. G. March (Ed.), Handbook of organizations. Chicago, IL: Rand McNally.
62.
Teece, D. J. (1980). Economies of scope and the scope of the enterprise. Journal of Economic Behavior and Organization, 1: 223-247.
63.
Teece, D. J. (1982). Towards an economic theory of the multiproduct firm. Journal of Economic Behavior and Organization, 3: 39-63.
64.
Teece, D. J. (1986a). Firm boundaries, technological innovation, and strategic management. In LG. Thomas (Ed.), The economics ofstrategic planning: Essays in honor of Joel Dean. Lexington, MA: Lexington Books.
65.
Teece, D. J. (1986b). Profiting From technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy, 15: 785-805.
66.
Tuma, N. B. & Hannan, M. T. (1984). Social dynamics: Models and methods. Orlando, FL: Academic Press.
67.
Van de Ven. A. H., Hudson, R., & Schroeder, R. (1984). Designing new business start-ups: Entrepreneurial, organizational, and ecological considerations. Journal of Management, 11: 87-107.
68.
Wemerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5: 171-180.
69.
Williamson, O. E. (1985). The economic institutions of capitalism. New York, NY: Free Press.
70.
Wright, P. (1987). A refinement of Porter’s strategies. Strategic Management Journal, 8: 93-101.
