Margarethe F. Wiersema

Top Management Team Demography and Corporate Strategic Change

This study examined the relationship between the demography of top management teams and corporate strategic change, measured as absolute change in diversification level, within a sample of Fortune ...

Matching method to paradigm in strategy research: limitations of cross‐sectional analysis and some methodological alternatives

A central focus of empirical research in strategic management has been to understand the relationships associated with the structure–strategy–performance paradigm. To examine these relationships, investigators have relied extensively on cross‐sectional methods that embody the implicit assumption that model parameters are stable across firms and over time. Yet, many of the theoretical constructs used in strategic management have clear firm‐ and time‐specific components. Hence, it might be expected that the parameters of the relationships investigated empirically will vary across firms and over time. Whereas recent research has raised concerns about the use of cross‐sectional analysis when parameters vary over time, little attention has been given to the issue of parameter variability across firms. Given the focus of strategy researchers on firm‐level effects and the predominant reliance on cross‐sectional analysis, accounting for across‐firm variability is a significant methodological issue. Failure to account for such variability can lead to biased parameter estimates and incorrect inferences. This paper argues for the adoption of alternative methods that can overcome the limitations of a cross‐sectional analysis and it offers guidance on how researchers can proceed to use these alternative methods to explicitly incorporate or test for variation in model parameters across firms or over time. Copyright

Gaining Strategic and Organizational Capability in a Turbulent Business Environment

Being an executive in the late 1980s and the 1990s will be like playing basketball with a moving basket. With increasing rates of environmental changes as well as the diversified nature of most large firms, continuity and durability of organizational strategy no longer guarantee success. Drafting 5or 10-year strategic plans becomes an exercise in futility when the organizational environment changes so dramatically that long-term plans fail to adjust for transient targets. To compete in this and the next decade of transformation requires that executives create and maintain organizational assumptions and practices that help clarify and cope with continual environmental change. This article proposes executive actions that can increase strategic and organizational capability in turbulent times.

Executive Decision-Making: Linking Dynamic Managerial Capabilities to the Resource Portfolio and Strategic Outcomes

To more completely understand the basis for firm performance differences, we need greater clarity on the drivers of differentiation in managerial strategic decision making, as well as on the impact these decisions have on the composition and configuration of the firm’s resource portfolio. In this article, we provide an integrative framework that illustrates how strategic leaders influence firm strategy and performance. Our model clarifies the role that dynamic managerial capabilities play in fashioning a unique bundle of resources for the firm, thus leading to differences in firm strategies and performance outcomes. The process is illustrated by examples drawn from industry.

Portfolio Interrelationships and Financial Performance in the Context of European Firms

The linkage between the interrelationships of a firms lines of business and corporate financial performance has been the subject of extensive research in the strategy field. Yet very little research has examined this key relationship within firms operating in Continental Europe. This study investigates firm relatedness and its further relationship to accounting and market-based performance measures within a sample of European firms. The results confirm a positive and significant relationship between resource-based relatedness and firm performance for German, Swiss and Austrian multi-business firms. Thus, this study provides further evidence that resource-based relatedness of large diversified manufacturing companies can help explain variability in corporate financial performance across different institutional environments.

Entrepreneurial strategies and radical innovation: A punctuated disequilibrium approach

Current models of organizational development, particularly the punctuated equilibrium model, explore how industry conditions and trends shape the evolution of firms or business units within that industry over time. From this perspective, firms evolve from entrepreneurial strategies, informal structure and radical innovation towards increasingly competitive strategies stressing a focus on efficiency through formalized structures, tight managerial control systems and incremental innovation (Abernathy & Clark, 1985; Moore & Tushman, 1982; Tushman & Romanelli, 1985) as the industry matures. As a result, periods of radical product innovation are perceived as a short-lived phenomenon or as a temporary aberration from more normative patterns of stability during periods of industrial discontinuity and chaos. However, this description of an environmental-strategy fit is functional primarily for large organizations in relatively stable industries. Research on strategic fit in environments characterized by high degrees of demand uncertainty and technological instability reveals that some organizations consistently choose alternative strategies based on a focus on creativity and innovation. This paper examines how the punctuated equilibrium model can be adapted to describe these environments characterized by high uncertainty, and to explain how certain firms proactively pursue strategies, structures, and managerial styles consistent with ongoing radical innovation across developmental stages as a viable source of competitive advantage. The paper concludes by exploring how strategy theory can be integrated with the punctuated disequilibrium model to account for this unexpected range of strategic variation.

CEO Turnover in the New Era: A Dialogue with the Financial Community

Scholars working in the strategy area have long held that one of the primary ways in which organizations adapt to external changes is through strategic choice. Inasmuch as a new CEO can result in a new strategic direction for the firm, the CEO turnover event itself is an important way by which organizations can signal an alteration in the direction of the firm. In this chapter, we explore how and why CEO turnover has become one of the most powerful indicators of adaptation the firm can make and propose a research agenda to guide future work on CEO turnover.

Empirical Methods in Strategy Research: Regression Analysis and the Use of Cross-Section Versus Pooled Time-Series, Cross-Section Data

Empirical research in strategic management has relied extensively on the use of cross-section data analysis. This paper undertakes a formal examination of methodological issues raised by a cross-section analysis. Specifically we address the limited ability of a cross-section analysis to account for coefficient variation across firms and over time. These pose as important limitations in the context of strategic management research. This paper discusses alternative analytical techniques that can control for many of the limitations of a cross-section analysis. Regression methods based on pooled time series, cross-section data can help overcome biases introduced because model parameters can vary across firms or over time.

Analyzing analyst research : a review of past coverage and recommendations for future research

As visible and knowledgeable experts who constantly collect, analyze, and disseminate information about the future prospects of publicly listed firms, financial analysts fulfill an important information brokerage and monitoring function for investors. By providing investment advice, financial analysts also influence the demand for a firm’s stock and thus its price. Executives pay close attention to financial analysts’ earnings forecasts and recommendations, so much so that they are frequently criticized for excessive focus on their forecasts at the expense of the long-term interests of the firm. But while research on analysts in strategic management is steadily growing, we lack a coherent understanding of the extent and nature of analysts’ diverse influences on executives’ and investors’ decision making and the context in which analysts operate. This is largely due to the fragmentation of the literature and the absence of prior reviews or meta-analyses of the topic. By organizing, synthesizing, and analyzing extant research efforts on analysts in the various domains of strategic management research, we aim to advance our knowledge on the influence of analysts on firms and investors. Further, we hope that our analyses and recommendations help further increase research coverage on this important organizational stakeholder.

The Impact of Earnings Pressure on Layoff Decisions

This article investigates the impact of investment analyst earnings expectations on corporate downsizing decisions. Drawing on the behavioral theory of the firm, we propose that earnings expectatio...