Advertisement

Capabilities and financial performance: the moderating effect of strategic type

  • Michael Song
  • C. Anthony Di BenedettoEmail author
  • Robert W. Nason
Original Empirical Research

Abstract

The Miles–Snow (M–S) strategic typology has continued to receive attention in the academic business press, even though it has been criticized for not making explicit the relationships between strategic type and ultimate profit performance. Using the market orientation and Resource-Based View literature, we develop hypotheses regarding relationships between M–S strategic type and four firm capabilities (technology, information technology, market-linking, and marketing capabilities), relationship between the four capabilities and performance, and the moderating role of M–S strategic type. An empirical test involves multiple data collections from 216 firms. The study results suggest that there are significant relationships between capabilities and performance if one does not account for the moderating role of strategic type. When strategic type is used as a moderating variable, we find that only certain capabilities had significant effects on profitability. For example, technology and information technology capabilities increase financial performance for prospector organizations, while a different set of capabilities (market-linking and marketing) are positively related to financial performance for defender organizations. We discuss how our findings are consistent with the expectations of the Resource-Based View of the firm. We conclude with a discussion of theoretical and managerial implications.

Keywords

Market orientation Strategic type Firm capabilities Miles–Snow typology Resource-based view 

References

  1. Anderson, J. C., & Gerbing, D. W. (1982). Some methods for respecifying measurement models to obtain unidimensional construct measurement. Journal of Marketing Research, 19 (November), 453–460.Google Scholar
  2. Anderson, J. C., & Gerbing, D. W. (1988). Structural equation modeling in practice, a review and recommended two-step approach. Psychological Bulletin, 103(3), 411–423.CrossRefGoogle Scholar
  3. Baker, W. W., & Sinkula, J. M. (1999). The Synergistic effect of market orientation and learning orientation on organizational performance. Journal of the Academy of Marketing Science, 27(4), 411–427.CrossRefGoogle Scholar
  4. Barney, J. B. (1986). Strategic factor markets: Expectations, luck and business strategy. Management Science, 32(10), 1231–1241.Google Scholar
  5. Barney, J. B., & Zajac, E. J. (1994). Competitive organizational behavior: Toward an organizationally-based theory of competitive advantage. Strategic Management Journal, 15, 5–9.Google Scholar
  6. Bharadwaj, A. S., Bharadwaj, S. G., & Konsynski, B. R. (1999). Information technology effects on firm performance as measured by Tobin’s Q. Management Science, 45(7), 1008–1024.Google Scholar
  7. Chatterjee, S., Hadi, A. S., & Price, B. (2000). Regression analysis by example (3rd ed.). New York, NY: John Wiley and Sons, Inc.Google Scholar
  8. Churchill, G. A., Jr. (1979). A Paradigm for developing better measures of marketing constructs. Journal of Marketing Research, 16(1), 64–73.CrossRefGoogle Scholar
  9. Cohen, J., & Cohen, P. (1983). Applied multiple regression analysis for the behavioral sciences (2nd ed.). Hillsdale, NJ: Lawrence Erlbaum Associates.Google Scholar
  10. Conant, J. S., Mokwa, M. P., & Varadarajan, P. R. (1990). Strategic types, distinctive marketing competencies and organizational performance: A multiple-measures-based study. Strategic Management Journal, 11, 365–383.Google Scholar
  11. Davis, F. D. (1986). A technology acceptance model for empirically testing new end user information systems: Theory and results, Unpublished doctoral dissertation, Massachusetts Institute of Technology.Google Scholar
  12. Day, G. S. (1990). Market driven strategy: Processes for creating value. New York: Free Press.Google Scholar
  13. Day, G. S. (1994). The capabilities of market-driven organizations. Journal of Marketing, 58(1), 37–52.CrossRefGoogle Scholar
  14. Day, G. S., & Nedungadi, P. (1994). Managerial representations of competitive advantage. Journal of Marketing, 58(4), 31-44.CrossRefGoogle Scholar
  15. DeSarbo, W. S., Di Benedetto, C. A., Song, M., & Sinha, I. (2005). Extending the miles and snow strategic framework: Strategic types, capabilities, environmental uncertainty, and firm performance. Strategic Management Journal, 58(4), 31–44.Google Scholar
  16. DeSarbo, W. S., Di Benedetto, C. A., Jedidi, K., & Song, M. (2006). A constrained latent structure multivariate regression methodology for empirically deriving strategic types. Management Science, 52(6), 909–924.CrossRefGoogle Scholar
  17. Dillman, D. A. (1978). Mail and telephone surveys: The total design method. New York, NY: Wiley.Google Scholar
  18. Dyer, B., & Song, X. M. (1997). The impact of strategy on conflict: A cross-national comparative study of U.S. and Japanese firms. Journal of International Business Studies, 28(3), 467–493.CrossRefGoogle Scholar
  19. Griffin, A., & Hauser, J. R. (1992). Patterns of communication among marketing, engineering and manufacturing: A Comparison between two new product teams. Management Science, 38, 360–373.Google Scholar
  20. Hambrick, D. C. (1983). Some tests of the effectiveness and functional attributes of miles and snow’s strategic types. Academy of Management Journal, 26(March), 5–25.CrossRefGoogle Scholar
  21. Hambrick, D. C. (2003). On the staying power of defenders, analyzers, and prospectors. Academy of Management Executive, 17, 115–118.Google Scholar
  22. Jaccard, J., Turrisi, R., & Wan, C. K. (1990). Interaction effects in multiple regression. Newbury Park, CA: Sage.Google Scholar
  23. Lumpkin, G. T., & Dess, G. D. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135–172.CrossRefGoogle Scholar
  24. Maltz, E., & Kohli, A. (1996). Market intelligence dissemination across functional boundaries. Journal of Marketing Research, 33(1), 47–61.CrossRefGoogle Scholar
  25. McDaniel, S. W., & Kolari, J. W. (1987). Marketing strategy implications of the miles and snow strategic typology. Journal of Marketing, 51(1), 19–30.CrossRefGoogle Scholar
  26. McKee, D. O., Varadarajan R., & Pride, W. M. (1989). Strategic adaptability and market performance: A market-contingent perspective. Journal of Marketing, 53(3)(July), 21–35.Google Scholar
  27. Miles, R., & Snow, C. (1978). Organizational strategy, structure, and process. New York: McGraw-Hill.Google Scholar
  28. Miles, R., & Snow, C. (1994). Fit, failure, and the hall of fame: How companies succeed or fail. New York: Free Press.Google Scholar
  29. Moorman, C., & Slotegraaf, R. J. (1999). The contingency value of complementary capabilities in product development. Journal of Marketing Research, 36(2), 239–257.CrossRefGoogle Scholar
  30. Narver, J. C., & Slater, S. F. (1990). The effect of a market orientation on business profitability. Journal of Marketing, 54(1), 20–35.CrossRefGoogle Scholar
  31. Narver, J. C., Slater, S. F., & MacLachlan, D. L. (2004). Responsive and proactive market orientation and new-product success. Journal of Product Innovation Management, 21(5), 334–347.CrossRefGoogle Scholar
  32. Penrose, E. (1959). The theory of growth of the firm. Oxford: Blackwell Press.Google Scholar
  33. Peter, J. P. (1979). Reliability: A review of psychometric basics and recent marketing practice. Journal of Marketing Research, 16 (February), 6–17.Google Scholar
  34. Peter, J. P. (1981). Construct validity: A review of basic issues and marketing practices. Journal of Marketing Research, 18(May), 133–135.Google Scholar
  35. Robinson, W. T., Fornell, C., & Sullivan, M. W. (1992). Are market pioneers intrinsically stronger than later entrants? Strategic Management Journal, 13(November), 609–624.Google Scholar
  36. Ruekert, R. W., & Walker, O. C., Jr. (1987). Interactions between marketing and R&D departments in implementing different business strategies. Strategic Management Journal, 8, 233–248.Google Scholar
  37. Shankar, V. (1999). New product introduction and incumbent response strategies: Their interrelationship and the role of multimarket contact. Journal of Marketing Research, 36(3), 327–344.CrossRefGoogle Scholar
  38. Shortell, S. M., & Zajac, E. J. (1990). Perceptual and archival measures of miles and snow’s strategic types: A comprehensive assessment of reliability and validity. Academy of Management Journal, 33(4), 817–832.CrossRefGoogle Scholar
  39. Slater, S. F., & Narver, J. C. (1995). Market orientation and the learning organization. Journal of Marketing, 59(3), 63–74.CrossRefGoogle Scholar
  40. Slater, S. F., & Narver, J. C. (2000). Market oriented is more than being customer-led. Strategic Management Journal, 20, 1165–1168.CrossRefGoogle Scholar
  41. Song, X. M., & Montoya-Weiss, M. M. (2001). The effect of perceived technological uncertainty on Japanese new product development. Academy of Management Journal, 44, 61–80.CrossRefGoogle Scholar
  42. Swanson, E. B. (1994). Information systems innovations among organizations/. Management Science, 40(9), 1069–1092.CrossRefGoogle Scholar
  43. Walker, O. C., Jr., Boyd, H. W., Jr., Mullins, J., & Larréché, J.-C. (2003). Marketing strategy: Planning and implementation (4th ed.). Homewood, IL: Irwin/McGraw-Hill.Google Scholar
  44. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5, 171–180.Google Scholar

Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  • Michael Song
    • 1
  • C. Anthony Di Benedetto
    • 2
    Email author
  • Robert W. Nason
    • 3
  1. 1.Management of Technology and InnovationUniversity of MissouriKansas CityUSA
  2. 2.Fox School of Business and ManagementTemple UniversityPhiladelphiaUSA
  3. 3.Department of Marketing and Supply Chain ManagementMichigan State UniversityEast LansingUSA

Personalised recommendations