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This paper examines the effect on product development of project scope: the extent to which a new product is based on unique parts developed in-house. Using data from a larger study of product development in the world auto industry, the paper presents evidence on the impact of scope on lead time and engineering productivity. Studies of the automotive supplier industry suggest that very different structures and relationships exist in Japan, the U.S., and Europe. Yet there has been little study of the impact of these differences on development performance. Further, little is known about the effects of different parts strategies (i.e. unique versus common or carryover parts) on development. The evidence presented here suggests that project scope differs significantly in the industry, even for comparable products. These differences in strategy, in turn, explain an important part of differences in performance. In particular, it appears that a distinctive approach to scope among Japanese firms--high levels of unique parts, intensive supplier involvement in engineering--accounts for a significant fraction of their advantage in lead time and cost. [ABSTRACT FROM AUTHOR]

Recent popular business literature has suggested that there is a significant trend in the United States for firms to decrease the size and increase the focus of manufacturing plants they operate, and that this leads to higher productivity. This paper tests empirically the validity of these claims. We analyze data on virtually the entire population of manufacturing plants in the United States and find that, contrary to the popular business literature, the average size of plants increased during the period 1972-1984. However, consistent with the popular notion, the rate of growth in plant size slowed considerably, and even turned negative for a category of large plants. Plant focus did increase during this period. We then investigate the relationship between productivity and plant characteristics including plant size and plant focus. Overall, our results do not support argument that reduction in plant size results in productivity gains. However, we do find support for this argument in some two-digit SIC industries; also, scale economies in the entire population decreased over the period 1972-1982. We also find only limited support for the popular argument that plant focus increases productivity. [ABSTRACT FROM AUTHOR]

The focus of this paper is on three major questions: (1) what is the theoretical rationale for the strategic group concept?; (2) does strategic group membership have performance implications?; and (3) are strategic groups and membership in strategic groups stable characteristics of industries? A statistical procedure is proposed to longitudinally identify strategic groups. The empirical setting is the U.S. pharmaceutical industry over the period 1963-82. While performance differences are found in terms of market share, profitability differences between groups are not observed. Neither are differences found in terms of risk and risk-adjusted performance. These results are attributed to the existence of performance variation within each strategic group. A dynamic model of competitive repositioning is proposed which helps integrate the findings from the study. [ABSTRACT FROM AUTHOR]

The selection of appropriate product strategies by firms must account for the expected long-run returns from the market a firm contemplates entering, relative to the expected long-run returns from the market it is currently serving. These expected returns must also reflect the capabilities a firm has to implement this strategy and the resulting competitive situations it will face. The mathematical techniques of Markov processes and dynamic programming are used in this paper to develop an analytic framework which will select optimal product strategies for a firm that are consistent with its capabilities, that will meet its competitive situations, and that will maximize expected returns in the long run. This model is applied to a selected set of Michigan machine tool firms. The results indicate the general importance of total firm capabilities and the greater importance of management capability over the supporting capabilities in the selection of optimal product strategies. [ABSTRACT FROM AUTHOR]

There has been considerable emphasis on the strategic importance of process and product innovation in the management literature. What actually constitutes process and product innovation, however, is a confused issue in the current literature. Are product and process innovations separate, or are they on a continuum? The importance of addressing this issue is that research over the past few decades has attributed Japan's increasing competitiveness to its propensity to process innovate. This paper uses a consumer-based approach to distinguish between process and product innovation using a model based on choice theory. An empirical illustration of the model is also presented. The model is then used to emphasize the need to pursue an integrated strategy of process and product innovation in response to consumer wants. The model also helps managers decide on the appropriate mix of process innovation relative to product innovation for R&D resource allocation purposes. [ABSTRACT FROM AUTHOR]

The article discusses general interindustry relatedness. Empirical research on the resource-based view of a business enterprise involves the categorization of resources which have been determined to be responsible for the growth of the corporation and this is difficult as resources may be ambiguous. A general interindustry relatedness index is developed in order to empirically assess the relatedness of resources that characterize the direction of the business' growth, with particular focus being paid to the U.S. manufacturing economy.

The U.S. Securities and Exchange Commission enacted Rule 10b5-1 to deter insiders from trading with private information, yet also protect insiders' preplanned, non-information-based trades from litigation. Despite its requirement that insiders plan trades when not privately informed, the rule appears to enable strategic trade. Participating insiders' sales systematically follow positive and precede negative firm performance, generating abnormal forward-looking returns larger than those earned by nonparticipating colleagues. The observed association does not appear to be explained by market transaction disclosure response, "predictable" reversion following positive performance, or general periodic price declines. There is evidence, however, that a substantive proportion of randomly drawn plan initiations are associated with pending adverse news disclosures. There is also evidence that early sales plan terminations are associated with pending positive performance shifts, reducing the likelihood that insiders' sales execute at low prices. Collectively, this suggests that, on average, trading within the rule does not solely reflect uninformed diversification. [ABSTRACT FROM AUTHOR]

Given the importance of proximity for knowledge spillovers, we examine firms' location choices expecting differences in firms' strategies. Firms will locate to maximize their net spillovers as a function of locations' knowledge activity, their own capabilities, and competitors' anticipated actions. Using new entrants into the United States from 1985 to 1994, we find that firms favor locations with academic innovative activity. Other results highlight differences in firms' location strategies suggesting that firms consider not only gains from inward knowledge spillovers but also the possible cost of outward spillovers. While less technologically advanced firms favor locations with high levels of industrial innovative activity, technologically advanced firms choose only locations with high levels of academic activity and avoid locations with industrial activity to distance themselves from competitors. [ABSTRACT FROM AUTHOR]

The resource-based view (RBV) of the firm suggests that strategic deployment of capabilities allows strategic business units (SBUs) to exploit distinctive competencies and create sustainable competitive advantage. Following the RBV, we propose a new predictive methodology for deriving typologies of SBUs that accommodates heterogeneity among SBUs with respect to their strategic capabilities, how effectively they are employed, and performance. Statistically, we devise a constrained finite-mixture structural-equation procedure that simultaneously accounts for firm capabilities, performance outcomes, and the relationships between them. The procedure allows for a comprehensive modeling and grouping of entities, and simultaneously provides a diagnosis of the sources of heterogeneity via the flexibility of estimating a series of nested models. Managerially, our proposed methodology is grounded in the strategic type and RBV literature and can capture the effects of environmental and industry-specific factors. Using data obtained from 216 SBUs in the United States for illustration, the results show that our derived four mixed-type solution dominates the four-group, Prospectors-Analyzers-Defenders-Reactors classification as well as a number of other nested model solutions in terms of objective statistical fit criteria for this data set, suggesting a more contingency-driven strategic stance adopted by these SBUs. We conclude with a discussion of the theoretical and managerial benefits of an improved methodology for empirically deriving strategic typologies. [ABSTRACT FROM AUTHOR]

Many young firms use strategic actions to attract partners who help them increase the size of their operations quickly. This article examines the use of strategic actions to attract partners and increase system size in the context of franchising. We build on research in entrepreneurship, marketing, organization theory, strategic management, and finance to develop specific hypotheses about the influences of franchisor pricing policy and strategic control decisions on system size. We test these hypotheses empirically, using panel data on a sample of 1,292 business format franchise systems from 152 industries that were established in the United States between 1979 and 1996 and followed from their inception forward in time. Our model accounts for the endogeneity of strategic decisions, controls for unobserved firm and industry factors, and accounts for selection effects due to system failure. The results show that franchisors that grow larger (1) lower royalty rates as the systems age, (2) have low up-front franchise fees that rise over time, (3) own a small proportion of outlets and lower that percentage over time, (4) keep franchisees' initial investment low, and (5) finance their franchisees. [ABSTRACT FROM AUTHOR]

The "resource-based view of the firm" has become an important conceptual framework in strategic management but has been widely criticized for lack of an empirical base. To address this deficit, we utilize a new method for identifying inter firm differences in efficiency within the context of stochastic frontier production functions. Using data on Japanese and U.S. automobile manufacturers, we develop measures of resources and capabilities and test for linkages with firm performance. The results show the influence of manufacturing proficiency and scale economies at the firm and plant level. We apply the parameter estimates to account for Toyota's superior efficiency relative to other producers. [ABSTRACT FROM AUTHOR]

Today, firms employing two distinct survival strategies--(1) innovation and (2) imitation--coexist in the U.S. pharmaceutical industry. History indicates that this intraindustry heterogeneity did not exist prior to 1940. This study empirically investigates the origin of this strategic divergence by focusing on changes in firms' R&D inputs and outputs. It finds that some U.S. pharmaceutical firms responded to the opportunity presented by the discovery of antibiotics in the 1940s by investing more in R&D, while many others did not. Over time, the innovators dominated in developing new drugs, and the gap between innovators and imitators steadily increased. These findings also shed light on 'the genesis of strategic groups,' a phenomenon that is not yet well understood. [ABSTRACT FROM AUTHOR]

For decades, policy makers in both the public and private sectors have been concerned with the question: What is the impact of changes in federal R and D support on company-financed R and D expenditures? This is one of the first empirical studies at a micro level of this topic. The results, which pertain to energy R and D, indicate a complementarity between government-financed and company-financed R and D, on the average, although there is a considerable amount of interfirm variation in this regard. In about one-third of the projects studied, federally-financed R and D projects suggested some further R and D into which the firm invested its own funds. The results of a logit analysis suggest that whether or not a government-financed R and D project results in such a spinoff depends on the extent to which the performing firm contributes to the formulation of the project's goals and strategies. [ABSTRACT FROM AUTHOR]

Over the past decade strategy has become a concept of value to management as it relates the firm to the threats and opportunities of an increasingly turbulent environment. However, empirical tests of the validity of the strategy construct have been limited, as have been the managerial applications of the models used to test the construct. Early research efforts, both analytical and empirical, have shown that quantitative modeling of strategy could be a tool of value in helping top management achieve the goals of the firm [7], [9]. Prior research has been limited to single equation models linking strategy and environment to only one performance goal, profitability. While there is some controversy about it, complex organizations set multiple, and sometimes conflicting goals, creating a need for models that can encompass more than a single performance goal. Moreover, the interactive effects of strategic variables governing the efficiency of daisy operations, suggests that single equation models of strategy cannot capture the complexity of the modern firm. This research explores the use of a simultaneous equation model of corporate strategy as a means of overcoming the multiple performance goal problem, while capturing the complex patterns of the strategic, operating, and environmental variables that influence goal achievement. The difficulties of estimating the model, including the problems of sample heterogeneity so important to this type of work, are identified and discussed, using data and results taker, from the U.S. brewing industry. [ABSTRACT FROM AUTHOR]

The literature on strategy formation is in large part theoretical but not empirical, and the usual definition of "strategy" encourages the notion that strategies, as we recognize them ex post facto, are deliberate plans conceived in advance of the making of specific decisions. By defining a strategy as "a pattern in a stream of decisions", we are able to research strategy formation in a broad descriptive context. Specifically, we can study both strategies that were intended and those that were realized despite intentions. A research program suggested by this definition is outlined, and two of the completed studies are then reviewed--the strategies of Volkswagenwerk from 1934 to 1974 and of the United States government in Vietnam from 1950 to 1973. Some general conclusions suggested by these studies are then presented in terms of three central themes: that strategy formation can fruitfully be viewed as the interplay between a dynamic environment and bureaucratic momentum, with leadership mediating between the two forces; that strategy formation over time appears to follow some important patterns in organizations, notably life cycles and distinct change-continuity cycles within these; and that the study of the interplay between intended and realized strategies may lead us to the heart of this complex organizational process. [ABSTRACT FROM AUTHOR]