策略相似性與廠商績效：正當性與競爭之權衡 - 政大學術集成

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(1)國立政治大學企業管理學系博士論文. 政治大. 策略相似性與廠商績效：正當性與競爭之權衡立. ‧. ‧ 國. 學. Strategic similarity and firm performance: The tension between legitimacy and competition. er. io. sit. y. Nat. n. al 指導教授：于卓民教授 iv Ch. n U e n黃國峯 g c h i 教授. 研究生：龔天鈞撰. 中華民國一百零六年二月.

(2) 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v.

(3) 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v.

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(5) 誌謝. 回首博士班，赫然發現這段時間佔了我已往人生的五分之一。博士班生涯是一個不斷學習成長的階段，也是一種對自我的洗練過程，更是一段在知識未及荒野的探索旅程。這段充實而不平凡的過程常是艱辛、挫折、痛苦而無助的，幸好這一路上有著家人支持、友人相伴、貴人相助及高人指導。在此，僅能以簡短的文辭向他們表達我無盡的感謝。首先，要感謝我的兩位指導老師，于卓民老師及黃國峯老師。在我博士. 政治大領我進入國際企業及策略管理研究的大門；之後更聘用我作為研究助理，透過言立. 班生涯中，最重要的一位貴人只能是于老師。他所教授的國際企業理論研討，引. ‧ 國. 學. 教身傳，教導我如何做研究，並提供許多資源與空間，讓我能充裕地進行研究與培養自身能力。在我需要任何幫助時，不論是各種申請、推薦、或是討論，于老. ‧. 師總是第一時間回覆，並給予必要的協助與鼓勵。此外，他的學養與風範，是我. sit. y. Nat. 作為一位新進學者的最佳典範，讓我有著前進的方向與動力。. n. al. er. io. 黃老師則像是我在學術研究上的前輩，從修習他與于老師及巫立宇老師共. i n U. v. 同開設的策略管理專題研討開始，他就常給予我研究上的建議與想法。後來有幸. Ch. engchi. 與他合作研究時，在各種研究難題上，他都能快速的找到解決方案，讓我從中獲益良多。從黃老師身上，我不僅學習到如何做研究，更開始瞭解如何投稿這門學問，讓我知道什麼才是真正的學者，如何與學界進行對話。再來，我要感謝在美國 Drexel University 任教的 Yu-Chieh Lo 老師。羅老師是我在美國千里馬時的指導教授，非常感謝她看到我尋找國外指導老師的陌生拜訪信時，不僅沒有選擇忽略，還願意在與我一通 skype call 之後，立刻決定幫助我申請千里馬計畫，讓我有機會到美國進行為期一年的訪問研究。在美國期間，更盡心的指導我，補充了我在組織理論上的不足，讓我有機會在博論中進行策略管理與組織理論的整合性研究。每次與她的討論，都讓我受益良多，不僅是在學.

(6) 術上與知識上給我的啟發，更在於她果斷放棄過往成就，勇於赴美攻讀學位，追求夢想的人生故事所帶給我的感動與鼓舞。接著，我要感謝我的口試委員們。譚丹琪老師，在一對一修習她國際企業管理專題研討時，就教導我如何欣賞學術文章；後來不僅幫我寫推薦信，更苦口婆心地告誡我學術之路的艱辛，告訴我必須有所取捨，讓我清楚自己應有的信念，該有的堅持，更瞭解自己該走的路。陳厚銘老師，在口試時總之站在長遠的角度，幫我設想博士論文未來可能如何延伸，並提議口委們可以幫我寫聯名推薦信，讓我感受到他對於新進學者的無私關懷與提攜。黃銘章老師，在各方面. 政治大種注意事項。楊國彬老師，對於我的博論提供了許多卓越的見解及建設性的建立都給我相當大的幫忙，尤其是在找工作上，常常提供我資訊，並打電話提醒我各. ‧ 國. 學. 議，對於論文的完善及理論貢獻的提升有非常大的幫助。林舒柔老師，不僅是提點我論文的缺失，更積極地幫我融入學術社群，引薦我認識知名學者。我何其. ‧. 有幸，能有這幾位學養俱豐又提攜後進的口試委員。. y. Nat. sit. 我還要感謝政大企管系中教導過我的各位老師們。司徒達賢老師的個案. n. al. er. io. 教學及個案討論課程，教導我如何進行聽、說、讀、想的修練，對於教學與研究. i n U. v. 都有很大的幫助。巫立宇老師，不僅教導我理論，也找我當研究助理，並提供. Ch. engchi. 資料與我合作進行研究。在當他研究助理期間，他相當鼓勵我進行思考，發想自己的獨立研究，讓我有很多的發揮空間。同時，他在各方面都無私給予我指導與傳承，對於我在博士班的學習有很大的幫助。彭朱如老師，也曾聘我當研究助理，並時常在組內討論時提供我許多建議。還有其他老師的指導，雖然難以一一致謝，但我都會銘記於心。此外，我還要感謝政大企管系以及科技部，在我博士班期間提供了我許多的機會及資源，讓我能安心的學習。企管系在許多制度上的堅持，對於我的學習成長有很大的幫助，例如：一定要考資格考的堅持，讓有機會我把博一博二囫圇吞棗所唸的理論與方法進行有系統的整理，並真正的吸收、轉化為自身的知識與.

(7) 思考體系。策略國企組的固定討論，老師們每週撥出 2~3 小時，幫助我們發展與完善我們的博士論文，從中更能學習到老師們的思考、對話，也是另一種聽、說、讀、想的訓練。在我博士班期間，申請了科技部出席國際會議的補助，出國千里馬的補助，以及對於撰寫博士論文的補助，很幸運的都順利獲得補助，讓我能有資源進行研究、交流及撰寫博士論文。也要感謝在這段旅程一路陪著我走過的博士班同儕們，包含了同屆的博奕集團，以及跨屆甚至跨系所的吃貨博士們。在我博士班前期，如果沒有博奕同學們跟我一同奮鬥，一起面對難關與挫折，我可能撐不過前二年。在我博士班後期，. 政治大的話，我可能無法維持我的學習動力與研究熱情。其中，當然最要感謝的就是我立. 如果沒有吃貨博士們跟我討論研究，分享研究與新知，找我一起出遊跟享受美食. ‧ 國. 學. 的女友，敘竹，雖然每次跟她討論研究時都會吵架，但卻是我最好的合作者，最能討論研究的夥伴。一路以來，一起做研究，一起參與國際研討會，一同在研討. ‧. 會後自助旅行，一起去美國做研究，大概任何言語都道不盡我對她的感謝。另外，. sit. y. Nat. 也要特別感謝珮如跟惇惠，沒有他們，701 研究室可能都會少了些溫暖。. n. al. er. io. 最後則要感謝我的家人，要長期抗戰一定要有穩定的大後方，感謝我的家. i n U. v. 人，作為我穩定的力量，讓我能夠安心的完成博士學業。尤其是我姐，在爸媽生. Ch. engchi. 病或受傷的時候幫忙照顧，平常的時候也細心關懷家裡，我也難以專心於學業。對於這些家人、友人、貴人與高人，再多的言辭也道不盡我的謝意。完成博士學業後，我也將進入人生的下一階段，希望我能在未來的日子裡，用行動來繼續表達我的感謝，並用表現來讓他們覺得驕傲。. 龔天鈞謹識於台北.

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(9) STRATEGIC SIMILARITY AND FIRM PERFORMANCE: THE TENSION BETWEEN LEGITIMACY AND COMPETITION ABSTRACT Should firms behave differently from or similarly to competitors? Being distinctive helps develop competitive advantages and win competition. Being similar. 政治大 challenges, and punishments. Strategic balance perspective argues that firms should 立 contributes to gaining legitimacy and protecting firms from public suspicions,. take a balanced approach and maintain a moderate level of similarity to obtain better. ‧ 國. 學. performance. Based on this perspective, this dissertation includes two studies to. ‧. address some problems inhibiting the development of this stream of research. In study. y. Nat. 1, we found that 69 of 155 (44.5%) manufacturing industries provide supportive. er. io. sit. evidence. Further analysis suggested that moderate level of similarity is not beneficial to firm performance in industries with low level of competition or with multiple. al. n. v i n strategic groups. In the secondC study, we focused onUcontexts where consist of two hengchi. groups of firms, local firms and foreign firms. We examined the influences of positioning strategies for foreign firms who desperately seek local acceptance and found that foreign firms should be strategically similar to local firms and maintain moderate level of similarity to other foreign firms. This dissertation not only has contributions on consolidation, accumulation, and advancement of knowledge base of strategic balance perspective, but also has several implications for future research.. Keywords: Strategic Balance Perspective; Competition; Legitimacy; Replication; Collective Identity.

(10) 策略相似性與廠商績效：正當性與競爭之權衡摘要廠商的策略該與競爭者相似，或與競爭者不同？相似或相異都有其道理，與競爭者不同有助於發展競爭優勢以贏得市場競爭；然而與產業同儕相似可取得正當性，免於社會各界的質疑、挑戰與懲罰。策略平衡觀點主張廠商應平衡兩者，保持有點像又有點不像最有助於績效。本論文基於此，進行兩個研究試圖探討廠商該採取相似或相異的策略。研究一以大陸 155 個製造產業進行實證，結果發現. 政治大存在的產業中，中等的相似性未必有好績效。研究二則探討當產業中存在兩群廠立僅有 69 個(44.5%)產業支持此觀點，進一步分析發現在低度競爭及多個策略群組. ‧ 國. 學. 商，一群是既有的本地廠商，另一群是新進入市場的外商，對於急需當地社會接受(正當性)的外商而言，應與本地廠商相似，或與其他外商相似，亦或不同於兩. ‧. 群廠商？以大陸製造業外商的實證結果，外商在策略上應與本地廠商相似，並與. sit. y. Nat. 其他外商維持中等程度的相似性，將最有益於績效。本論文不僅有助於策略平衡. n. al. er. io. 觀點知識基礎之鞏固、累積與發展，並提供了此脈理論未來的研究方向。. Ch. i. i n U. v. engch 關鍵字：策略平衡觀點；競爭；正當性；複製；集體認同.

(11) TABLE OF CONTENTS. CHAPTER 1 INTRODUCTION. 1 . CHAPTER 2 STRATEGIC SIMILARITY AND FIRM PERFORMANCE: REPLICATIONS OF DEEPHOUSE (1999). 8 . SECTION 2.1 LITERATURE REVIEW. 11 . SECTION 2.2 METHODS. 12 . SECTION 2.3 RESULTS. 21 . SECTION 2.4 DISCUSSION. 立. 政治大. 32 . APPENDIX A: LIST OF INDUSTRIES. 52 . ‧ 國. 學. CHAPTER 3 THE TENSION BETWEEN LEGITIMACY AND. ‧. 55 . y. 59 . sit. COMPETITION FACED BY FIRMS IN AN EMERGING GROUP:. 71 . EVIDENCE FOR FOREIGN FIRMS IN CHINA. Nat. SECTION 3.1 LITERATURE AND THEORY. n. al. er. io. SECTION 3.2 METHODS SECTION 3.3 RESULTS. Ch. engchi. i n U. v. SECTION 3.4 DISCUSSION AND CONCLUSION. 81 88 . CHAPTER 4 TOWARDS A CONSOLIATED, ACCUMULATED, AND COMPREHENSIVE THEORY OF STRATEGIC BALANCE. 98 103 . REFERENCE. i.

(12) LIST OF TABLES Table 2-1 Descriptive Statistics and Correlations. 37. Table 2-2 Results of Exact Replication Regression Analysis (WLS Estimation) 38 Table 2-3 Results of Improved Replication Regression Analysis (D&K Estimation). 43. Table 2-4 The Comparison of the Patterns of the Strategic Deviation-Performance Relationship Between WLS and D&K Estimations (With and Without Additional Controls). 48. 政治大 Deviation-Performance Relationship between SD3 and ESD (with WLS 立 and D&K Estimations), and between SMEs and Non-SMEs 49. Table 2-5 The Comparison of the Patterns of the Strategic. ‧ 國. 學. Table 2-6 The Comparison of Industry Characteristics between Different Patterns of Strategic sSimilarity-Performance Relationship. 50. ‧. Table 2-7 Descriptive Statistics and Correlations between Industry-Level. Nat. sit. y. Variables and Main Variables. n. al. er. io. Table 3-1 Firm Performance and Strategic Dimensions in Different Groups. i n U. v. Table 3-2 Means, Standard Deviations, and Correlations for All Variablesa. Ch. engchi. 51 93 94. Table 3-3 Results of Driscoll-Kraay Estimation for Relative ROA of Foreign Firms in China. 95. Table 3-4 Firm performance among a matrix of relative position to foreign peers and relative position to local peers Table 3-5 Compared results among subsample analyses. ii. 97 97.

(13) LIST OF FIGURES. Figure 3-1 The moderating effect of group legitimacy on the relationship between strategic deviation from foreign peers and firm performance. 96. Figure 3-2 The moderating effect of group legitimacy on the relationship between strategic deviation from local peers and firm performance. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. iii. i n U. v. 96.

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(15) CHAPTER 1 INTRODUCTION How to gain legitimacy and win competition simultaneously is critical to firms’ prosperity and survival (Baum and Oliver, 1991, Chen and Hambrick, 1995; Oliver, 1997). Institutional theorists have suggested that to be similar to peers is beneficial in terms of obtaining legitimacy and avoiding performance penalties (e.g., DiMaggio and Powell, 1983). Other researchers with strategic views, such as the resource-based view and competitive analysis, have argued that firms should be different in order to develop their unique resources and capabilities and stake out a unique competitive. 政治大 1985; Helfat et al., 2007; Porter, 1996). Given this tension between legitimacy and 立 position (Barney, 1991; Baum and Mezias, 1992; Baum and Singh, 1994; Carroll,. ‧ 國. 學. competition, scholars have proposed a strategic balance perspective and empirically found that firms that position themselves at a medium level of distance relative to. ‧. industrial norms contributes to firm performance the most, compared to positioning at. sit. y. Nat. either a low or high levels of distance (Oerlemans and Meeus, 2005; Robinson and. io. er. McDougall, 2001; Deephouse, 1999; Porac, Thomas, and Baden-Fuller, 1989).. al. How firms strategically manage the competing pressures of gaining legitimacy. n. v i n C hoptimal performance and wining competition and obtain e n g c h i U through proper positioning strategy is not only a core research question of strategic perspective, but also one of the core paradoxes at the interface of strategic management and organization theory (Deephouse, 1999; Durand and Calori, 2006; Miller and Chen, 1996; Zhao, Fisher, Lounsbury, and Miller, 2016). After institutional theory enters the strategy conversation, substantive engagements between these two perspectives have occurred since the late 1990s. For example, Oliver (1997) compared the influences of organizations’ relationships to the competitive environment (also named as task environment) versus institutional environment on firm performance in Canadian 1.

(16) construction industry and found that competitive environment relationship contributed to firms’ profitability and productivity. She also found that institutional relationship was associated significantly with firm performance under highly regulatory stringency ─the complexity and burden of regulatory environments (Fennel and Alexander, 1987). Her study indicated that both institutional and competitive environments affect firm performance, especially when these environments exert intense pressures on firms. Deephouse (1999) firstly introduced the idea of strategic balance approach toward competitive and institutional pressures and found that a moderate level of. 政治大 strategic position of other firms competing in its market at a particular point in time’ 立 strategic similarity─’the extent to which a firm’s strategic position resembles the. ‧ 國. 學. (p. 148) ─of resource allocation maximizes firms’ financial performance compared with low and high levels of strategic similarity in an industry with both intense. ‧. competitive and institutional forces using 159 commercial banks located in the Twin. sit. y. Nat. Cities area.. n. al. er. io. To date, the strategic balance perspective is broadly recognized as the best. i n U. v. method for addressing the pressures from social norms and competition and. Ch. engchi. maximizing firm performance. This perspective recommends that firms should position themselves “as different as legitimately possible” (Deephouse, 1999: 147) and engage in strategies that achieve optimal distinctiveness (Zuckerman, 2016). Current research has highlighted that strategic balance perspective has key implications for a variety of firm outcomes including resource acquisition (Lounsbury and Glynn, 2001), corporate governance (Zajac and Westphal, 1994), firm and stakeholder attention (Ocasio, 1997), reputation (Basdeo et al., 2006), and financial performance (Deephouse, 1999). This perspective is not only advocated by strategic scholars but is also widely applied in other fields, such as organizational image 2.

(17) (Lamertz, Heugens, and Calmet, 2005), technology collaborations (Eapen and Krishnan, 2009), and global talent management (Sidani and Al Ariss, 2014). Due to the importance and growing research of strategic balance perspective, Zhao et al. (2016) reviewed past research related to strategic balance perspective and optimal distinctiveness and encouraged a more integrative effort to broaden the interface between institutional theory and strategic management. They enumerated several problems inhibiting research progress on this stream of research. First, those related studies employ different conceptual terms and operationalizations such as strategic similarity (Deephouse, 1999), competitive conformity (Chen and Hambrick, 1995),. strategic. conformity. 立. 治政大 (Finkelstein and Hambrick,. 1990),. legitimate. distinctiveness (Navis and Glynn, 2011), and strategic categorization (Vergne and. ‧ 國. 學. Wry, 2014), creating ambiguities in the literature. Second, institutional theory and. ‧. strategic management have been somewhat polarized in their focus on either. sit. y. Nat. conformity or differentiation and this perceived theoretical divide between these two. io. er. camps has been too vast to encourage a more integrative effort. Third, scholars embracing strategic balance perspective have assumed that there is a single, relatively. al. n. v i n Ch static convergence point in organizational from which distinctiveness e n gcharacteristics chi U. is judged in a market and firms positioned too far from convergence point risk being ignored or sanctioned (Zuckerman, 1999). However, many markets may bear more convergence points because of multipoint competition (Fuentelsaz and Gómez, 2006), multiple strategic groups (Peteraf and Shanley, 1997), or rugged landscapes (Levinthal, 1997). The aforementioned problems may result in the lack of empirical evidence and mixed findings, undermining the knowledge base of strategic balance perspective. To respond to Zhao et al.’s (2016) call, this dissertation includes two essays to 3.

(18) consolidate, accumulate, and broaden the knowledge base of strategic balance perspective by (at least partially) addressing aforementioned problems. I began by replicating. Deephouse’s. (1999). seminal. work. using. almost. the. same. operationalization, model specification, and analysis1. Reproducibility of results lies at the core of modern science (Bettis, Helfat, and Shaver, 2014). Replication not only helps building a cumulative body of thought that is reliable, but also facilitates exploring phenomenon-based empirical regularity (e.g., learning curve, diversification pattern/performance, conditions favoring joint ventures). In addition, conducting replication in a different or independent context from the original study enhances the. 治政大 in 155 manufacturing benefits of external validity (Rosenthal, 1991). By replication 立 industries in China, the first study examines the replicability, accumulates empirical. ‧ 國. 學. evidence to seek for regular patterns, contributes to the external validity, identifies the. sit. y. Nat. strategic balance perspective.. ‧. boundary conditions, and provides additional knowledge for theory development of. io. er. In the second essay, co-authored with Prof. Yu-Chieh Jade Lo, we focused on foreign firms operating in China. In such contexts, MNCs are new entrants that can be. al. n. v i n C hthe local industryUof the host country, competing seen as the emerging group within engchi against local firms－the established group. Even though different MNCs may come. from different countries, their foreign status and the fact that they often need to fight the liability of foreignness together constitute the common identity basis for such firms. We attempted to explore how foreign firms as members of an emerging group manage legitimacy and competition across and within groups and obtain optimal. 1. Because some variables in Deephouse’s (1999) study are specific to commercial bank industry (e.g.,. strategic similarity and market growth), I have to adjust them to reflect the nature of manufacturing industries. Other variables are constructed in the same manner as those in Deephouse’s (1999) study. The model specification and analysis are strictly followed; see details in the methods section of study 1. 4.

(19) performance through proper positioning strategy. Drawing on recent development of collective identity and organizational legitimacy theories, we have tried to exhibit an integrative progress of organizational theory and strategic management and push the research boundary of strategic balance perspective from a single convergence point to multiple convergence points. Strategic balance perspective is developed in the U.S. and has been examined in various industries in the U.S. and some European countries such as the Netherlands (Oerlemans and Meeus, 2005), while it remains unexplored in the Chinese context. Although using China as a research context contributes to the external validity of. 治政大that the Chinese context is strategic balance perspective, it is necessary to ensure 立 compatible with its theoretical foundations. According to the seminal work of. ‧ 國. 學. Deephouse (1999), these theoretical foundations include (1) firms facing strong. ‧. competition and institutional forces, (2) and firms’ performance subjecting to resource. sit. y. Nat. control and legitimacy.. io. er. China as a transitional economy has some characteristics of institutional and competitive environments different from those developed countries such the U.S. and. al. n. v i n Market Ccompetition U h e n g cish iintensified. European countries.. because state-owned. enterprises (SOEs), private-owned enterprises (POEs), foreign firms, and numerous start-ups jointly compete in product market (Peng, 2003). The intensified competition continuously exerts strong pressures and threads on firms’ prosperity and survival. Second, financial infrastructure in China is underdeveloped and weak financial market constrains POEs’ access to capital and resources. The imperfect financial market and difficulty of resource acquisition trigger severe resource competition among POEs. Third, the role of government in business is influential and active (Tjosvold, Peng, Chen, and Su, 2008). Industries polices announced by government 5.

(20) are popular among all industries. Most firms are facing highly uncertain and dynamic environment, whereas certain firms are protected from such uncertainty and dynamism by these polices. These polices diversify the degrees of competitive and institutional forces not only among industries but among different types of ownership of firms. Fourth, SOEs which often confront lower degrees of competitive and institutional forces are larger and more dominant than POEs in major industries. Fifth, for POEs, political ties (i.e. the connections with government agencies) are important, which can help firms to secure favorable regulatory conditions (Agrawal and Knoeber, 2001) and access to resources such as bank loans (Khwaja and Mian, 2005; Faccio,. 治政大 1990; Fisman, 2001; 2006), and ultimately increase the value of firms (Roberts, 立. Ramalho, 2007) and improve firm performance (Johnson and Mitton, 2003). The. ‧ 國. 學. condition of regulatory stringency and the importance of political ties are reflection of. ‧. highly coercive pressures compelling isomorphic processes.. sit. y. Nat. Based on the aforementioned characteristics, the Chinese context indeed imposes. io. er. strong competitive and institutional pressures on firms and firms’ performance depends on resource control and legitimacy, fitting the theoretical foundations of. al. n. v i n C h some firms which strategic balance perspective. However, e n g c h i U are greatly interdependent. with governments such as SOEs face relatively weak competition and regulatory requirements due to the protection of policies and access to resources. These firms are often lack of operating efficiency and pursue political agenda (e.g., maintaining social welfare and employment) rather than financial returns. Strategic balance is not an issue for these firms but remains critical for other firms such as POEs. China is an ideal context to examine strategic balance perspective, if the potential bias caused by SOEs is eliminated. Fortunately, other firms including POEs and foreign firms generally do not consider SOEs as competitors because the goals and strategies of 6.

(21) SOEs are highly distinguished from them. In addition, the numbers of SOEs has been declined to less than 15 percent of all firms in 2007. It means that the potential bias can be removed by deleting SOEs from the sample firms examined.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. 7. i n U. v.

(22) CHAPTER. 2. STRATEGIC. SIMILARITY. AND. FIRM. PERFORMANCE: REPLICATIONS OF DEEPHOUSE (1999) Executives have frequently asked: ‘Should I behave differently from others or should I behave in the same way as peers?’ Over the past few decades, researchers in strategic management and organizational theory have attempted to answer this question by examining the relationship between strategic similarity and firm performance (e.g., Baum and Mezias, 1992; Baum and Singh, 1994; Norman, Artz, and Martinez, 2007).Institutional theory argues that being similar to obtain legitimacy. 政治大 develop competitive advantage 立 (Baum and Mezias, 1992; Baum and Sign, 1994; (DiMaggio and Powell, 1983), whereas strategic view suggests to be different to. ‧ 國. 學. Carroll, 1985). Deephouse (1999) integrated these two conflicting perspectives and developed the strategic balance perspective. He proposed and empirically confirmed. ‧. that firms can actively balance the two types of pressure (i.e., social norms and. sit. n. al. er. io. strategic similarity.. y. Nat. competition) and generate high performance by maintaining a moderate degree of. v. Although the strategic balance perspective has been broadly accepted by. Ch. engchi. i n U. researchers for over ten years, a lack of follow-up empirical evidence and the inconsistent results found in several studies have left the knowledge base in this stream of research on shaky ground (Hubbard, Vetter, and Little, 1998). Some follow-up studies supported Deephouse’s perspective whereas others did not. On the one hand, studies supporting the strategic balance perspective found that there is an inversely U-shaped relationship between the deviation of firms’ innovation strategies and their performance (Oerlemans and Meeus, 2005) and that firms with a moderate, rather than markedly higher or lower, degree of product differentiation have higher profitability (Robinson and McDougall, 2001). On the other hand, some studies 8.

(23) argued that balancing the two pressures does not necessarily create better performance. One study found that a differentiation strategy has a positive effect and a confirmatory strategy has no effect on firm performance (Kale and Arditi, 2003); another study found a U-shaped relationship between the distinctive positioning of firms and their performance (Cennamo and Santalo, 2013). These few and mixed empirical evidences not only blur the validity of strategic balance perspective, but also evoke the necessity of systematic replications. Replication studies play several important roles in scientific research and contribute to strategic balance perspective. First, replications serve as a guard against. 治政大into the literature (Hubbard the uncritical assimilation of erroneous empirical results 立. and Vetter, 1996). Because journal editors and reviewers often favor the publications. ‧ 國. 學. of statistically significant (p<0.05) results, this, in turn, encourages researchers to. ‧. produce such results. Taken to the extreme, journals may be filled with the 5 percent. sit. y. Nat. of studies that are Type I errors (erroneous rejections of the null hypothesis), while. io. er. the remaining 95 percent with insignificant results gather dust in the file drawers of researchers which Rosenthal (1979) named as the ‘file drawer problem’. Second,. al. n. v i n C h and falsification replications contribute to verification e n g c h i U of the theory (Singh, et al., 2003). When a replication supports the findings of the original study, it provides. quantum leaps in credibility. If numerous replications provide repeatedly confirmatory evidences, it is highly likely that the theory has hit upon some real structure in the social world (Tsang and Kwan, 1999). Third, replications in different contexts such as country, time, or industry help to assess the generalizability and determining the scope and limits of original findings (Hubbard and Vetter, 1996; 1998). Fourth, replication studies advance a cumulative body of empirically supported research (Betties, Helfat, and Shaver, 2016). Because replication study builds on the 9.

(24) original study, they are not only repeatable but also cumulative. When each replication study provides additional evidence and knowledge, the accumulation of knowledge will facilitate theory development. Tsang and Kwan (1999) take vertical integration in transaction cost economics as an example and demonstrate the knowledge advance progress from offering evidence for the transactional determinants of vertical integration, examining the effects of asset specificity on make-or-buy decision, to confirming that specific human, rather than physical, assets play a more influential role in vertical integration decisions. Fifth, cumulative information obtained by multiple replications provides implications for future. 治政大 regularity (Bettis et al., research such as exploring phenomenon-based empirical 立 2016).. ‧ 國. 學. Regarding strategic balance perspective literature, some follow-up studies are not. ‧. consistent, even contrary, to Deephouse’s findings and have raised concerns of its. sit. y. Nat. internal validity and generalizability (i.e. external validity). However, the scarcity of. io. er. replications disallows us to reach a accumulative body of strategic balance perspective, which, in turn, constrains theory verification or falsification and. al. n. v i n determination of the scope andC limits, that accumulated empirical studies are h e Given ngchi U. needed to consolidate and develop knowledge, examining the replicability of Deephouse’s study in multiple contexts is not only essential to strengthen the strategic balance perspective, but also is beneficial to explore the boundary conditions and contextual factors potentially affecting the validation of strategic balance perspective. Furthermore, scholars in strategy and management are attaching importance to the reproducibility of empirical results and replication studies. Articles emphasizing the necessity of replication study are published in top journals such as Academy of Management Review (Tsang and Kwan, 1999), Strategic Management Journal 10.

(25) (Hubbard et al., 1998), and Journal of Management (Singh, et al., 2003). Recently, Strategic Management Journal has published a special issue for replications in 2016. The Academy of Management had a specific session for replication studies in the annual meeting in 2015. Since the replicability is substantially important and the empirical results of strategic balance perspective is not solid, I replicate the seminal study of Deephouse (1999) using panel data for 57,644 firms from 2004 to 2007 in China and test the replicability of his findings across 155 industries.. SECTION 2.1 LITERATURE REVIEW. 政治大 Deephouse (1999) proposed that a firm’s decision on whether to be similar to or 立. ‧ 國. 學. different from competitors presents a great challenge. Being too similar to or too different from competitors both potentially erodes a firm’s performance, but a. ‧. moderate degree of similarity may improve performance. On the one hand, firms with. sit. y. Nat. strategies similar to competitors’ face intense competition for resources and then. io. er. experience diminished performance and an increased possibility of failure (Baum and. al. Mezias, 1992; Baum and Singh, 1994; Carroll, 1985). Adopting differentiating. n. v i n C h competitive positions strategies allows them to enhance their e n g c h i U (D’Aveni, 1994) and can. become a source of competitive advantage (Miller and Eden, 2006; Grimm and Smith, 1997). On the other hand, firms whose behavior departs from a range of normal strategies face legitimacy challenges that hinder their ability to acquire resources and thus hurt their performance (DiMaggio and Powell, 1983). Adopting conforming strategies might therefore reduce the relative uncertainty of the association between a specific action and its possible consequences (DiMaggio and Powell, 1983) and ensure a firm’s access to the resources necessary for survival and prosperity (Meyer and Rowan, 1977). 11.

(26) Deephouse used two thought experiments to demonstrate why a moderate degree of strategic similarity increases performance under strong competitive and institutional forces (Deephouse, 1999, p.153–155). The first thought experiment applies the differentiation and conformity propositions to three types of firms with different level of strategic similarity: high, moderate, and low. The second applies the two propositions to a firm as its strategic similarity decreases from high to low. The results of these experiments revealed that moderate strategic similarity leads firms not only to avoid legitimacy challenges but also to reduce competition. Firms can achieve maximum performance when the gains from reduced competition are equal to the. 治政 costs of legitimacy challenges. Conversely, a higher大 or lower degree of strategic 立 similarity will erode performance. Thus, the replication of the strategic balance. ‧ 國. 學. proposition is presented as follows:. sit. y. Nat. performance.. ‧. Replication Proposition: A moderate degree of strategic similarity will increase. io. Replication procedures. er. SECTION 2.2 METHODS. al. n. v i n C h (1999) study inUdetail, I adhered to the core To compare with Deephouse’s engchi. procedures of the original study (Tsang and Kwan, 1999). Our replication procedures were conducted as follows. First, I adopted the same measures, model specification, and analysis, but used different measures for strategic similarity, market share, and market growth. As these three variables were specific to commercial banking industry used in the Deephouse’s study, I had to adjust the measures to fit manufacturing industries. I used sales instead of deposits to calculate market share and market growth. Regarding strategic similarity, I kept the original concept of Deephouse’s calculation but adopted the measurement developed by Finkelstein and Hambrick 12.

(27) (1990). These two measures of strategic similarity both use multiple resource allocation strategies and the same calculation method, but Deephouse’s measure is specific to the banking industry whereas Finkelstein and Hambrick’s measure is a general measure for all industries. Second, I used the same method as Deephouse (i.e., weighted least squares estimation) did and adjusted the regression coefficients to make the results of the two studies comparable. I divided these regression coefficients by 100 because Deephouse multiplied relative return on assets (ROA) by 100 to simplify presentation (Deephouse, 1999, p.157). Then, I further divided the regression coefficients by the. 治政大the difference between our standard deviation (0.007) of relative ROA due to 立 measure of relative ROA and his (for details, see the section on dependent variables).. ‧ 國. 學. Third, I conducted an improved analysis, the Driscoll-Kraay estimation, to obviate the. ‧. potential bias (i.e., cross-sectional or spatial dependence) and then compared the. sit. y. Nat. results with those from the second step. Fourth, I conducted three robustness tests. io. er. including (1) incorporating three potential common factors, (2) reconstructing two modifications of strategic similarity, (3) and adding ten industry-level variables to test. n. al. the robustness of the. i n C results. Fifth, implemented an h e nI g chi U. v. exploratory analysis by. examining the difference of industry-level variables such as industry concentration across industries with different patterns of strategic similarity-performance relationship using oneway ANOVA. Sixth, I executed an additional analysis to explore the influences of firms’ capabilities against environmental forces on strategic balance perspective by examining strategic similarity-performance relationship in two subgroup samples, small firms and large firms. Data and sample Whereas Deephouse (1999) focused on competition between U.S. commercial 13.

(28) banks in a single market from 1985 to 1992, I focused on 159 manufacturing industries (identified by three-digit Standard Industrial Classification (SIC) codes) by extracting a panel dataset from the Annual Industrial Survey Database (2003 to 2007) of the Chinese National Bureau of Statistics (CNBS). Using CNBS data to conduct replications of the Deephouse’s study simultaneously has two advantages. First, CNBS has the most comprehensive information on manufacturing firms in China (Tian, 2007) and has adequate representation of the target population. Manufacturing firms with sales above RMB 5 million are required to submit their basic information and financial reports to CNBS annually. Firms in CNBS account for. 治政大(of that 90%, state-owned nearly 90 percent of total industrial sales in China 立. enterprises account for 22% while the others account for 68%). Numerous replications. ‧ 國. 學. in diverse circumstances are beneficial for verifying and falsifying theories (Tsang. ‧. and Kwan, 1999), fitting the principle of replicability, and enlarging the scope of. sit. y. Nat. theories (Hubbard, et al., 1998). CNBS includes firms across 159 industries, allowing. io. er. us to simultaneously investigate the strategic similarity–performance relationship across nearly all manufacturing industries. Second, CNBS differs from the original. al. n. v i n C hsuch as country, Uindustry, and time frame. The study’s dataset in various aspects engchi. benefits of external validity are enhanced by conducting a replication study in a different or independent context from the original study (Rosenthal, 1991). Although CNBS provided unique dataset for numerous replications in diverse circumstances, the difference of competition scope between commercial banks and manufacturing industries might affect the definition of competitors and peers. Commercial banks serve local customers and pursue localized competition, whereas manufacturing firms serve national clients and compete nationwide. Due to the property of localized competition, Deephouse defined competitors as local 14.

(29) commercial banks in Twin Cities area in the U.S. According to the feature of nationwide competition, I defined competitors as manufacturing firms in a given industry in China in order to fit empirical context. For our samples, I selected firms that operated in the same industry from 2003 to 2007. Based on the above criteria, our original samples included a total of 107,900 firms from 159 industries and covered 31 provinces or province-equivalent municipal cities in China. I set 2003 as the starting point of our study because CNBS adjusted the SIC coding system in 2002. The adjustment made it extremely difficult to identify whether a firm was in the same industry between 2002 and 2003. Because firms. 治政大in the same industry for a perceive each other as competitors when they operate 立. period of time, identifying a firm’s presence in the same industry is a critical criterion. ‧ 國. 學. for our sample. Therefore, I excluded the data before 2003. Additionally, I included. ‧. the data up to 2007 because most firms faced the global financial crisis in 2008. Firms. sit. y. Nat. chose to reduce costs against decreasing demand during the crisis period, which. io. er. implies that most firms during the financial crisis adopted similar strategies, intending to respond to environmental shock rather than conform to industrial norms. al. n. v i n C ahresult, the relationship (Lieberman and Asaba, 2006). As e n g c h i U between strategic deviation. and firm performance may be distorted during this period and thus I tested our hypotheses for the data between 2003 and 2007. To obtain a more valid sample and rule out outliers, I followed Cai and Liu’s (2009) procedures and deleted the following observations from the original sample population: (1) firms missing any key indicators such as profits, total assets, number of employees, or sales; (2) firms with fewer than eight employees (these firms lack reliable accounting systems); (3) firms for which one of the following was true: (a) total sales were lower than sales of the primary business, (b) total assets were smaller 15.

(30) than net fixed assets, (c) accumulated depreciation was lower than current depreciation, (d) net fixed assets were smaller than or equal to zero, or (e) total costs were smaller than sales and general administrative expenses (SGA expenses); and (4) firms with values of key variables either above the 99.9 percentile or below the 0.1 percentile) Finally, I excluded state-owned enterprises (SOEs) from our sample because SOEs’ strategies and goals are different from those of firms in the private sector (Ju and Zhao, 2009; Tan, 2002). After the aforementioned procedure, I obtained four years of panel data with 226,946 observations from 57,644 firms across 159 industries. Measures. 立. Dependent variables. 政治大. ‧ 國. 學. To be consistent with the measure used by Deephouse, I adopted the relative. ‧. ROA as a performance indicator. The relative ROA indicates how well a firm. sit. y. Nat. performs relative to its competitors. Whereas Deephouse computed the relative ROA. io. er. for each year by mean centering a bank’s ROA in a given year, I further divided it by its standard deviation; that is, standardized ROA, to compare across different. n. al. industries. Strategic deviation. Ch. engchi. i n U. v. I followed Deephouse’s method to measure strategic similarity using strategic deviation. The strategic deviation was the degree of deviation of a firm’s strategy from the average strategic profile of its competitors in the same industry. I used six strategic indicators for manufacturing industries (following Finkelstein and Hambrick, 1990) to create a composite measure of strategic deviation. The six strategic indicators were: (1) advertising intensity (advertising expenses/sales), (2) research and development intensity (R&D expenses/sales), (3) 16.

(31) capital intensity (fixed assets/total sales), (4) non-production overheads (SGA expenses/sales), (5) inventory levels (inventories/sales), and (6) financial leverage (debt/total assets). The following equation illustrates the calculation for the strategic deviation for firm j in industry i: Strategic Deviation where Vaij is the value of strategic dimension a for firm j in industry i, ABS is the absolute value function, M(Vai) is the mean of strategic dimension a in industry i, and SD(Vai) is its standard deviation.. 治政大the operationalization must To capture the conception of strategic similarity, 立. meet the underlying assumptions of strategic balance perspective which includes (1). ‧ 國. 學. managers can select and implement strategies that they think will lead to higher. ‧. performance; (2) firms can resist or attempt to influence CP and IP; (3) other. y. Nat. determinants of competition, legitimacy and performance are assumed to be constant. er. io. sit. (Deephouse, 1999, p.149). Accordingly, I chose these six strategic dimensions based on the following criteria. First, top managers can control the allocation of resources to. al. n. v i n C h FinkelsteinUand Hambrick (1990) employed each one for increasing firm performance. engchi. these six strategic dimensions to examine how top management team tenure affects firms’ strategies (i.e. strategic persistence and strategic conformity). They did find top managers’ tenure increases both strategic persistence and strategic conformity,. indicating that tenured top managers tend to follow industrial norm strategies and the firm’s past strategies. It suggests that top managers can decide the resources allocation on these six strategic dimensions. Second, stakeholders impose expectations and norms on firms in these six strategic dimensions and conforming helps firms to gain legitimacy (advertising intensity, capital intensity, and financial leverage: Miller, Le 17.

(32) Breton-Miller, and Lester, 2013; R&D intensity: Chen and Miller, 2007; non-production overheads, and inventory levels: Buchko, 2011). For example, Buchko (2011) found U.S. automobile suppliers tend to behave similarly on several strategic dimensions such as inventory levels and non-production overheads due to institutional isomorphic forces. Third, outdoing competitors on these dimensions ameliorates firms’ positions in the market (by improving their reputation, for example) so that they can better withstand CP (advertising intensity: Russo and Fouts, 1997; R&D intensity: Baysinger and Hoskisson, 1989; capital intensity: Koch and McGrath, 1996; inventory levels: Slone, 2004; financial leverage: Vicente‐Lorente, 2001;. 政治大 non-production overheads: Kotha, Rajgopal, and Rindova, 2001). For instance, Miller, 立. ‧ 國. 學. Le Breton-Miller, and Lester (2013) showed that family firms could employ several of. these strategic dimensions including R&D intensity, advertising intensity, capital. ‧. intensity, and financial leverage not only to gain legitimacy by conforming. sit. y. Nat. stakeholders’ expectation, but also to obtain competitive advantage by deviation from. io. er. industry norms due to pursuit of idiosyncratic family agenda. Additionally, these. al. dimensions are complementary and each focuses on a particular aspect of a firm’s. n. v i n C h visible to external strategic profile. They are also most e n g c h i U stakeholders, so that firms usually compete and compare with each other on these dimensions. Thus, these six strategic dimensions are especially relevant to strategic balance perspective. As R&D expenses were not included in the CNBS database until 2005, I created strategic deviation 1 (SD1) by summing all six indicators and created strategic deviation 2 (SD2) by excluding R&D intensity (i.e., summing the other five indicators). The correlation coefficient of SD1 and SD2 was extremely high (r = 0.92). I used SD1 and SD2 to conduct the analyses and the results were similar. For simplicity, I only presented the results of SD2. 18.

(33) Control variables. In accordance with Deephouse’s study, I used one-year lagged dependent variables and included market share, total expense ratio, and market growth as control variables. The lagged dependent variables were included to control for omitted variables. Market share, reflecting firms’ competitive position and operating efficiency, was measured by the ratio of a firm’s sales to total sales in the relevant subsector. The total expense ratio, reflecting cost reduction, was measured by the ratio of total expenses to total sales. Market growth, reflecting changes in the resource environment that may affect competition and performance, was operationalized by the. 治政大 annual percentage change in total sales in the relevant subsector. 立. Recent studies have suggested that firm age, firm size, and organizational slack. ‧ 國. 學. should also be controlled when investigating the relationship between a firm’s. ‧. conduct and performance (Miller et al., 2007; Miller and Chen, 1996). Firm age was. sit. y. Nat. calculated by the focal year minus the funding year of the firm. Firm size was. io. er. measured as the natural logarithm of employees. Financial slack, a specific class of organizational slack flexibly redirecting a firm’s strategic decisions (Natividad, 2013),. al. n. v i n C h(i.e., the difference was measured by working capital e n g c h i U between current assets and current liabilities).. Replication Hypothesis Given the measures for strategic similarity and firm performance, the following hypothesis was tested: Replication Hypothesis: The relationship between strategic deviation and relative ROA is inversely U-shaped. Analysis I followed the estimation procedure used by Deephouse and adopted the 19.

(34) weighted least squares (WLS) estimation to test the replication hypothesis for each industry. Autocorrelation and heteroscedasticity is a potential concern when using lagged dependent variables and panel data (Deephouse, 1999). Deephouse used Durbin’s h-statistics to test for autocorrelation (and found it was not a problem) and chose WLS in the case of heteroscedasticity. I conducted the Wooldridge test (Wooldridge, 2002), to test first-order autocorrelation and the results revealed that there was an autocorrelation problem in the model (F = 6899, p < 0.001). I used the Sargan test and Modified Wald test (Greene, 2008) to test for heteroscedasticity, and found that heteroscedasticity was a problem in our panel data.. 治政 In addition, cross-sectional or spatial dependence大 neglected by Deephouse may 立. lead to invalid statistical inferences (Driscoll and Kraay, 1998). Given that social. ‧ 國. 學. norms and psychological behavior patterns, such as social learning and herd behavior,. ‧. typically enter panel regressions as unobservable common factors, complex forms of. sit. y. Nat. spatial and temporal dependence may arise even under randomly sampled conditions. io. er. (Hoechle, 2007). In particular, the independent variable, strategic deviation, is determined not only by the strategic position of the focal firm but also the strategic. al. n. v i n positions of the other firms inC thehsame industry. Social e n g c h i U learning or herd behavior across firms may affect the strategic position of the focal firm and the strategies of. other firms in the same industry. This implies substantial spatial correlations in the disturbances of our panel models and Deephouse’s (1999). I therefore conducted a Pesaran cross-sectional dependence test (Hoechle, 2007) and found significant cross-sectional. dependence. (p<0.001).. In. the. presence. of. autocorrelation,. heteroscedasticity, and cross-sectional dependence, the feasible generalized least squares (FGLS) estimation and the Driscoll-Kraay estimation (a special case of the fixed effect model) were both reliable. However, I chose the Driscoll-Kraay 20.

(35) estimation for two reasons. First, I performed the standardized Hausman test (Wooldridge, 2002) and the result (p<0.001) suggested that the model should be estimated using a fixed effects (within) regression. Second, FGLS is typically inappropriate for large-scale microeconometric panels (Hoechle, 2007). I used STATA statistical software for all aforementioned analyses.. SECTION 2.3 RESULTS Table 2-1 reports the means, standard deviations and correlations among. 政治大 estimates and Driscoll-Kraay estimates for the aggregated sample and for 155 立. variables. Table 2-2 and Table 2-3 present the results from our replication study, WLS. ‧ 國. ‧. ------------------------------------. ------------------------------------. io. y. sit. Nat. Insert Table 2-1 about here. er. (1999).. 學. industries2 respectively, in addition to the original results reported in Deephouse. n. a-----------------------------------iv l C n U InserthTable e n2-2 h i here g cabout ----------------------------------------------------------------------Insert Table 2-3 about here ------------------------------------. 2. Four of the one hundred and fifty night industries had fewer than forty firms, causing no estimates. I. therefore did not conduct individual analyses for these four industries, so the results from only one hundred and fifty five industries are presented in Table 2-2. However, all one hundred and fifty night industries were included in the aggregation analysis. 21.

(36) WLS estimation (exact replication) The results of the WLS estimation are presented in Table 2-2. It depends on whether the squared term of strategic deviation is negative and significant to exam the replicative hypothesis due to I standardized all variables in the analyses.. In. analyzing our aggregated sample, the coefficient for the squared term of strategic deviation was negative and significant (β = -0.003, p < 0.001). In the individual analyses for each industry, the curvilinear relationship between strategic deviation and firm performance was significantly negative for only 34 out of 155 industries (21.9%). The coefficients of squared strategic deviation for the other 121 industries showed no. 治政大 support for the strategic significant (78.1%). The results merely provided slight 立. balance perspective and the replication hypothesis. Although the relationships were. ‧ 國. 學. not significant in 121 industries, most of them were in line with the hypothesis.. ‧. I then conducted a more rigorous test, the uTest, which was developed by Lind. sit. y. Nat. and Mehlum (2010), to test for the presence of an inverted U shape (or U shape) by. io. er. assessing whether the slope is positive at low values and negative at high values, and checking that the estimated turning point is within the data range. I found that the. al. n. v i n C h in 41 of theU155 industries inverted U relationship was significant engchi. 3. (26.5%). The. results also showed that the strategic deviation-performance relationship was inverted-U shape but not significant for 94 industries and that the relationship was insignificantly U-shape for 15 industries. For the remaining 5 industries, the turning points were out of data range, so that it is unable to conduct uTest. 3. The number of industries (41/155) presenting significantly inverted-U relationship between strategic. deviation and relative ROA is larger than the number of industries (34/155) where the coefficients of square strategic deviation are significantly negative. It is because the uTest employs one-tailed test by default but I conducted WLS estimation with two-tailed test. Since uTest is an advanced analysis for testing U or inverted-U relationship, I identified the strategic deviation-performance relationship firstly based on the results of uTest and secondly depending on the results of WLS analyses. 22.

(37) According to the results of uTest and the coefficients of both first order and second order term of strategic deviation from WLS analyses, I identified the strategic deviation-performance relationship for each industry4, also presenting in Table 2-2. In addition to 41 industries presenting inverted-U shaped relationship, five industries showed significantly. positive and linear relationship between strategic deviation and. relative ROA while 109 industries displayed no significant relationship. Overall, the results of our exact replication study barely support the replication hypothesis and Deephouse’s strategic balance perspective. Driscoll-Kraay estimation (improved replication). 治政 The results of the Driscoll-Kraay estimation are大 presented in Table 2-3. In the 立. analysis of the aggregated sample, the coefficient for the squared term of the strategic. ‧ 國. 學. deviation was negative and significant (β = -0.002, p < 0.001). In the analysis for each. ‧. industry, the curvilinear relationship between strategic deviation and firm. sit. y. Nat. performance was significantly negative for 79 out of 155 industries (51%). The. io. er. curvilinear relationship was not significant for 62 industries (40%) while it was positive and significant for the remaining 14 industries (9%), which is opposite to. n. al. Deephouse’s results.. Ch. engchi. i n U. v. Based on uTests, I found that the inversely U-shaped relationship was significant in 69 out of 155 industries (44.5%), whereas the significantly U-shaped relationship presented in 8 industries (5.2%). The results also showed that the strategic 4 . The procedure of identification included three steps. Firstly, I identified whether the strategic. deviation-performance relationship is U or inverted-U shaped based on the results of uTest. Secondly, I identified whether the relationship is increasing/decreasing concave-up/down or positively/negatively linear based on the coefficients of both the first order and second order term of strategic deviation from WLS analyses. For example, I identified the relationship as increasing concave-down if the squared strategic deviation was significantly negative and the strategic deviation was positive (even if it is not significant). I identified the relationship as positively/negatively linear if the squared strategic deviation was not significant and the strategic deviation was significantly positive/negative. 23.

(38) deviation-performance relationship was inverted-U shape but not significant for 43 industries and that the relationship was insignificantly U-shape for 17 industries. For the remaining 18 industries, the turning points were out of data range, so that it is unable to conduct uTest. The strategic deviation-performance relationship I identified also presents in Table 2-3. In addition to 69 industries presenting inverted-U shaped relationship and 8 industries presenting U shaped relationship, eight industries showed significantly positive and linear relationship and eleven industries showed significantly negative and linear relationship between strategic deviation and relative ROA while 45. 治政大there were seven industries industries displayed no significant relationship. Besides, 立 presenting increasing concave-down relationship, five industries presenting. ‧ 國. 學. decreasing concave-down relationship, one industry presenting increasing concave-up. ‧. relationship, and one industry presenting decreasing concave-up relationship. The. sit. y. Nat. results of the uTests partially support the replication hypothesis, suggesting that. io. er. moderate strategic similarity enhance firm performance in almost half of the manufacturing industries. It also demonstrated that divergent patterns of the strategic. al. n. v i n C hpresented across industries. deviation-performance relationship engchi U. Comparing the results of the WLS estimations to the Driscoll-Kraay estimations,. the number of industries presenting significantly negative coefficients of the squared strategic deviation increased from 34 to 79 and the number of industries presenting significantly positive coefficients of the squared strategic deviation increased from 0 to 14, whereas the number of industries with insignificant coefficients of the squared strategic deviation decreased from 121 to 62. Regarding the patterns of the strategic deviation-performance relationship. (please see to comparison in Table 2-4), the. numbers of industries presenting inverted-U shape increased from 41 to 69, those 24.

(39) presenting U shape increased from 0 to 8, those presenting positively linear increased from 5 to 8, those presenting negatively linear increased from 0 to 11, those presenting increasing concave-down shape increased from 0 to 7, those presenting decreasing concave-down shape increased from 0 to 5, and those presenting decreasing and increasing concave-up shape both increased from 0 to 1. -----------------------------------Insert Table 2-4 about here -----------------------------------The comparison revealed that the WLS estimation may underestimate the. 治政大differences between the two influence of strategic deviation on firm performance. The 立. estimations are rooted in either an unobserved individual effect or spatial dependence.. ‧ 國. 學. This suggests that the fixed effect model with spatial dependence correction is more. sit. y. Nat. 2007).. ‧. appropriate for examining the strategic balance perspective (Greene, 2008; Hoechle,. io. er. By conducting a more rigorous test for an inverted U relationship, the uTest, with an improved model, the Driscoll-Kraay estimation, our replication study showed that. al. n. v i n C hwas supported in U69 out of 155 industries. This the strategic balance perspective engchi indicates that Deephouse’s study is found reliable, replicable in only limited contexts. (less than half). The results also reveal that the patterns of the strategic deviation-performance relationship may vary depending on the industrial contexts. Sensitivity analysis To test the robustness of the results, I conducted several robust tests. First, I incorporated three potential common factors, firm age, firm size, and financial slack, as additional control variables. The comparison between with and without additional controls is shown in Table 2-4. For WLS estimation, it only led one industry with 25.

(40) positively linear relationship turned into no relationship. Regarding D&K estimation, it increased the number of industries with no relationship from 45 to 48, the number of industries with positively linear from 8 to 11, the number of industries with U relationship from 8 to 9, the number of industries with increasing concave-down from 7 to 10, whereas it decreased the number of industries with negatively linear from 11 to 8, the number of industries with inverted-U relationship from 69 to 68, the number of industries with decreasing concave-down from 5 to 1, and the number of industry both with increasing concave-up and decreasing concave-up from 1 to 0. Overall, the results only slightly changed after adding in the three additional controls, confirming. 治政 the robustness of the results. Additionally, I found 大 that firm age, firm size, and 立 financial slack were significantly related to both strategic deviation and performance.. ‧ 國. 學. Given the potential bias of firm age, firm size, and financial slack, it is necessary to. ‧. control for these variables when examining strategic balance perspective.. sit. y. Nat. Second, I employed two modified measures of strategic similarity to test the. io. er. sensitivity. One modification of strategic deviation was reconstructed by excluding inventory level and financial leverage as SD3 using absolute deviation method. al. n. v i n C hvalue of inventoryUlevel and financial leverage for because there might be an optimal engchi firm performance. For example, logistics and supply chain discipline suggests the. lower the inventory costs, the better the firm performance. Therefore, stakeholders may not expect firms to behave the same as industry average on these two dimensions. If this logic is true, the results representing no relationship between strategic deviation and firm performance will turn into inverted-U relationship. The other modification was recalculated strategic similarity by Euclidean distance as ESD using the same strategic dimensions. Although Euclidean distance and absolute deviation both were used to measure strategic similarity, these two measures represented different mental 26.

(41) model of stakeholders to evaluate firms’ strategic behaviors. Employing Euclidean distance as measurement suggests that stakeholders evaluate firms’ action with a multi-dimensional space model. Whereas, using absolute deviation indicates that stakeholders evaluate firms’ strategic behaviors dimension by dimension and each dimension weighs equally. However, in the literature there is no discussion about which method better fits stakeholders’ mental model. If Euclidean distance is better (than absolute deviation), it is expected that Euclidean distance has higher explanatory power. The correlation coefficients between SD2 and SD3 and ESD are 0.82 and 0.97, respectively.. 治政大with both WLS and D&K The comparison of SD3 and ESD modifications 立. estimations is presented in Table 2-5. Regarding the results of SD3 modification, the. ‧ 國. 學. number of industries with no relationship for both WLS estimation and D&K. ‧. estimation was increased (128 and 66, respectively), and the number of industries. sit. y. Nat. with inverted-U relationship was decreased (WLS estimation: 19; D&K estimation:. io. er. 32). These results showed that exclusion of inventory level and financial leverage turned industry inverted-U relationship into no relationship which is contrary to the. al. n. v i n C that original expectation. It indicated measure is a better operationalization h eoriginal ngchi U. than SD3 and revealed that there are industry norms and public expectations on firms’ inventory level and financial leverage. With regard to the results of Euclidean distance (ESD) modification, the number of industries with no relationship for both WLS estimation and D&K estimation also was increased (135 and 66, respectively), and the number of industries with inverted-U relationship was decreased (WLS estimation: 14; D&K estimation: 27). This result represented that Euclidean distance modification had no higher explanatory power than absolute deviation measure of strategic similarity. However, the results also showed that the patterns of strategic 27.

(42) similarity-performance relationship have a significant change, especially for negatively linearity and U shape (according to D&K estimation, the number of industries with negatively linear relationship increased from 11 to 19 and 16; the number of industries with U relationship increased from 8 to 19 and 23), suggesting that the patterns of the relationship is sensitive to the operationalization of strategic similarity. -----------------------------------Insert Table 2-5 about here ------------------------------------. 立. 政治大. Third, I added several industry-level variables including market size, industry. ‧ 國. 學. average ROA, industry average firm age, industry concentration, number of firms,. ‧. ratio of foreign firms to total firms, market uncertainty, ratio of export, and ratio of. sit. y. Nat. new product sales as control variables in the aggregation analysis due to the. io. er. aggregation sample were crossing industry in nature and industry-level variables potentially affecting the strategic similarity-performance relationship. Market size was. al. n. v i n measured as accumulated salesCofhall firms in a given e n g c h i U industry. Industrial average. ROA was calculated by the mean value of all firms’ ROA in a given industry. Industry average firm age was calculated by the mean value of all firms’ age in a given industry. Industry concentration was measured by Herfindahl index, which was calculated as the sum of the squared market share of firms in a given industry. Number of firms was measures by the number of firms in a given industry, while ratio of foreign firms was computed by the number of foreign firms divided by the number of firms in a given industry. Market uncertainty was measured by the standard deviation of market size between 2004 and 2007 in a given industry. Ratio of export 28.

(43) was calculated by total value of export product divided by accumulated sales of all firms in a given industry, while ratio of new product sales was measured by total sales of new product divided by accumulated sales of all firms in a given industry, The coefficients of the first-order and the second-order strategic deviation were still positively significant and negatively significant, but these two coefficients both decreased from 0.036 to 0.019 and from -0.003 to -0.008. The uTest of presence of inverted-U relationship was also statistically significant (p < 0.001), suggesting the robustness of aggregation analysis. Exploratory analysis. 治政大 relationship were much Since the patterns of strategic similarity-performance 立. diverse than expected and it should be attributed to industrial contexts, I further. ‧ 國. 學. conducted an exploratory analysis to investigate what industry variables potentially. ‧. affect the patterns of strategic similarity-performance relationship in order to provide. sit. y. Nat. additional information for future research. Specifically, I created a nominal variable,. io. er. pattern of strategic similarity-performance relationship, based on the results of D&K estimations with additional controls in Table 2-4. After that, I conducted one-way. al. n. v i n ANOVA on industry-level to C examine industry-level characteristics differ h e nwhether gchi U across patterns. The results of one-way ANOVA were presented in Table 2-6 and the descriptive statistics and correlations between industry-level characteristics and main variables were shown in Table 2-7. It shows that most industry-level variables correlate with each other, especially for ratio of foreign firms and ratio of export (r =0.85). -----------------------------------Insert Table 2-6 about here -----------------------------------29.

(44) -----------------------------------Insert Table 2-7 about here ------------------------------------. In Table 2-6, the extent of industry concentration in industries with no relationship (0.016) was significantly larger than that in industries with inverted-U relationship (0.010) and those in industries with other patterns were also larger, though not significantly, than that in industries with inverted-U relationship. It revealed that industry concentration might be the boundary condition of strategic. 治政 balance theory. When industry concentration is large 大 enough, the competition is less 立. severe and the benefits of differentiation may be weakened. In this situation, strategic. ‧ 國. 學. balance on competition and legitimacy may not be the optimal strategic choice.. ‧. Market size in industries with inverted-U relationship was found significantly larger. sit. y. Nat. than that in industries with other patterns. This result indicated that strategic balance. io. er. perspective may be limited in industries above certain level of market size. Average ROA, market growth, and ratio of new product sales were similar across patterns of. n. al. Ch. relationship. Average firm age in industries with. engchi. iv n positive U linear relationship was. significantly larger than that in industries with negative linear relationship. However, average firm age in industries with other patterns was not significantly different from that in industries with these two patterns of relationship. Number of firms in industries with inverted-U relationship was significantly larger than that in industries with other patterns. While number of competitors and industry concentration both were proper proxy of competition in an industry, this result produced similar implication with industry concentration, suggesting strategic balance perspective only valid in industries with fierce competition. 30.

(45) Industries with negative linear relationship was found to have larger portion of foreign firms than those with positive linear relationship, while industries with no relationship was found to have larger ratio of foreign firms than those with inverted-U relationship. This result implied that low ratio of foreign firms may be one of the boundary conditions of strategic balance perspective because foreign firms in an industry may form a different social group from local firms. Industries with inverted-U relationship and positive linear relationship faced higher market uncertainty than those with no relationship, U relationship, and increasing concave-down relationship. Industries with negative linear relationship and increasing. 治政大other patterns. concave-down relationship had higher ratio of export than 立 Additional analysis. ‧ 國. 學. Although this study primarily focused on industry level analysis, firm-level. ‧. variables, especially for firms’ capability to against environmental threads, may alter. sit. y. Nat. the strategic similarity-performance relationship. For example, successful firms may. io. er. be easier to gain legitimacy than small firms. Because legitimacy contributes small firms’ survival the most, conforming to gain legitimacy is more critical for them than. al. n. v i n C hto explore the roleUof firms’ capability in strategic for large firms. Hence, it is worth engchi balance perspective. Since firm size is a good proxy of firm capability, I separated the sample firms into small and medium enterprises (SMEs) and non-SMEs by mean firm size in a given industry. After that, I conducted D&K estimation for both SMEs and non-SMEs groups and presented the results in Table 2-5. Table 2-5 shows that overall patterns of strategic similarity-performance relationship between SMEs and non-SMEs group are similar. The results provided no support for the idea that strategic balance perspective is more valid for SMEs than large firms.. 31.

(46) SECTION 2.4 DISCUSSION I have replicated Deephouse’s (1999) study by examining the relationship between strategic similarity and performance across 155 manufacturing industries in China. This study has four major findings as follows. First, strategic balance perspective has limitations with regarding to contexts and exploring the boundary conditions is critical for knowledge accumulation and theory development. Second, the presence of multiple reference points in an industry potentially causes the divergent patterns of strategic similarity-performance relationship. Third, some industry. characteristics. may. 政trigger治specific大. pattern. of. strategic. similarity-performance relationship. Forth, for investigating strategic balance. 立. ‧ 國. 學. perspective, Driscoll-Kraay estimation is a more reliable analysis than WLS estimation while standard deviation is a proper measure for strategic similarity.. ‧. Although 69 of the 155 manufacturing industries provided supportive evidence. sit. y. Nat. for strategic balance perspective, 86 of them do not show consistent results and 45 of. io. er. them suggest that being similar or being different is irrelevant to firm performance.. al. Given that balance is not always the best method for addressing competing demands. n. v i n C h it should be careful from social norms and competition, e n g c h i U about the contexts to apply strategic balance perspective to a variety of contexts, especially not in strategy fields. Understanding the boundary of a theory is important (Tsang and Kwan, 1999). This study suggests that higher level of competition is one of the potential boundary conditions. Low degrees of industry concentration and large number of competitors reflect fierce competition and the necessity for firms to balance the tension between competitive and institutional forces. Future studies on strategic balance perspective should pay more attention on research contexts, especially for competition condition. Deephouse (1999, p. 153) has emphasized the importance of contexts and notes that 32.