SBU Strategies, Corporate-SBU Relations, and SBU Effectiveness in Strategy Implementation

Abstract

In a departure from earlier studies focusing only on the effects of corporate strategies, this study examined the effects of strategic business units' (SBUs') strategies on the utility of various states of corporate-SBU relations. For SBUs trying to build market share or to pursue differentiation as a competitive strategy, openness in corporate-SBU relations and subjectivity in performance assessment were found to be positively associated with effectiveness; for SBUs trying lo maximize short-term earnings or to pursue low cost as a competitive strategy, the corresponding associations were found to be negative. In contrast, corporate-SBU decentralization emerged as positively associated with SBUs' effectiveness irrespective of their strategic contexts; although SBUs' competitive strategies moderated the magnitude of that association, their strategic missions did not.