Performance Variations Among Strategic Group Members: An Examination of Individual Firm Capability

Abstract

Because of inconsistent empirical evidence, the membership-performance model pervasive in strategic group analysis is re-examined. We propose that individualfirm capabilities, which reflect capacity to implement or change strategy, moderate the effect of members' shared strategy characteristics on performance. Controlling for market structure, we defined two strategic groups based on common strategy characteristics among 55 manufacturing firms. We found significant differences in performance and capabilities within each group. There was also evidence of a significant correlation between capabilities and performance within each group. We conclude that effects offirms' capabilities should be accountedfor to increase the explanatory power of strategic groups in competitive performance.