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Conformity or divergence in describing the business concept and profitability

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  • Häckner, Einar

Abstract

The relationship between conformity or divergence in the way CEOs and chief financial officers describe the business concept, and profitability, was studied in 20 firms in one industry. Measures were obtained for firm size, profitability, degree of conformity, organizational stability, product development and the CEO's influence on strategic decisions. Controlling for the effect of size, the relationship was analysed in stepwise multiple regression analyses. Conformity was positively correlated to profitability in stable organizations, and (weakly) to divergence in unstable ones. These findings are consistent with those reported in studies of top management team consensus and performance, which suggest that environmental turbulence has a moderating effect on the relationship. It is concluded that environmental contingency factors affect the conformity-profitability relationship by way of organizational processes. Consequently, differences in organizational stability should be taken into account in studying the impact of environmental conditions on this relationship.

Suggested Citation

  • Häckner, Einar, 1993. "Conformity or divergence in describing the business concept and profitability," Scandinavian Journal of Management, Elsevier, vol. 9(4), pages 265-282, December.
    • Handle: RePEc:eee:scaman:v:9:y:1993:i:4:p:265-282
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