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A Simultaneous Equation Model of Corporate Strategy

Author

Listed:
  • Dan Schendel

    (Purdue University)

  • G. Richard Patton

    (University of Pittsburgh)

Abstract

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 goal is of the firm [Gershefski, George W. 1969. Building a corporate financial model. Harvard Business Rev. (July-August) 61-72; Guth, W. D. 1972. Product differentiation and concentration in the brewing industry. J. Business Policy. 2 (3) 31-36.]. 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 car; encompass more than a single performance goal. Moreover, the interactive effects of strategic variables governing the efficiency of daily 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 taken from the U.S. brewing industry.

Suggested Citation

  • Dan Schendel & G. Richard Patton, 1978. "A Simultaneous Equation Model of Corporate Strategy," Management Science, INFORMS, vol. 24(15), pages 1611-1621, November.
  • Handle: RePEc:inm:ormnsc:v:24:y:1978:i:15:p:1611-1621
    DOI: 10.1287/mnsc.24.15.1611
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    Citations

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    Cited by:

    1. Jae Wook Yoo & Richard Reed & Shung Jae Shin & David J. Lemak, 2009. "Strategic Choice and Performance in Late Movers: Influence of the Top Management Team's External Ties," Journal of Management Studies, Wiley Blackwell, vol. 46(2), pages 308-335, March.
    2. Giovanni. Gavetti & Daniel A. Levinthal, 2004. "50th Anniversay Article: The Strategy Field from the Perspective of Management Science: Divergent Strands and Possible Integration," Management Science, INFORMS, vol. 50(10), pages 1309-1318, October.
    3. Avi Fiegenbaum & Howard Thomas & Ming-Je Tang, 2001. "Linking hypercompetition and strategic group theories: strategic maneuvering in the US insurance industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 265-279.
    4. repec:zbw:bofrdp:2011_004 is not listed on IDEAS
    5. Zuniga-Vicente, Jose Angel & de la Fuente-Sabate, Juan Manuel & Suarez Gonzalez, Isabel, 2004. "Dynamics of the strategic group membership-performance linkage in rapidly changing environments," Journal of Business Research, Elsevier, vol. 57(12), pages 1378-1390, December.
    6. John E. Ettlie, 1998. "R&D and Global Manufacturing Performance," Management Science, INFORMS, vol. 44(1), pages 1-11, January.
    7. Mehmet Ali Köseoglu & John A. Parnell & Melissa Yan Yee Yick, 2021. "Identifying influential studies and maturity level in intellectual structure of fields: evidence from strategic management," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(2), pages 1271-1309, February.
    8. Eling, Martin & Jia, Ruo & Schaper, Philipp, 2017. "Get the Balance Right: A Simultaneous Equation Model to Analyze Growth, Profitability, and Safety," Working Papers on Finance 1716, University of St. Gallen, School of Finance.
    9. Fang, Yiwei & Francis, Bill & Hasan, Iftekhar & Wang, Haizhi, 2012. "Product market relationships and cost of bank loans: Evidence from strategic alliances," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 653-674.
    10. Fang, Yiwei & Francis, Bill & Hasan, Iftekhar & Wang, Haizhi, 2011. "Product market relationships and cost of bank loans: evidence from strategic alliances," Bank of Finland Research Discussion Papers 4/2011, Bank of Finland.
    11. Karel Cool & Ingemar Dierickx, 1993. "Abstract," Strategic Management Journal, Wiley Blackwell, vol. 14(1), pages 47-59, January.
    12. Zhongyuan Yu & William B. Rouse & Nicoleta Serban, 2011. "A computational theory of enterprise transformation," Systems Engineering, John Wiley & Sons, vol. 14(4), pages 441-454, December.
    13. Davis, Blakley C. & Hmieleski, Keith M. & Webb, Justin W. & Coombs, Joseph E., 2017. "Funders' positive affective reactions to entrepreneurs' crowdfunding pitches: The influence of perceived product creativity and entrepreneurial passion," Journal of Business Venturing, Elsevier, vol. 32(1), pages 90-106.
    14. Heather Berry, 2010. "Why Do Firms Divest?," Organization Science, INFORMS, vol. 21(2), pages 380-396, April.
    15. Fritz, Wolfgang, 1993. "Die empirische Erfolgsfaktorenforschung und ihr Beitrag zum Marketing: Eine Bestandsaufnahme," Working Papers 93/12, Technische Universität Braunschweig, Institute of Marketing.

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