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Executive Judgment, Organizational Congruence, and Firm Performance

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  • Richard L. Priem

    (Department of Management, College of Business Administration, The University of Texas at Arlington, UTA Box 19467, Arlington, Texas 76019)

Abstract

Contingency theory suggests that a match among business-level strategy, organizational structure, and the competitive environment is necessary for high performance. This research asks whether manufacturing firm chief executives judge as “good” those strategy-structure-environment matches recommended by contingency theory. Knowledge of executive judgment is particulary important for two reasons. First, judgment—defined as an individual's understanding of relationships among objects—governs the strategic choices made by top managers. Second, prescriptive strategy theories recommend the judgments that executives “should” use, but there is little evidence specifically tying executive judgment to firm performance.Part of this research is essentially a “laboratory” study of executive judgment that was conducted in the field. Manufacturing firm chief executives' beliefs about cause-and-effect relationships among business-level strategy, structure, environment and performance were ascertained through a judgment task. The second part of the study was a field survey wherein other top executives of each firm reported on their firm's actual strategy, strategy making processes, structure, competitive environment and performance. Both the chief executives' judgments and the actual alignments were compared to the matches recommended as “best” by contingency theory. The hypotheses tested link the two parts of the study. Some predict relationships between judgment policies, realized alignments, and firm performance. Others attempt to identify factors that may lead to differences in executives' judgments.Results indicate that chief executive judgment is strongly related to the actual organizational alignment. Further, judgment policies that favor the strategy-structure-environment matches recommended by contingency theory produce higher performance than do other judgment policies. No support was found for either executive experience or quality of the firm's strategy making process as factors leading to executive judgment. These results suggest that the judgment of top executives is important to both organizational alignment and firm performance.

Suggested Citation

  • Richard L. Priem, 1994. "Executive Judgment, Organizational Congruence, and Firm Performance," Organization Science, INFORMS, vol. 5(3), pages 421-437, August.
    • Handle: RePEc:inm:ororsc:v:5:y:1994:i:3:p:421-437
    DOI: 10.1287/orsc.5.3.421
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    Cited by:

    1. Dean A. Shepherd & Andrew Zacharakis, 2000. "Structuring Family Business Succession: An Analysis of the Future Leader's Decision Making," Entrepreneurship Theory and Practice, , vol. 24(4), pages 25-39, July.
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    3. Oyemomi, Oluwafemi & Liu, Shaofeng & Neaga, Irina & Chen, Huilan & Nakpodia, Franklin, 2019. "How cultural impact on knowledge sharing contributes to organizational performance: Using the fsQCA approach," Journal of Business Research, Elsevier, vol. 94(C), pages 313-319.
    4. Shepherd, Dean A. & Zacharakis, Andrew & Baron, Robert A., 2003. "VCs' decision processes: Evidence suggesting more experience may not always be better," Journal of Business Venturing, Elsevier, vol. 18(3), pages 381-401, May.
    5. Warnick, Benjamin J. & Murnieks, Charles Y. & McMullen, Jeffery S. & Brooks, Wade T., 2018. "Passion for entrepreneurship or passion for the product? A conjoint analysis of angel and VC decision-making," Journal of Business Venturing, Elsevier, vol. 33(3), pages 315-332.
    6. Dean A. Shepherd & Holger Patzelt, 2015. "Harsh Evaluations of Entrepreneurs Who Fail: The Role of Sexual Orientation, Use of Environmentally Friendly Technologies, and Observers' Perspective Taking," Journal of Management Studies, Wiley Blackwell, vol. 52(2), pages 253-284, March.
    7. Hoisl, Karin & Stelzer, Tobias & Biala, Stefanie, 2015. "Forecasting technological discontinuities in the ICT industry," Research Policy, Elsevier, vol. 44(2), pages 522-532.
    8. Wood, Matthew S. & McKelvie, Alexander & Haynie, J. Michael, 2014. "Making it personal: Opportunity individuation and the shaping of opportunity beliefs," Journal of Business Venturing, Elsevier, vol. 29(2), pages 252-272.
    9. Shepherd, Dean A. & Ettenson, Richard & Crouch, Andrew, 2000. "New venture strategy and profitability: A venture capitalist's assessment," Journal of Business Venturing, Elsevier, vol. 15(5-6), pages 449-467.
    10. Högström, Claes & Gustafsson, Anders & Tronvoll, Bård, 2015. "Strategic brand management: Archetypes for managing brands through paradoxes," Journal of Business Research, Elsevier, vol. 68(2), pages 391-404.
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    12. Tim R. Holcomb & R. Duane Ireland & R. Michael Holmes Jr. & Michael A. Hitt, 2009. "Architecture of Entrepreneurial Learning: Exploring the Link among Heuristics, Knowledge, and Action," Entrepreneurship Theory and Practice, , vol. 33(1), pages 167-192, January.
    13. Olan, Femi & Ogiemwonyi Arakpogun, Emmanuel & Suklan, Jana & Nakpodia, Franklin & Damij, Nadja & Jayawickrama, Uchitha, 2022. "Artificial intelligence and knowledge sharing: Contributing factors to organizational performance," Journal of Business Research, Elsevier, vol. 145(C), pages 605-615.
    14. Patricia Pitcher & Anne D. Smith, 2001. "Top Management Team Heterogeneity: Personality, Power, and Proxies," Organization Science, INFORMS, vol. 12(1), pages 1-18, February.
    15. Henk W. Volberda & Niels van der Weerdt & Ernst Verwaal & Marten Stienstra & Antonio J. Verdu, 2012. "Contingency Fit, Institutional Fit, and Firm Performance: A Metafit Approach to Organization–Environment Relationships," Organization Science, INFORMS, vol. 23(4), pages 1040-1054, August.
    16. J. Michael Haynie & Dean A. Shepherd & Jeffery S. McMullen, 2009. "An Opportunity for Me? The Role of Resources in Opportunity Evaluation Decisions," Journal of Management Studies, Wiley Blackwell, vol. 46(3), pages 337-361, May.
    17. McKelvie, Alexander & Haynie, J. Michael & Gustavsson, Veronica, 2011. "Unpacking the uncertainty construct: Implications for entrepreneurial action," Journal of Business Venturing, Elsevier, vol. 26(3), pages 273-292, May.
    18. Covin, Jeffrey G. & Slevin, Dennis P. & Heeley, Michael B., 2001. "Strategic decision making in an intuitive vs. technocratic mode: structural and environmental considerations," Journal of Business Research, Elsevier, vol. 52(1), pages 51-67, April.
    19. J. Michael Haynie & Dean A. Shepherd & Holger Patzelt, 2012. "Cognitive Adaptability and an Entrepreneurial Task: The Role of Metacognitive Ability and Feedback," Entrepreneurship Theory and Practice, , vol. 36(2), pages 237-265, March.
    20. Joardar, Arpita & Wu, Sibin, 2017. "Liabilities and benefits: Examining the two sides of the foreignness coin from entrepreneurial perspective," International Business Review, Elsevier, vol. 26(6), pages 1157-1167.
    21. Hanisch, David N. & Rau, Sabine B., 2014. "Application of metric conjoint analysis in family business research," Journal of Family Business Strategy, Elsevier, vol. 5(1), pages 72-84.
    22. Alfredo De Massis & Josip Kotlar & Federico Frattini, 2013. "Is Social Capital Perceived as a Source of Competitive Advantage or Disadvantage for Family Firms? An Exploratory Analysis of CEO Perceptions," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 22(1), pages 15-41, March.
    23. Murnieks, Charles Y. & Cardon, Melissa S. & Sudek, Richard & White, T. Daniel & Brooks, Wade T., 2016. "Drawn to the fire: The role of passion, tenacity and inspirational leadership in angel investing," Journal of Business Venturing, Elsevier, vol. 31(4), pages 468-484.

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