How corporate strategy contributes to firm performance : a cross-sectional study of resource governance decision making in US firms : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Strategic Management at Massey University, Palmerston North
Corporate strategy has been a neglected topic in both theoretical and empirical discussions on superior firm performance. In addition to using competitive strategy to attain sustainable competitive advantage, firms should also focus on achieving a corporate level measure of performance, namely, persistent superior firm performance. The resource based theory paradigm suggests that factors which lead to superior firm performance are largely endogenous to the firm. Corporate strategy is one such factor. Empirical evidence has shown that corporate strategy matters. It has a small but significant influence on the variance of both business unit performance and firm performance. This research extends current knowledge by determining, firstly, if corporate strategy could be used to distinguish successful firms from nonsuccessful firms and, secondly, if so, how does corporate strategy actually influence firm performance. Fifteen Fortune 1000 US firms were categorised into three subpopulations based on persistent superior, average and inferior levels of performance. Eighteen indicators representing both excellence in corporate strategy and the incidence of corporate strategy were collected through the content analysis of Wall Street Journal articles from 1980 to 2004. Various inferential statistical techniques were conducted to provide a broad profile of findings. The frequency of resource governance decisions was found to distinguish the persistent superior firm performance category from both the persistent average and inferior firm performance categories. The corporate level decision making skill perspective provides an explanation for this empirical evidence. Superior performing firms, through the use of superior corporate level decision making skills, are able to simplify resource governance decision making (e.g., decision making rules). This simplification results in superior resource governance decisions being made, lowering the incidence of resource governance decisions. This research extends resource based theory by providing empirical evidence of the importance of resource governance decisions in achieving persistent superior firm performance. This research also integrates the concept of superior corporate level decision making skills into existing resource based theory. The research has implications also for both theoretical and practitioner literatures as it redefines corporate strategy. It shows that corporate strategy matters to firm performance, and importantly, it shows why corporate strategy matters.