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Do strategic groups exist? an economic framework for analysis
Author(s) -
Dranove David,
Peteraf Margaret,
Shanley Mark
Publication year - 1998
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(1998110)19:11<1029::aid-smj992>3.0.co;2-l
Subject(s) - spurious relationship , strategic interaction , empirical research , economics , group (periodic table) , microeconomics , industrial organization , foundation (evidence) , empirical evidence , strategic planning , positive economics , management , political science , mathematics , epistemology , statistics , philosophy , chemistry , organic chemistry , law
Abstract This paper offers a framework and methodology for resolving the question regarding the existence of strategic groups. We say that a strategic group exists if characteristics of the group affect firm performance independently of firm‐level and industry‐level effects. We argue that group‐level effects are a byproduct of strategic interactions among members, and develop an empirical testing model, based on the ‘New Economics of Industrial Organization,’ to distinguish true group effects from spurious effects. From this model, we derive a series of logically consistent propositions, suggesting that while strategic interactions are critical for a group‐level effect on profits, mobility barriers are necessary to preserve both groups and their effects over time. A review of prior empirical studies of strategic groups suggests that the inconclusive nature of prior research has been due more to the lack of a theoretical foundation for empirical analysis than to the nonexistence of groups. To the extent that our methods have been employed, there is limited evidence that a rigorous search for strategic groups may prove fruitful. © 1998 John Wiley & Sons, Ltd.