Business Strategy Types and Innovative Practices

This study explores how firms with different strategic orientations manage innovative practices. Specifically, we examine differences in how firms with contrasting strategic orientations view the environmental and organizational factors that influence their management of innovation. Although there are many dimensions of strategic behavior, our focus on innovation is driven by a substantial body of empirical and theoretical work that highlights its increasingly critical role as a source of sustainable competitive advantage (Eisenhardt and Martin, 2000; Fiol, 1996; Storey, 2000; Teece et al., 1997). This article contributes to the integration of the strategic management and innovation perspectives by empirically examining how innovative practices vary among firms with different strategic orientations, thereby achieving tighter integration between these two important theoretical perspectives. In doing this, we begin to address some important questions which are likely to be of crucial interest to both scholars and practicing managers. For example, how do innovative behaviors in strategically conservative firms differ from those in firms that are less conservative? Are the former less innovative than the latter, or do they simply target their innovative activities to different areas of the value chain? Likewise, what are the most important sources of knowledge and innovation for such firms and how do they differ? By exploring these and related questions we provide new insights into organizational strategies and related innovative behaviors. The article proceeds as follows. We first establish a foundation for our study by examining the literatures on strategy and innovation, especially concentrating on the Miles and Snow (1978) strategy typology. We then develop hypotheses on relationships between a firm's strategy type and its management of innovation. We then test the hypotheses using data from 244 firms. A discussion of the empirical results and conclusions drawn from them close the article. LITERATURE REVIEW Strategy and Innovation One key to successful strategic management is the ability to achieve fit or coherence among a set of competitive factors, both internal and external to the organization, in a manner that facilitates high performance. The strategic choice perspective (Child, 1972) argues that organizations do not simply react to their environments but dynamically interact with them via the strategic actions of top managers. Achieving strategic fit thus requires alignment of organizational resources, capabilities and competencies with environmental opportunities and threats (Bourgeois, 1980; Schendel and Hofer, 1979). Beyond this, proper fit requires internal consistency with regard to the firm's overall activities and operations. In this sense, strategic management constitutes a "pattern in a stream of decisions" (Mintzberg, 1978) intended to dynamically regulate the relation between an organization and its environment while at the same time ensuring that internal interdependencies are efficiently managed and that strategic actions are inherently consistent. While strategic managers strive to formulate cohesive strategies to guide managerial decision making, the results of these decisions may be unanticipated. Mintzberg (1978) distinguished between deliberate strategies, whereby an intended strategy is actually realized, and emergent strategies, whereby a realized strategy may have never been intended. This notion has subsequently been extended (Brown and Eisenhardt, 1998; Jennings et al., 2003; Mintzberg et al., 1998; Tegarden et al., 2003) to further highlight the dynamic interplay between the organization and its environment and the distinctions between rational and extemporaneous aspects of strategic management. Through the ideas of dynamic fit and interdependencies, the strategic choice perspective introduces the notion of equifinality into examinations of firm performance--that is, within similar environments there may be multiple equally effective organizational strategies (Doty et al. …