Strategic Orientation, Organizational Structure, and the Associated Effects on Performance in Industrial Firms

ABSTRACT The paper presents an investigation of the structural characteristics of firms with differing strategic orientations, as conceptualized by Miles & Snow (1978). The associated relationships to perceived performance are studied in a sample of executives at products firms across four industrial groups. The authors find that most firms have a mixed structural form, with fewer firms exhibiting either high-levels of structure or low-levels of structure. Also, Reactors represent the fewest firms, while the most firms are Defenders. No differences are found between the strategy types and their associated organizational structures, with each strategy type equally likely to implement either a high, mixed, or low structural configuration. Also, in regards to perceptions of performance, the structural form of firms has no impact and neither does the interaction of structure and strategy. Therefore, any structural form has an equal chance of achieving high performance, regardless of the strategy implemented. However, the results do indicate that strategic orientation has an influence on performance. Analyzers are higher overall performers than either of the Prospector, Defender, or Reactor firms. Also, Analyzers and Defenders exhibit better adaptability than Reactor firms. It is suggested that firms may increase performance by altering their strategic profile to be more aggressive, more focused, or be more thoughtful prior to implementing major decisions. INTRODUCTION Business strategy has been discussed from many differing perspectives (c.f. Porter 1980, Miller 1987, Katobe 1990). One common and useful conceptualization put forward by Miles and Snow (1978) focuses on a firm's strategic environmental adaptation or aggressiveness towards the market. Much research over the years has investigated differences among the four strategic types regarding a variety of internal factors, including innovation, management characteristics, organizational performance, and organizational design. The outlined Defender, Analyzer, Reactor, and Prospector strategies are suggested to be distinct in their actions, with each group enacting consistent decisions and activities across a variety of organizational areas (c.f. Aragon-Sanchez et al 2005, Slater and Narver 1993, Doty et al 1993, Conant et al 1990, Shortell and Zajac 1990). Recent studies have supported and extended the findings of earlier works regarding Miles and Snow's typology: the strategic groups are found to differ amongst each other on a variety of factors, including implementation and usage of market research, organizational performance, and environmental perceptions (cf. Auh and Menjuc 2005, Bednall and Valos 2005, Freel 2005, Moore 2005). In particular, one main proposal of Miles and Snow (1978) is that the four strategic types vary according to their efforts at innovation and related activities, with Prospectors the most aggressive followed in order by Analyzers, Defenders, and Reactors (Slater and Narver 1993, McDaniel and Kolari 1987). However, the level of innovation does not always translate into profitability or better performance, due to cost factors or market factors. In order to improve the chances of success, a company might match its strategy with an appropriate structural form to achieve higher performance. The purpose of this study is to determine which type of organizational structure is implemented by the four strategic orientations and whether these combinations of strategy and structure influence performance or, rather, the main effects of strategy and structure are the drivers of performance. The authors use a sample of managers from industrial companies across four industrial groupings to investigate these relationships. THE MILES AND SNOW STRATEGIC ORIENTATIONS Miles and Snow (1978) introduced a typology which purported to classify the strategic orientation of firms based on specific strategic actions. Firms within any industry could be classified into one of four groups as Prospectors, Defenders, Analyzers, or Reactors. …