Article1992

SBU strategy and performance: The moderating effects of the corporate‐SBU relationship

144 citations0/0 files storedStrategic Management Journal

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Organizational Management and Leadership Accounting and Organizational Management Management and Organizational Practices

Abstract

Abstract This study suggests that the link between an SBU strategy and performance is moderated by the SBU's relationship with corporate management. Information processing arguments suggest that this relationship, typically characterized by general measures of centralization, has been inappropriately conceptualized in prior research. An alternative view, one that considers which decisions and activities should be controlled by the individual SBU, is proposed and tested. The results of a study of 496 SBUs indicate that SBU performance is enhanced when: (1) SBUs with an external strategic orientation control environmental monitoring activities and strategic decision analysis, and (2) SBUs with an intraorganizational orientation control those activities relating to operations. Weaker SBU performance is associated with SBU control over those functions and activities not central to the SBU's business strategy. Therefore, it is suggested that the corporate‐SBU relationship can either facilitate or inhibit the implementation of the SBU's intended strategy.

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References

1978Organizational Strategy, Structure, and Process 1985Of strategies, deliberate and emergent 1987The Concept of Corporate Strategy 1972Characteristics of Organizational Environments and Perceived Environmental Uncertainty 1978Patterns in Strategy Formation 1986The dominant logic: A new linkage between diversity and performance 2018The Concept of Fit in Strategy Research: Towards Verbal and Statistical Correspondence 1985Alternative Forms of Fit in Contingency Theory

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